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Collective Bargaining (Kollektivvertrag) in Austria: What Foreign Employers Must Know
Summary:
- Austria has no statutory minimum wage; pay floors and many terms are set by sector collective agreements (Kollektivverträge), which cover ~98% of employees through compulsory WKO membership.
- The applicable KV is determined by the employer’s industry classification, and it mandates the 13th and 14th salaries — taxed very favourably (first €620 tax-free, then a flat 6%).
- Employer on-costs run roughly 28–31% of gross (≈21% social security plus DB 3.7%, DZ, the 1.53% severance-fund contribution and, where there’s a local PE, 3% municipal tax); the 2026 social-security ceiling is €6,930/month.
- A foreign company can run payroll without an Austrian entity, but employee activity can create a permanent establishment — which is why many use an EOR.
Quick answer: In Austria there is no statutory minimum wage: pay and many conditions come from the sector Kollektivvertrag (collective agreement), which covers about 98% of employees because chamber (WKO) membership is compulsory. The applicable KV is set by the employer’s industry and mandates the 13th and 14th salaries, which enjoy favourable 6% taxation. Employer on-costs are roughly 28–31% of gross. You can run payroll without an entity, but watch permanent-establishment risk — which is why many companies use an EOR.
Why the Kollektivvertrag is the starting point
Austria has no statutory minimum wage. Instead, minimum pay and many core conditions are set by sector-level collective agreements — Kollektivverträge (KV) — negotiated between the trade unions and the Austrian Economic Chamber (WKO). Because WKO membership is compulsory for businesses, a KV binds all employers in a sector and all their employees regardless of union membership, giving Austria roughly 98% collective-bargaining coverage — among the highest in the world.
Crucially, the applicable KV is determined by the employer’s industry classification (its WKO sector), not by the employee’s job title. There are 800+ KVs, and identifying the right one is the first step in any Austrian hire: it sets minimum pay by category and seniority, working-time rules, allowances, and the special payments below. Employees of a foreign employer are entitled to at least the KV pay owed to comparable Austrian employees at the place of work.
The 13th and 14th salaries (Sonderzahlungen)
Virtually every KV mandates two extra annual payments — Urlaubsgeld (holiday pay, ~June) and Weihnachtsgeld (Christmas pay, ~November) — so Austrian salaries are quoted “14 times a year.” Their standout feature is tax: within the annual “Jahressechstel” allowance, the first €620 is tax-free and the remainder is taxed at a flat 6%, far below the rate on regular salary. This materially lowers the blended annual tax rate and is a key part of how Austrian compensation is structured.
Social security and total employer cost (2026)
Social security (Sozialversicherung) is split roughly 21% employer / 18% employee, on earnings up to the 2026 monthly ceiling of €6,930 (up from €6,450 in 2025). On top of social security, employers carry several additional charges:
- DB (employer contribution to the family-burden fund): 3.7% of payroll.
- DZ (surcharge to the DB): ~0.32–0.40%, varying by province.
- Kommunalsteuer (municipal tax): 3% — but only where the employer has an Austrian permanent establishment.
- Abfertigung neu (severance fund): 1.53% (see below).
All in, employer on-costs run roughly 28–31% of gross, depending on province and PE status.
Abfertigung neu — the portable severance system
For employment that began on or after 1 January 2003, the old tenure-based severance lump sum was replaced by Abfertigung neu: the employer pays 1.53% of monthly gross (from the second month of employment) into a Betriebliche Vorsorgekasse (BV-Kasse) fund. The accrued capital follows the employee across jobs rather than resetting with each employer — a modern, portable model that foreign employers should budget as a fixed on-cost.
Income tax and key terms
Wage tax (Lohnsteuer) is progressive for 2026: 0% up to €13,539, then 20% / 30% / 40% / 48% / 50%, and 55% above €1,000,000. Other key terms:
- Probation: maximum 1 month.
- Notice: harmonised for blue- and white-collar staff since October 2021; employer notice scales from 6 weeks (up to 2 years’ service) to 5 months (over 25 years), usually ending at a calendar quarter.
- Annual leave: 25 working days (5 weeks), rising to 6 weeks after 25 years with the same employer.
- Working time: standard 40 hours/week (many KVs set 38.5).
Entity, PE risk and the EOR route
A foreign company can register directly with the health-insurance carrier (ÖGK) and run Austrian payroll without forming an entity. The catch is permanent-establishment risk: depending on the activity, an employee in Austria can create a Betriebsstätte, triggering Austrian corporate tax and the 3% municipal tax. An Employer of Record in Austria employs the worker on your behalf — identifying the correct KV, registering with the ÖGK, and running payroll, Lohnsteuer, the severance fund and the 13th/14th — without you setting up an entity. If you already have one, our Austria payroll service handles the monthly run. Read more about the EOR model or get in touch.
Frequently asked questions
Does Austria have a minimum wage?
No. Austria has no statutory minimum wage. Minimum pay is set by sector collective agreements (Kollektivverträge), which cover about 98% of employees because membership in the WKO chamber is compulsory for businesses. Most 2026 entry-level KV minimums fall around €1,800–2,000 gross per month, paid 14 times a year.
How do I know which collective agreement applies?
The applicable Kollektivvertrag is determined by the employer’s industry classification — its WKO sector — not by the employee’s job title. That agreement then sets minimum pay by category and seniority, working-time rules, allowances and the 13th/14th salaries.
Are the 13th and 14th salaries mandatory in Austria?
They are not in general statute but are mandated by virtually every collective agreement, so in practice Austrian salaries are paid 14 times a year. They are taxed very favourably: the first €620 per year is tax-free and the remainder is taxed at a flat 6% within the Jahressechstel allowance.
How much does an employee cost an employer in Austria?
Beyond gross salary, an employer pays roughly 21% social security plus the DB (3.7%), DZ (~0.4%), the 1.53% severance-fund contribution and, where it has an Austrian permanent establishment, 3% municipal tax. Total employer on-costs run about 28–31% of gross, depending on province.
What is the social security ceiling in 2026?
For 2026 the monthly Höchstbeitragsgrundlage is €6,930, up from €6,450 in 2025. Earnings above the ceiling are not subject to ongoing social security contributions, and employer and employee rates are about 21% and 18% respectively.
What is Abfertigung neu?
It is Austria’s modern, portable severance system for all hires from 1 January 2003 onward. The employer pays 1.53% of monthly gross — from the second month of employment — into a Betriebliche Vorsorgekasse fund, and the accrued capital follows the employee across jobs instead of resetting with each employer.
Does a foreign company need an Austrian entity to hire there?
No — a foreign employer can register directly with the ÖGK and run compliant payroll without an entity. However, the employee’s activities may create a permanent establishment, exposing the company to Austrian corporate tax and 3% municipal tax, which is why many companies use an Employer of Record.
Useful Insights
Collective Bargaining (Kollektivvertrag) in Austria: What Foreign Employers Must Know
Austria has no statutory minimum wage — pay floors come from sector Kollektivverträge. A 2026 guide to KV coverage, the 13th/14th salary, social security costs and Abfertigung neu.
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Mark is the Global Sales Director at Topsource Worldwide. He has been a pioneering figure in the global expansion space since 2013. He is the first salesperson to sell EOR services in Europe, a feat he accomplished in 2013.