Compliantly Engage Contractors in Austria
Our workforce compliance guide to Austria covers everything you need to compliantly hire, onboard, manage and pay independent contractors in Austria.
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Our workforce compliance guide to Austria covers everything you need to compliantly hire, onboard, manage and pay independent contractors in Austria.
Worksuite offers a whole range of professional services and compliance tools, making it easy to compliantly engage independent contractors in Austria.
We work with the best legal partners in Austria to create contract templates that are compliant with local laws to protect you and your contractors from fines and penalties.
Our bespoke onboarding workflows and screening questionnaires will help you determine the worker status in compliance with Austrian law, based on which you can decide to engage a worker as a contractor or full-time worker—all without needing to set up your business entity.
Any business hiring in Austria should understand the important legal distinction between who classifies as an independent contractor and who can be hired as an employee. Fines or penalties may be issued to businesses that are hiring contractors under the guise of employment. In Austria, companies can be ordered to pay fines of up to EUR 50,000 for each employee who is incorrectly classified as a contractor.
Understanding the distinctions between employees and independent contractors is therefore critical to compliantly engaging workers in Austria. It is important to work with a partner like Worksuite to ensure you put in place an engagement framework that accurately classifies independent contractors for you and lets you know when contractor talent must be engaged as a payrolled contractor or employed directly.
Austria’s primary employment laws are codified within the following legislation:
Other relevant employee legislation includes:
Independent contractors are not strictly defined in Austrian law. As in many European countries, there is a reliance upon precedence in case law.
A candidate must submit their CV or resumé to the employer. Once a decision has been made, the employer can issue an employment contract either in writing or verbally. If the contract is verbal, the employer must still issue the employee with a written service contract (Dienstzettel), which details the employee’s rights and responsibilities.
If there are gaps between what is included in the service note and what was verbally agreed, this can expose the employer to legal and financial risks.
Independent contractors can be hired directly or via an intermediary, such as a staffing agency or umbrella company. Independent contractors may be found via word of mouth, jobs boards, social networks, industry bodies, or other forums. Although the hiring practices vary, the independent contractor may be asked to provide a CV, portfolio, and references, and possibly sign an NDA.
The four key independent contractor categories are:
Employees are subject to wage tax which is taken at source. This means employees are not required to submit any tax forms in relation to their income earned via employment.
However, they will need to include some details from these forms as part of any tax self-assessments for additional self-employed work.
Independent contractors are subject to income tax and must file their own income taxes on an annual basis. Independent contractors pay tax on all income above EUR11,000 (single income) or EUR12,000 (multiple incomes). VAT applies to individuals with income over EUR30,000 per year.
Independent contractors must submit, at minimum, a Declaration on Employee Tax Assessment (Erklärung zur Arbeitnehmerinnenveranlagung) L1 form, which can be filed at the government tax office portal FinanzOnline, via a local tax office, or by downloading each form from the Ministry of Finance and manually submitting them
Employers are required to withhold employees’ tax and national insurance at time of payment to the employee.
Hiring companies do not withhold any of the independent contractor’s payment for tax purposes. However, for independent contractors whose monthly income is less than the marginal earnings threshold, the hiring company must enroll them in the accident insurance institution (Unfallversicherung).
Employees are paid on an hourly, weekly, or monthly basis.
There is no statutory minimum wage in Austria. Instead, minimum wages are set by industry-specific collective bargaining agreements.
Independent contractors operating as a business typically submit an invoice on a monthly basis. Independent contractors operating without a business (i.e., as a sole trader) may be paid via any preferred method and often require a payment receipt.
The hiring company and independent contractor may also negotiate a payment structure, including any up-front payment, partial payments, and a final payment upon completion of the work
Employees typically have a holiday allowance, maternity leave/pay, sick leave/pay, protection against dismissal, social security contributions, gender equality, and other rights. All employers must issue new employees with a written document (Dienstzettel) specifying their rights as contained in their contract.
Further rights may be contained in collective bargaining agreements.
Independent contractors generally do not have employee rights unless detailed in a specific agreement with the hiring company.
The employer pays all employee benefits, with health and social insurance being mandatory.
Independent contractors’ benefits are governed by the content of the contract. However, the client must process the independent contractor’s health insurance (which is mandatory in Austria), usually through the Austrian health insurance provider (ÖGK).
Employees are usually paid in arrears on or before the last day of the month for which payment is due. Notably, employees’ annualized salaries can also include an additional one or two months’ worth of pay, known as the 13th and 14th month salaries.
Employees are often rewarded via bonuses, which are paid either monthly or yearly.
Independent contractors send an invoice (or other form of payment request) and typically require payment within 14 days or 28 days of submission unless otherwise stipulated in the contract. Independent contractors are not paid by payroll in most cases.
Austria’s primary employment laws are codified within the following legislation:
Other relevant employee legislation includes:
A candidate must submit their CV or resumé to the employer. Once a decision has been made, the employer can issue an employment contract either in writing or verbally. If the contract is verbal, the employer must still issue the employee with a written service contract (Dienstzettel), which details the employee’s rights and responsibilities.
If there are gaps between what is included in the service note and what was verbally agreed, this can expose the employer to legal and financial risks.
Employees are subject to wage tax which is taken at source. This means employees are not required to submit any tax forms in relation to their income earned via employment.
However, they will need to include some details from these forms as part of any tax self-assessments for additional self-employed work.
Employers are required to withhold employees’ tax and national insurance at time of payment to the employee.
Employees are paid on an hourly, weekly, or monthly basis.
There is no statutory minimum wage in Austria. Instead, minimum wages are set by industry-specific collective bargaining agreements.
Employees typically have a holiday allowance, maternity leave/pay, sick leave/pay, protection against dismissal, social security contributions, gender equality, and other rights. All employers must issue new employees with a written document (Dienstzettel) specifying their rights as contained in their contract.
Further rights may be contained in collective bargaining agreements.
The employer pays all employee benefits, with health and social insurance being mandatory.
Employees are usually paid in arrears on or before the last day of the month for which payment is due. Notably, employees’ annualized salaries can also include an additional one or two months’ worth of pay, known as the 13th and 14th month salaries.
Employees are often rewarded via bonuses, which are paid either monthly or yearly.
Independent contractors are not strictly defined in Austrian law. As in many European countries, there is a reliance upon precedence in case law.
Independent contractors can be hired directly or via an intermediary, such as a staffing agency or umbrella company. Independent contractors may be found via word of mouth, jobs boards, social networks, industry bodies, or other forums. Although the hiring practices vary, the independent contractor may be asked to provide a CV, portfolio, and references, and possibly sign an NDA.
The four key independent contractor categories are:
Independent contractors are subject to income tax and must file their own income taxes on an annual basis. Independent contractors pay tax on all income above EUR11,000 (single income) or EUR12,000 (multiple incomes). VAT applies to individuals with income over EUR30,000 per year.
Independent contractors must submit, at minimum, a Declaration on Employee Tax Assessment (Erklärung zur Arbeitnehmerinnenveranlagung) L1 form, which can be filed at the government tax office portal FinanzOnline, via a local tax office, or by downloading each form from the Ministry of Finance and manually submitting them
Hiring companies do not withhold any of the independent contractor’s payment for tax purposes. However, for independent contractors whose monthly income is less than the marginal earnings threshold, the hiring company must enroll them in the accident insurance institution (Unfallversicherung).
Independent contractors operating as a business typically submit an invoice on a monthly basis. Independent contractors operating without a business (i.e., as a sole trader) may be paid via any preferred method and often require a payment receipt.
The hiring company and independent contractor may also negotiate a payment structure, including any up-front payment, partial payments, and a final payment upon completion of the work
Independent contractors generally do not have employee rights unless detailed in a specific agreement with the hiring company.
Independent contractors’ benefits are governed by the content of the contract. However, the client must process the independent contractor’s health insurance (which is mandatory in Austria), usually through the Austrian health insurance provider (ÖGK).
Independent contractors send an invoice (or other form of payment request) and typically require payment within 14 days or 28 days of submission unless otherwise stipulated in the contract. Independent contractors are not paid by payroll in most cases.
As in many countries, there is no strict definition of employees and independent contractors in Austrian law. However, individuals are generally considered independent contractors if they:
In particular, an individual’s personal ‘dependence’ on the employer – which usually implies economic dependence too – is typically taken as the hallmark of being an employee.
It is worth noting that unlike the employee-contractor distinction in many other countries, Austrian independent contractors typically do not (or would not be expected) to hire their own employees nor work for multiple clients. For this reason, these independent contractors are often referred to as ‘dependent employees’, even though in legal terms they are self-employed independent contractors.
Austria has four main categories of independent contractors:
Regardless of the category, the individual has to register at their local Economic Chamber (Wirtschaftskammer), along with registering for freelance income tax, health insurance, and social security.
There are two primary engagement models for working with independent contractors in Austria:
A. Direct engagement: Under this model, the hiring company engages directly with the independent contractor and establishes a direct contract for the provision of services. The hiring company then pays the independent contractor directly, in accordance with the terms of the contract.
B. Third party: These firms come in two forms and both are specially designed to vet and engage freelancers compliantly as either contract employees or independent contractors on your behalf.
Companies hiring independent contractors in Austria should avoid making payments directly through their payroll system. Beyond these guidelines, there are no specific lawful requirements related to paying independent contractors in Austria. The contract should stipulate the preferred payment method agreed upon by both parties.
Self-employed independent contractors are liable for their own income tax, which they pay on an annual basis. Independent contractors are taxed on earnings above EUR11,000 per year if they have a single income, or above EUR12,000 per year if they have multiple incomes. Independent contractors also pay 27.68% of their annual profits towards social security contributions, which are also tax-deductible. Social security contributions are paid on all earnings up to EUR71,820. Earnings beyond this level are social security-free.
Independent contractors whose income is above the earnings threshold (Unfallversicherung) are required to register with the Austrian health insurer (Krankenversicherungsträger) in order to be covered by pension insurance and accident health insurance, along with registering for unemployment insurance to receive unemployment benefits (Arbeitslosengeld) in case of bankruptcy. Independent contractors who have multiple employment relationships, each below the marginal earnings threshold (Unfallversicherung), can also receive sick pay and maternity pay if their total income is above the threshold. However, they do not need to register for unemployment insurance and do not receive unemployment benefits.
We can simplify hiring full-time workers in Austria by acting as the Employer of Record (EOR) on your behalf, handling everything from contracts, onboarding, documentation, payroll, benefits, and workforce management. Reduce your time-to-hire by 90%, slash your overheads, and remain fully compliant.