Payroll In Austria: A Complete Guide for US Businesses

Known for its high standard of living, efficient public services and strong employee protections, Austria has one of the most structured and employee-friendly payroll systems in Europe. Businesses operating in Austria must navigate a well-developed framework of payroll tax, social security contributions and employment rights that are designed to promote fairness and stability in the workplace.

This guide offers a detailed breakdown of everything employers need to know about payroll in Austria. Austrian labour laws and tax regulations leave little room for error, and mistakes in payroll processing can lead to administrative fines, employee claims and reputational damage. We'll also talk about how BatchTransfer can help your team do international payroll.

Payroll Cycle And Monthly Filing Duties In Austria

Austria operates on a clear monthly payroll cycle where employee salaries must be paid by the last working day of each month. In some industries, collective bargaining agreements (CBAs) or individual employment contracts may allow for alternative payment schedules, but monthly payments are the standard across most sectors.

Austrian payroll processing involves several employer responsibilities:

• Payslip issuance: Employers must provide a payslip with every payment. This document must clearly show the gross salary, payroll tax, social security contributions, income tax deductions and the final net pay. Payslips can be issued either in paper form or electronically, as long as employees can easily access them.
• Monthly payroll tax filings: Employers are required to calculate and submit payroll tax payments to the Austrian tax office (Finanzamt)¹ every month. This includes withholding and remitting the correct amount of income tax on behalf of employees.
• Social security reporting: Alongside payroll taxes, businesses must also pay employer social security contributions and withhold employee contributions. These are remitted to the social insurance institution (Österreichische Gesundheitskasse).²

The employers must also maintain complete payroll records for a minimum of seven years. This includes payslips, tax filings, social security declarations and payment summaries.

Standard Working Hours and Overtime Rules

Working hours in Austria are closely regulated, with standard full-time hours set at 40 hours per week. However, many industries operate under collective bargaining agreements (CBAs),³ which often reduce this standard to 38 hours weekly. Employers must review the applicable CBA for their industry, as it may introduce specific terms on working time, rest periods, or flexible arrangements.

Employees are entitled to structured breaks during their working day. A minimum uninterrupted rest break of 30 minutes must be provided after six continuous hours of work. Longer working shifts may require extended break periods, especially in physically demanding or safety-sensitive industries.

Overtime is clearly defined under Austrian labour law. It applies to any hours worked beyond the standard weekly threshold and comes with strict limitations:

• Daily working limits: Employees may work up to 12 hours in a single day, including overtime.³
• Weekly working limits: Weekly working hours can rise to a maximum of 60 hours, but employers must ensure that over a 17-week period, the average weekly working time does not exceed 48 hours.³

Overtime compensation is a mandatory payroll component:

• Overtime pay rate: Overtime must be paid at a premium of at least 50% above the employee’s regular hourly wage.³
• Time-off alternative: Instead of additional pay, employees may agree to receive compensatory time off at a rate of 1.5 hours off for every overtime hour worked.³

These overtime conditions have a direct impact on monthly payroll processing. Employers must track working hours accurately, apply the correct premium rates, and ensure payroll calculations comply with both statutory limits and sector-specific agreements.

Minimum Salary Requirements and Employment Contract Rules in Austria

Austria does not enforce a universal statutory minimum wage across all industries. Instead, minimum salary levels are established through collective bargaining agreements (CBAs), which apply to nearly every sector of the Austrian economy. These agreements determine not only the minimum base salary but also define additional pay components such as bonuses, allowances and holiday entitlements.

Employers must consult the relevant CBA for their industry to determine the correct minimum wage rates and compensation packages. CBAs are legally binding and updated regularly, which means salary adjustments may be required even for long-standing employment relationships. Typical additional payments include:

• Holiday bonuses (13th salary): Usually paid in June.
• Christmas bonuses (14th salary): Typically paid in November.
• Special allowances: For work performed on weekends, holidays or during unsocial hours, which are commonly required under CBAs.

Alongside minimum pay requirements, Austria imposes strict rules regarding employment contracts. Every employee must receive a written summary of their employment terms, known as the Dienstzettel, even when a verbal agreement is made. This document should cover details like job title, salary, working hours, holiday entitlements and notice periods.

Payroll Tax Rates and Social Security Contributions in Austria

Payroll tax in Austria is made up of several components that must be withheld and paid by employers on a monthly basis. This includes income tax, a range of social security contributions and additional mandatory levies such as the municipal tax. Together, these deductions represent a significant share of an employee’s gross salary and are important for funding Austria’s comprehensive social welfare system.

Social security contributions in Austria total approximately 39% of an employee’s gross salary. These contributions are split between the employer and employee:

• Employer contribution: Roughly 21% of the gross salary is paid by the employer.
• Employee contribution: Employees contribute approximately 18%, deducted directly from their gross pay.

Social security contributions provide coverage for several core benefits:

• Health care insurance: Funding public health services and medical care.
• Pension insurance: Securing future retirement benefits for employees.
• Unemployment insurance: Offering financial protection during periods of job loss.
• Accident insurance: Covering workplace injury costs, fully paid by the employer.

In addition to social security, employers must also pay a 3% municipal tax (Kommunalsteuer), calculated on the gross salary of each employee. This tax is paid to the local municipality where the business is registered and is a standard cost for all Austrian employers.

Income Tax Bands and Withholding Rules for Austrian Payroll

Income tax in Austria operates on a progressive scale, meaning the tax rate increases as an employee’s earnings rise. The current income tax rates range from 0% for lower-income earners to a maximum of 55% for high earners. This progressive structure ensures that higher salaries are taxed at a steeper rate, contributing more to public funds while providing relief to lower-income groups.

Employers are responsible for managing all income tax obligations under the pay-as-you-earn system.⁴ This means that taxes are automatically deducted from an employee’s gross salary each month before payment is made. The withheld amount is then remitted directly to the Austrian tax office (Finanzamt).

When calculating income tax, employers must account for several factors:

• Personal tax-free allowances: These are standard deductions available to all employees, reducing the taxable income base.
• Applicable tax credits: Employees may be entitled to credits for family status, commuter benefits, or other qualifying circumstances, which lower the final tax owed.
• Additional deductions: Voluntary deductions such as union fees or recognised charity donations can further reduce the tax liability.

The income tax calculation is not a simple percentage of gross salary but a detailed process that incorporates these allowances and deductions into a cumulative wage tax table (Lohnsteuertabelle).⁵

Severance Pay Contributions And Termination Costs Under Austrian Law

In Austria, severance pay is governed by a mandatory contribution system known as “Abfertigung neu” (new severance pay scheme). This system applies to all employees whose employment contract began on or after January 1, 2003. Employers must contribute 1.53% of each employee’s gross monthly salary to a dedicated severance fund managed by an independent severance pay provider.

These severance contributions are made monthly and must be processed alongside payroll tax and social security payments. The severance fund accumulates throughout the employment period, regardless of the reason for termination. When the employment relationship ends, employees can choose between:

• Receiving a lump-sum cash payout of the severance balance.
• Transferring the severance amount into a private pension scheme, providing long-term financial security.

This flexible arrangement ensures employees retain access to severance benefits even in cases of voluntary resignation, provided certain minimum employment periods are met.

Termination of employment in Austria also involves additional legal responsibilities for employers. Statutory notice periods apply and vary based on the employee’s length of service and job classification.

---

Pay Employees With BatchTransfer

BatchTransfer has an easy-to-use instant payments system that allows you to make multiple payments, for both domestic and international, in one go. Small businesses and enterprises can get access to BatchTransfer with no additional cost after getting a Wise Business account.

BatchTransfer’s core strengths for payroll:

What sets BatchTransfer apart is its commitment to providing the mid-market rate for currency conversions. This means that businesses get a fair and transparent deal when making international payments.

Another perk of using BatchTransfer for international payroll is its extensive coverage of over countries and currencies! With features like automatic payment scheduling and API integration, small businesses can streamline their payroll process, freeing up valuable time and resources for other important tasks.

• How can businesses use BatchTransfer for payroll?: Businesses can send up to 1000 payments with a single click with BatchTransfer. US-based business can access BatchTransfer at no extra charge.

• Connect to your accounting software: You can easily manage and reconcile your mass payments through accounting software integrations such as QuickBooks or Xero.

Start making payments
with BatchTransfer >>

Wise Features	Price
Mid-market exchange rate for currency conversions Payments to countries in currencies Delivery estimator, real-time tracking, pay-to-email & more	Free to sign up for US business accounts, no monthly fees, no minimum balance requirements. Transparent and competitive rates Free access to API, BatchTransfer, and integrations features. You can also get major currency account details for a one-off fee to receive overseas payments.

---

Paid Leave Rights And Unemployment Insurance Contributions In Austria

Austria provides employees with generous leave entitlements as part of its strong employee protection framework. The baseline entitlement is five weeks of paid annual leave per year, increasing with years of service. After 25 years of continuous employment, the entitlement rises to six weeks annually, rewarding long-term service.

Austrian law guarantees several categories of special leave:

• Maternity leave: Female employees are entitled to 16 weeks of fully paid maternity leave: eight weeks before and eight weeks after childbirth. In cases of premature birth, multiple births, or Caesarean section, the postnatal leave period extends to 12 weeks.
• Paternity leave: Fathers can access paternity leave options, including unpaid “Papa Monat” (father’s month), which grants four weeks of leave immediately following childbirth, with the option to apply for childcare allowance.
• Parental leave: Following maternity or paternity leave, parents can take extended unpaid parental leave until the child reaches the age of two, with job protection in place.

Austria also mandates paid sick leave, where employees are entitled to full salary during illness for a set number of weeks, depending on the length of service. After this period, they receive continued partial wage replacement through social security.

Unemployment insurance is designed to protect employees during periods of job loss. This insurance is jointly funded:

• Employers contribute approximately 3% of gross salary toward unemployment insurance.
• Employees contribute a similar percentage, deducted from their gross salary.

Unemployment insurance contributions grant employees access to financial benefits, job-seeking assistance, retraining programs and reintegration services.

Key Employer Compliance Duties When Processing Payroll In Austria

Payroll in Austria involves much more than simply calculating employee salaries. Employers must fulfil a range of compliance obligations to ensure their payroll processes meet Austrian legal standards. Failure to comply with these duties can result in severe consequences, including administrative fines, penalties, and legal action.

One of the most important responsibilities is the accurate calculation and timely payment of all required deductions. This includes payroll tax, social security contributions, income tax and other statutory levies such as the municipal tax. These amounts must be correctly withheld from employee salaries each month and paid to the relevant Austrian authorities by strict deadlines.

Austrian employers must meet specific reporting and registration duties:

• Employee registration: Every new employee must be registered with the Austrian social insurance institution (Österreichische Gesundheitskasse) before starting work. This ensures that employees are covered by health insurance, pension schemes, unemployment insurance and accident insurance from their first working day.
• Payroll tax filings: Monthly payroll tax declarations must be submitted to the Austrian tax office (Finanzamt), along with the payment of withheld taxes.
• Record-keeping requirements: Employers are legally required to keep detailed employment and payroll records. This includes payslips, payment summaries, tax filings and social security reports. All records must be securely retained for a minimum of seven years to comply with audit requirements.

Employers are also expected to comply with sector-specific CBAs, which may impose additional reporting duties or financial contributions.

In-House vs. Outsourced Payroll Processing: Which Option Fits Your Business?

One of the most important decisions for companies operating in Austria is whether to handle payroll processing internally or to partner with a payroll service provider. The right choice depends on company size, in-house expertise, and how much administrative capacity is available to manage Austrian payroll tax, income tax withholding and CBAs.

Here’s a quick comparison of the pros and cons of both approaches:

Factor	In-House Payroll	Outsourced Payroll
Compliance Control	Full control, but requires constant legal monitoring	Provider ensures up-to-date compliance with Austrian payroll tax and social contributions
CBA Management	Must be manually tracked and updated internally	Included in service; CBA updates are automatically applied
Administrative Effort	High: requires payroll staff and systems	Low: provider handles calculations, filings, and payments
Error Risk	Higher, especially without legal/payroll expertise	Significantly reduced risk of errors or late payments
Cost	Potentially cheaper at scale, but hidden compliance risks	Monthly service fees, but predictable and scalable costs
Scalability	Can be time-consuming as headcount grows	Easy to scale as company expands, including cross-border hires

Companies with dedicated HR or finance teams may prefer the control of in-house payroll, provided they have the tools to handle payroll tax filings and legal updates. Outsourcing is often the safer option for companies navigating Austria’s complex employment laws, especially during the initial market entry phase or periods of rapid growth.

Final Thoughts

Payroll in Austria involves far more than issuing paychecks. If you operate in Austria or plan to hire employees there, these rules are not optional. Payroll mistakes lead to fines, delayed payments, employee complaints and legal audits.

Between social security contributions, income tax bands and strict employment contract rules, employers must manage a complex set of compliance responsibilities. Businesses can benefit from local expertise or outsourcing providers to navigate Austria’s payroll system, especially when dealing with CBAs or cross-border teams.

Frequently Asked Questions

What Is the Payroll Tax Rate in Austria?

Payroll tax in Austria includes income tax, social security contributions, and a municipal tax, totalling around 40% to 45% of gross salary when combining employer and employee portions.

Is There a Statutory Minimum Wage in Austria?

No, Austria does not have a statutory minimum wage. Minimum salaries are set through collective bargaining agreements, which are legally binding.

How Much Are Unemployment Insurance Contributions?

Unemployment insurance is part of social security contributions. The combined rate is approximately 6%, shared equally between employer and employee.

Are the 13th and 14th Salaries Mandatory?

Yes, under most CBAs, employees receive a 13th salary (usually in June) and a 14th salary (typically in November), taxed at a preferential rate.

Can Payroll Be Processed Digitally in Austria?

Yes, electronic payslips and digital payroll processing are permitted, provided employers comply with legal reporting and record-keeping standards.

Save Time and Hassle With Wise Business

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. Wise makes it easy to send, hold, and manage business funds in currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. Simply add the local account details when billing international customers to receive international payments with no fees.

Account opening is 100% online, with no need to visit a branch or book appointments.

Once you’re set up, you can connect to software such as Wave, FreshBooks, and more. You can also withdraw funds from Stripe without currency conversion fees.

Open a Wise Business account online

Some key benefits of Wise Business include:

Major local account details to receive international payments with ease No monthly account fees just a simple one-off fee for account details Receive payments from e-commerce platforms such as Amazon or via Stripe. Free invoicing tool to generate and send invoices. Create invoices using the Wise invoice generator or invoice templates. Accounting integrations, including a QuickBooks Bill Pay connection. Bill payments will be synced, matched, and categorized in QuickBooks for simple reconciliation. Access to BatchTransfer. Fast payment of up to 1,000 people.

---

Sources:

1. Tax Offices and Authorities – Federal Ministry of Finance Austria
2. Austrian Health Insurance Fund (ÖGK)
3. Typical Contents of Collective Agreements – Entsendeplattform
4. Austria Payroll Guide – Playroll
5. Austria Income Tax Table – Finanz.at