European Trade Union Institute, ETUI.

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Labour market reforms in Austria: background summary

After a long period of quite modest reforms to labour markets, the 2017 elections produced a political outcome that has led to a more conflictual climate for social policy formation.

A government of Christian-democrats and populists, which was sworn in (late December 2017) amid protests against the far right’s prominent role in the cabinet, announced labour reforms that were criticised by the trade unions as being too ‘business-friendly'. The nub of the reforms was to end restrictions on working hours, but the two governing parties also agreed to increase the maximum working day from 10 to 12 hours, and the maximum working week from 50 to 60 hours, using the argument that ‘international comparisons show that the more progressive the location, the more flexible the working arrangements’. The government also announced, before the summer of 2018, plans for a far-reaching reform of the social insurance system in order to save money. This reform of the institutional framework of the Austrian social security system turns it upside-down. The reform reduces the influence of the trade union movement and of the regions in the operation of the insurance institutions. The details of the planned reform were presented in September 2018. The trade union movement has been sharply critical and independent observers have also expressed doubts about the expected savings.

Income tax reform

  • At the beginning of 2016, income tax reforms came into force, bringing about improvements (i.e. savings) for the vast majority of employees and pensioners.
  • The ÖGB, together with the Chamber of Labour (AK), was heavily involved in the design and implementation of the tax reform. The two organisations ran a major campaign with the slogan ‘more money in the wallet’ and originally developed the tax model, which was then – with some changes – implemented by the government. The government and unions hoped that the reduction of taxes on wages would boost consumption and fuel economic growth.
  • Instead of (formerly) three tax levels, there are now six tax levels, which means that the differences between the levels are somewhat less pronounced and rises occur in smaller increments. The tax-free annual gross income of up to € 11 000 remains untouched by the reform.
  • The 2016 income tax model brought about the following six levels: the initial income tax rate is 25 % for those with an annual gross income of € 11 000 to below € 18 000; a tax rate of 35 % applies to an income of € 18 000 to below € 31 000; a tax rate of 42 % applies to an annual gross income of € 31 000 to below € 60 000; a rate of 48 % to incomes from € 60 000 to below € 90 000; a rate of 50 % to incomes from € 90 000 to € 1 million; and a tax rate of 55 % applies to annual gross incomes of above € 1 million.
  • Persons on low incomes (up to €11 000 a year) do not pay income tax and receive an annual negative tax refund of up to € 400 (before the tax reform, it was a maximum of € 110). Pensioners receive a negative tax refund of up to € 110 per year (before the tax reform, they did not receive a refund).

Law against wage and social dumping (Lohn- und Sozialdumping-Bekämpfungsgesetz LSDB-G)

  • Upon the opening of the Austrian labour market to eight new Member States in May 2011, a law against social and wage dumping was implemented. In 2015, the law was updated to make it more effective. The law seeks to ensure that foreign companies adhere to Austrian wage regulations and provide employees with wages set according to minimum standards. Its aim is thus to combat underpayment and the competitive advantage of foreign companies or foreign temporary agencies posting workers to Austria.
  • Penalties issued in cases of violation, ranging from € 1 000 to € 10 000, are in place for every underpaid employee; € 2 000 up to € 20 000 in cases of recurrence or if more than three workers are involved; and € 4 000 up to € 50 000 in cases of recurrence with more than three employees involved.
  • Checks have shown that underpayment occurs on a large scale. In 2015, the Government passed legislation, including several amendments, which reduces the penalties for companies making minor violations of the law: If the payment below collective agreement level does not exceed 10 % (of a monthly wage), a penalty can be avoided by paying the difference to the worker. In addition, the legislation states that the Austrian pay and labour law standards also apply to short-term work assignments for foreign-based companies in Austria.
  • If no wage documents were furnished during the controls, fines are avoided initially. Following the amendment, fines for not furnishing wage documents are the same as if an underpayment had occurred.
  • However, due to the lack of an enforcement directive, fines often cannot be collected. A further updated LSDB-G (implementing Directive 2014/67) came into force on 1 January 2017, which included: improvements with regard to cross-border administrative prosecutions in connection with wage and social dumping, a tightening of the general liability of contractors (Generalunternehmerhaftung), and the implementation of customer liability (including private and public customers) in the construction sector in order to secure wage entitlements for posted employees. This enables posted workers to claim wage differences not only from their (foreign) employer, but also from their (Austrian) customer.

Compulsory education

  • Regulations on compulsory education or training for young people up to 18 years of age (‘AusBildung bis 18’) were adopted in June 2016 and came into force on 1 August 2016, targeting all students finishing their compulsory schooling in the schoolyear (2016/17). In an important innovation, from the school year 2017/18 on, every young person has been required to attend further schooling or training after their initial nine years of compulsory schooling.

Working time

  • Working time issues have been debated on and off, but the discussion has intensified in  recent years. The incoming government has taken a strong stand by changing existing regulations. While business organisations had called for increased flexibility of working hours, meaning longer working days under certain circumstances, and with no requirement to pay overtime premiums, the white-collar GPA-djp union ran in 2015 a campaign for a shortening of working hours, asking for a usual (collectively agreed) working hours of 35 hours a week with full compensation of wages.
  • In the former federal coalition government’s work programme (2013-2018), an increase in daily maximum working hours (under certain circumstances, see below) and an easing of the rules on eligibility for a sixth week of annual leave were envisaged. At that time, only those who had worked for the same company for 25 years were eligible for a sixth week of annual leave. The old coalition programme provided for the extension of the provision of a sixth annual week of vacation to employees who had been in continuous employment (with multiple employers) for 25 years.
  • Due to an amendment to the Working Time Act (Arbeitszeitgesetz), the daily maximum working hours limit has been extended since 1 January 2016 to 12 hours when active travelling time is involved (i.e. driving a car during a business trip). Working time (including overtime) excluding travelling time was still limited to 10 hours a day.
  • On 5 July 2018, the parliament passed a new law proposed by the incoming government that brought other substantial changes to the Working Time Act, which  came into effect on 1 September 2018. The eight-hour working day has remained unchanged, however, the maximum daily working time (including overtime) has been increased from 10 hours under the existing law to 12 hours. The maximum weekly working time increased from 50 hours to 60 hours. In order to comply with the EU Working Time Directive, the average working time for each 17-week (four-month) period, including overtime, remains capped at 48 hours a week.
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