# Running Payroll in Austria Get payroll up and running in Austria. We'll help you set up payroll for your team in record time and take the entire compliance burden off your shoulders. &w=3840&q=75) ## Payroll cycle **Monthly** **Payslip**: Paper or digital **Tax filing**: Monthly **Tax year**: Calendar year **Employer taxes**: 20.98% **Currency**: Euro (EUR) ## Pay Your Team in Austria Strategically located in Central Europe, Austria offers **strong infrastructure and access to both Western and Eastern European markets**, making it an attractive destination for international business expansion. However, employers operating in Austria must navigate a well-defined and regulated payroll landscape. To remain compliant, companies must adhere to **strict requirements related to tax filings, social security contributions, and employee registration**. Timely submissions and accurate payments are essential to avoid penalties. Before initiating payroll operations, employers must complete a series of mandatory registrations with Austrian authorities, including tax and social insurance bodies. ## Setting up Payroll in Austria Before processing payroll in Austria, employers must complete specific registrations with Austrian authorities. - **Registration with the Tax Authority:** Employers are required to register with the competent local tax office within one month after commencing business activities. Upon registration, the tax office issues a tax identification number (_Steuernummer_), which is necessary for withholding and remitting income tax from employee wages. - **Registration with the Social Security Authority:** Employers must register with the social security authority to obtain an employer account number, which is used for all social security-related payments and declarations. Each employee must be registered before commencing employment. Employers are required to **maintain a payroll account** (_Lohnkonto_) **for each employee**. This account records all relevant payroll data, including gross salary, tax deductions, and social security contributions. It is **not legally required to establish a local legal entity** in Austria to hire employees. Foreign employers can hire Austrian residents under their foreign entity. However, foreign employers must comply with Austrian registration requirements for tax and social security purposes, as well as fulfill obligations related to wage tax withholding and social security contributions. ### Payroll advice for Austria Get expert guidance from the Lano team to find the best payroll setup for your business. &w=3840&q=75) ## Income Tax and Social Security in Austria Employers are responsible for **withholding income tax and social security contributions from employee wages** and remitting them to the authorities. Austria's social security system is jointly financed by employees and employers and covers areas such as health, pension, unemployment, and accident insurance. ### Tax Considerations Austrian tax residents are taxed on their worldwide income, while non-residents are subject only to Austrian-sourced income. The Austrian **income tax system is progressive**, with rates increasing across income brackets. As of 2025, the **tax-free threshold** has been raised to EUR 13,308, and tax rates range from 20% to 55%, depending on the income level. The top marginal rate of 55% applies to annual income exceeding EUR 1 million and is currently scheduled to remain in effect through the end of 2025. Special tax treatment is applied to **additional annual payments**, such as the 13th and 14th salaries. These payments are **taxed at a reduced rate** of 6%, provided they do not exceed one-sixth of the employee's total annual income. Any portion that exceeds this threshold is taxed at the standard progressive rates. In Austria, **municipalities levy a payroll tax at a rate of 3%** on the total monthly gross salaries and wages paid by employers. This tax applies exclusively to employers with a permanent establishment (_Betriebsstätte_) within Austria. Foreign employers without a permanent establishment are exempt from paying municipal payroll tax. ### 2025 Tax Bands | Income Range | Tax Rate | |----------------------------|----------| | Up to EUR 13,308 | 0% | | EUR 13,308 – EUR 21,617 | 20% | | EUR 21,617 – EUR 35,836 | 30% | | EUR 35,836 – EUR 69,166 | 40% | | EUR 69,166 – EUR 103,072 | 48% | | EUR 103,072 – EUR 1,000,000| 50% | | Above EUR 1,000,000 | 55% | ### Tax Withholding and Reporting Employers are responsible for withholding income tax from employee wages and submitting it to the Austrian tax authority. **Payments must be made by the 15th of the following month**. The municipal payroll tax (_Kommunalsteuer_), if applicable, is also due by the 15th of the following month. Payments are made directly to the respective municipality. An electronic municipal tax report must be submitted no later than March of the following year. An **annual income tax statement** must be filed **for each employee** by the end of February. For non-electronic filings, the deadline is the end of January. Employees who wish to file a tax return must do so by 30 April. For electronic filings, the deadline is extended to 30 June. There is no obligation to submit a tax return if the employee only receives income from employment and no additional income sources. The **tax year** in Austria runs from 1 January to 31 December. ### Social Security Contributions Employees and employers are legally required to make social security contributions. Austrian social security encompasses health insurance, pension insurance, accident insurance, and unemployment insurance. The contribution rates are as follows: - **Health insurance:** 7.65% (3.78% employer, 3.87% employee) - **Pension insurance:** 22.8% (12.55% employer, 10.25% employee) - **Accident insurance:** 1.1% (borne solely by the employer) - **Unemployment insurance:** 5.9% (2.95% employer, 2.95% employee) The **total employer contribution rate is approximately 20.98%** of an employee's gross salary—up to a monthly cap of EUR 6,450. The employee's contribution to unemployment insurance is income-dependent, with reduced rates for lower-income brackets. In addition to standard social security contributions, employers in Austria are responsible for several **supplementary payments that support various statutory funds**. These obligations apply regardless of company size and, in some cases, extend to foreign employers with staff subject to Austrian social security. These additional employer obligations include: - **Severance Pay Fund:** 1.53% of the employee’s gross salary, including special payments. - **Family Burden Equalization Fund (FLAF):** 3.7% of gross payroll. This contribution applies to all employers, including foreign companies with Austrian-based employees. - **Chamber of Commerce Levy:** An additional 0.32% to 0.42%, depending on the federal province, applicable only to members of the Austrian Chamber of Commerce. Foreign employers are generally exempt from this surcharge. - **Insolvency Fund Contribution:** 0.1% of gross salary. This contribution supports wage protection in the event of employer insolvency. - **Housing Subsidy Fund:** Included within the overall social security contribution rates; specific rates may vary. When combining the standard social security contributions (20.98%) with these additional employer obligations, the **total employer cost can exceed 29%** of an employee's gross salary. Employers are required to submit **social security statements** electronically on a monthly basis. The deadline for submitting these statements is the 15th of the month following the pay period. For example, contributions for March must be filed by April 15. The corresponding payments for both employer and employee contributions must also be made by the **15th of the following month**. ## Employment Obligations Employees in Austria are entitled to various benefits. These include: - **Annual leave and public holidays:** minimum 25 days for a 5-day working week (30 days for a 6-day working week), plus 13 public holidays - **Maternity leave:** 16 weeks paid by social security, typically starting 8 weeks before the expected due date and ending 8 weeks after childbirth - **Paternity leave:** 1 month, which must be taken within the first 91 days following the birth of the child - **Parental leave:** unpaid parental leave until the child reaches the age of 2 years - **Sick leave:** continued payment of full salary during periods of illness, with the duration depending on the length of service (ranging from 6 to 12 weeks), plus 4 weeks of half pay ## Compensation **Austria does not have a statutory national minimum wage**. Instead, minimum remuneration is determined through collective bargaining agreements specific to various industries and sectors. These agreements are prevalent, covering approximately 98% of employees in the private sector. **Overtime** work is generally **compensated at a rate of 150%** of the regular hourly wage. This applies regardless of whether the compensation is provided as additional pay or equivalent time off. Specific provisions regarding overtime may vary depending on the applicable collective agreement. It is customary in Austria for employees to receive a **13th and 14th salary,** commonly referred to as holiday and Christmas bonuses. They are typically paid in June and November/December. While there is no legal requirement to provide these additional payments, they are often mandated by collective agreements or stipulated in individual employment contracts. ## Payroll Requirements In Austria, **payroll is typically processed on a monthly basis**. Employees are usually paid by the last working day of the month, unless a different pay date is specified in the individual employment contract or an applicable collective bargaining agreement. Employers are obligated to adhere to the agreed-upon pay date. Employers are legally required to provide employees with a payslip at the end of each pay period. **Payslips can be delivered electronically** and must contain the following mandatory information: - Gross salary, - Calculation basis for social security contributions, - Withheld social security contributions, - Taxable income, - Withheld income tax, - Contributions to the Severance Pay Fund, and - Deducted family allowance. **Payroll records must be retained for** a minimum of **seven years**. This requirement ensures that records are available for inspection by the tax authorities and other relevant bodies.