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Austria

Opening Up Shop Austria

1. Introduction

Austria has a long tradition of employee’s rights. Ever since, employee associations have been strongly committed to the interests of employees and most of the legal rules aim to protect employees. For example, unions and the Chamber of Labour provide legal advice to employees in disputes towards their employer.

Claims are enforced rather quickly and frequently in Austria. There are specific courts for several specific matters, e.g. commercial courts and labour and social courts. Austria labour courts tend to be employee-friendly; however, judges are becoming more and more business-oriented and start to understand the needs and challenges employers are facing.

Austrian employment comprises many different legal sources, especially legislation and collective bargaining agreements (“CBA”). In particular, the search for and application of the correct CBA, the restrictions on working hours and working time models as well as the vast rights of works councils pose challenges for companies that open a shop in Austria.

The checklist below will guide you through some of the key legal requirements for opening up a shop in Austria.

KWR Karasek Wietrzyk Rechtsanwälte GmbH is one of the leading law firms in Austria and has been advising clients in all legal areas of business law for more than 17 years. The well-coordinated teams have extensive expertise in their field and always create tailor-made solutions for their clients.

KWR as a well-known and renowned full-service law firm has consulting focuses on employment law, corporate law, trade law and commercial law for both national and international clients across a wide variety of sectors. Our advice covers the entire spectrum of employment law and commercial law issues. The teams within KWR can assist you as a one-stop-shop service provider when you want to open up a shop in Austria. KWR’s areas of expertise comprise Employment, Corporate M/A, Data Protection, Dispute Resolution, Regulatory, IP/IT, Insolvency, Tax and Competition.

We at KWR understand that human resources are the most important assets of a successful company and therefore it is essential to protect HR from problems by appropriate structures and reliable relationships.

2. Labour and Employment Law Requirements

Austrian employment law is not embedded into or regulated by one single labour law code. The sources of Austrian employment law are to be found in several codes/acts/federal law, the respective applicable collective bargaining agreements, works council agreements on a company level, individual employment contracts and instructions.

Austrian employment law consists of various legal acts such as the General Civil Code (ABGB), the Labour Constitution Act (ArbVG), the White Collar Workers Act (AngG), the Act on Adjustment of Labour Law (AVRAG), Employment of Foreign Nationals Act (AuslBG), Disability Employment Act (BeinstG), Vacation Act (UrlG) and many others.

In addition, the provisions of the applicable CBA and works council agreements are important sources of rules. This variety of provisions and requirements represent a hurdle for many companies wishing to employ staff in Austria at first glance. Once a company has, for instances via workshops or trainings organised by us, understood the principles and pillars of Austrian employment law, it is still tough for employers but doable.

It is important to know that a distinction is still made under Austrian law between blue-collar and white-collar workers. The regulations and collective bargaining agreements applicable to the two groups are partly different, partly the same.

a) Collective Bargaining Agreements

In Austrian employment law, Collective Bargaining Agreements (CBAs) play a major role in day-to-day HR work. The system and mechanics of Austrian collective employment law are complicated and have a long history. It is very important to understand and observe Austrian collective employment law next to individual employment law.

There are more than 800 CBAs in Austria. A CBA is a written agreement entered into between employees’ associations and employers’ associations for the purpose of regulating working conditions for employees of the respective industry. Generally, a CBA is concluded for all businesses and all employees in one industry. In some areas, there are company CBAs instead of industry CBAs.

With only a very few exceptions, each employer doing business on the Austrian market and employing individuals in Austria, is automatically and mandatorily subject to a CLA. An employer cannot “opt out” or “choose” the applicable CBA. CBAs are mandatory for employers and are determined by the trade business carried out by the employer. CBAs take precedence over the legal provisions if they are more favourable towards employees. The provisions of the applicable CBA cannot be circumvented by employment contracts or by works council agreements. Detrimental clauses are invalid and often subject of legal proceedings.

CBAs typically regulate normal working hours, working time models, overtime charges, telework, time off for special occasions, travel allowances, premiums for long service and – most important –  the minimum wage. There is no nationwide minimum wage in Austria. Rather, each CBA provides for specific minimum wages. The applicable minimum wage must be determined separately for each position/each individual depending on the responsibilities and periods of service in the individual case. Salary payments below the respectively applicable minimum wage constitute wage and social dumping, which is forbidden and leads to high administrative fines and other negative consequences.

b) Employment Contracts

Every employer is obliged to provide the employee with a written record of the essential rights and obligations arising from the employment relationship immediately after the beginning of the employment relationship, if the employment relationship will last more than one month. This record must contain certain minimum information.

While such written records are used in some areas, an employment contract containing additional clauses negotiated and signed by both employer and employee is more common and usual practice.

The official language in Austria is German. Employment contracts should therefore be in German or least in a bilingual version with German being the prevailing language.

An employment contract should cover and regulate amongst other topics the applicable CBA, wages and special payments, working hours according, start and duration of the employment, trial month, duration of the notice period and termination provisions, usual place of work as well as the intended position and due date of the remuneration.

We at KWR have an extensive experience in assisting you in determining the applicable CBA and drafting employment agreements that are tailor-made to the specific needs of your business.

c) Workplace Requirements

Employee protection ensures the safety and health of employees at their place of work. Employers must monitor workplaces and ensure compliance with the applicable regulations. Some of these provisions also apply when working from home or abroad. Depending on the size of the company, employers are required to appoint persons responsible for first aid, fire protection and safety. The labour inspectorate controls and supports compliance with the regulations. Administrative penalties may be imposed if the employer or the responsible management does not take the necessary precautions.

d) Hiring Practice

Employment of foreigners in Austria is only permitted if they are generally exempt from the Employment of Foreign Nationals Act (AuslBG) or if an official permit for their employment has been issued. A person who does not have Austrian citizenship is generally considered a foreigner. Nationals of EEA and EU countries are exempt from the AuslBG.

Please note that the Austrian Wage and Social Dumping Act (LSD-BG), which applies when a company with its seat the EU/EAA posts workers to Austria, contains vast notification and administrative obligations for foreign companies. Employees who are posted to Austria to perform work are entitled to at least the remuneration, including special payments, overtime etc., to which employees of comparable employers are entitled in Austria by law, regulation or CBA. Underpayment and breach of the obligations of the LSD-BG are subject to high administrative penalties.

A foreign employer does not need to establish or work through a local entity to hire an Employee from an employment law perspective. It might, however, be necessary from a trade, tax or corporate law perspective. We at KWR can you with our competence and experience in making the right decision in such important aspects.

When hiring employees in Austria, special rules apply. For instance, job advertisements must contain the applicable minimum wage and must not be discriminatory. During the hiring process, data privacy and the ban of discriminatory questions must be observed in particular. Questions that concern or violate the candidate’s personal rights, for example about sexual orientation, family plans, disabilities or religion, must be avoided.

Throughout the application process and the whole duration of the employment, the employer must comply with the Equal Treatment Act (GlBG). Discrimination on the grounds of ethnicity, religion, belief, disability, age, sexual orientation, gender identity and gender is expressly forbidden by the Austrian Equal Treatment Act (GlBG). There are special Austrian institutions to ensure compliance with the principle of equal treatment (Gleichbehandlungskommission, Gleichbehandlungsanwaltschaft).

e) Employer Policy Requirements and Employee Training Requirements

If not included in the individual employment contract, it is recommended for employers to implement (amongst others) the following policies due to legal requirements/necessities:

  • a sick leave policy;
  • a policy on working hours;
  • a health and safety policy;
  • a maternity and parental leave policy;
  • an equality and diversity policy;
  • a communications policy;
  • a confidentiality and data protection policy;
  • a whistleblowing policy;
  • policies for the use of company resources (e.g. electronic devices, cars and other tools)

In order to mitigate risks of legal liability employees should also be trained on those topics on regular basis.

3. Corporate Law Requirements

a) Compliance for Incorporation

Austrian company law offers a wide variety of company forms, which are tailored to the respective tax and liability law needs of each company. A distinction must be made between corporations and partnerships. Further, the possibility of sole proprietorships exists.

Regarding corporations, stock corporations (Aktiengesellschaft, “AG”) and limited liability companies (Gesellschaft mit beschränkter Haftung, “GmbH”) are of particular importance in KWR’s daily consulting practice.

With regard to partnerships, the “open companies” (offene Gesellschaft, “OG”) and the “limited partnership” (Kommanditgesellschaft, “KG”) can become relevant when opening a shop in Austria.

KWR is at your disposal to assess which company form is best suited for your business needs in the individual case.

The most frequently chosen company form is the GmbH due to its limited liability, legal certainty as well as for tax reasons. A GmbH can be founded relatively easy and cost-efficiently, whereby it must be noted that the investment both in financial aspects as well as in effort is higher than in other countries. A GmbH can be founded by one or more persons, regardless of whether they are domestic or foreign, natural persons or legal entities. Unlike a partnership, a GmbH does not provide for personal liability of the partners. This reduces the risk for the individuals involved.

The share capital of a GmbH must be at least 35,000 EUR. At least half of this amount (17,500 EUR) must be paid in cash. A GmbH is only liable up to this share capital. The GmbH as a legal subject comes into existence the moment of registration at the Austrian Companies’ Register. Newly founded GmbHs can take advantage of the so-called “foundation privilege”: the articles of association can stipulate that the foundation privileged capital contributions are limited to 10,000 EUR instead of 35,000 EUR. At least half of this amount (5,000 EUR) must be paid in in cash; other contributions in kind are excluded. This founding privilege exists for a maximum of ten years from the company’s entry in the Austrian Companies’ Register.

In many cases, the establishment of a branch office (“Zweigniederlassung”) can be a suitable alternative to founding a GmbH. A branch office is not an independent legal entity, but an economically independent and geographically separated permanent establishment of a foreign company. A branch has an independent organisation and management. A branch is registered in the Austrian Companies’ Register. A proof of actual establishment of the branch in Austria is required next to many other documents.

The Austrian Companies’ Register is a public register kept by courts. The Companies’ Register fulfils an important information function for legal and business transactions. Failure to register facts subject to registration is sanctioned with penalties. Amongst others, the following data is kept in the Companies’ Register: companies’ register number, legal form and seat of the company, description of the business and the name of the company. It is the owner’s obligation to keep the data up-to-date at any time and register changes with the Companies’ Register.

Our corporate law and tax law experts are happy to draft the documents and implement all steps required for the foundation and registration of your local branch or company.

b) Post Incorporation Registrations

To carry out any kind of trade or business activity on the Austrian market, a trade licence (“Gewerbeberechtigung”) is needed. Applications for these licences must be submitted to the relevant district or city administration authorities (“Bezirksverwaltungsbehörden”). A list of requirements must be fulfilled. If the requirements are fulfilled the relevant authority has to enter the applicant into the Austrian Business Licence Information System (“Gewerbeinformationssystem Austria”, GISA). Austrian law distinguishes between so-called free trade and regulated trades. A managing director under trade law must be appointed next to the managing director(s) under corporate law.

Our regulatory and trade law experts at KWR are happy to assist you in this Austrian-specific area of trade law.

4. Payroll and Benefits Providers

KWR does not offer payroll or day-to-day tax consulting. Our experience has shown that outsourcing payroll accounting and tax consulting is beneficial for foreign companies opening up shops in Austria. We can recommend partners that can assist you with payroll or day-to-day tax consulting.

Any questions

Ask our member firm KWR in Austria