Austria: Avoid Expensive Mistakes As Startup Employer

Last Updated: 6 July 2017
Article by Teresa Waidmann
Most Read Contributor in Austria, September 2019

As violations may lead to enormous liabilities, start-up employers are advised from the outset to comply with the applicable laws pertaining to their personnel. In addition to being an underestimated factor when it comes to financial liabilities, employment-law-related mistakes may also result in difficulties in the course of a company's sales process. For a better understanding of what can go wrong in employment relationships, three of the most common mistakes that employers make are listed below.

1. Mistake 1: Applying the wrong collective bargaining agreement (Kollektivvertag, "CBA")

1.1 What are the risks if the wrong CBA is applied?

CBAs include many provisions that deviate from the laws usually applicable to employment relationships. These may range from more favourable termination periods and dates to various benefits and additional payments, such as jubilee or severance payments, holiday pay or Christmas bonuses. Most importantly, CBAs set out mandatory minimum salaries.

If the employer does not observe the provisions of the CBA, employees may make claims for payments, eg if the employees were paid a lower salary than they were entitled to under the applicable CBA.

Also, the Austrian Law against Wage and Social Dumping (Lohn- und Sozialdumping Bekämpfungsgesetz) lays down penalties if the salary actually paid to an employee is below the minimum. Authorities then may impose fines of up to EUR 50,000 for every underpaid employee, which the company's managing director(s) will be liable to pay.

1.2 May the applicable CBA be chosen freely?

No. The CBA applicable to your company generally depends on the assignment of your company to one or more professional organisations of the Austrian Economic Chamber of Commerce (Fachverband der österreichischen Wirtschaftskammer). The assignment depends on the kind of business licence (Gewerbeberechtigung) that your company holds.

The professional organisations negotiate and conclude CBAs on behalf of their members. If a CBA was therefore concluded by the professional organisation your company is assigned to, it automatically applies to your company.

1.3 May more than one CBA be applied?

Generally, no. Even if your company is a member of various professional organisations and, thus, various CBAs appear to apply, just one collective bargaining agreement shall apply within a business (Grundsatz der Tarifeinheit). Following this principle, the CBA corresponding to the economic sector most relevant for the business applies if two or more CBAs collide within a company. If the sector cannot be identified, the CBA applicable to most of the employees applies instead.

Consequently, if your company is assigned to various professional organisations, you need to assess which of the services provided by your company is economically most relevant in order to figure out the applicable CBA.

2 Mistake 2: Incorrect qualification of employees as freelancers or independent contractors

2.1 What are the risks if employees are incorrectly qualified?

Employers often expect cost savings when concluding service contracts (Werkvertrag) or freelance contracts (Freier Dienstvertrag) instead of "regular" employment contracts (Dienstvertrag). Among other things, freelancers and independent contractors are not subject to minimum wages, special payments, paid vacation leave or overtime pay, statutory termination periods or working time restrictions. Furthermore, no payroll tax or social security contributions need to be paid for independent contractors. 

The conclusion of a service or freelance contract with a person who is actually working as a regular employee may therefore result in severe financial exposure for the employer, as the employee is likely to subsequently claim additional payments. In addition, social security contributions and taxes (including financial penalties) would be due and payable. Penalty fees under the Austrian Law against Wage and Social Dumping of up to EUR 50,000 may be imposed.

2.2 How can the correct qualification be determined?

In order to classify the contractual relationship as a service contract, freelance contract or regular employment contract, the overall picture of the actual situation has to be taken into account. The title of the agreement may only be an indication for a certain type of contract.

There are no concrete legal provisions on when a person is considered a "regular" employee. Generally speaking, the more integrated a person is into a regular work or company environment, such as the workplace, working hours, work pattern or organisational integration, the higher the risk that a freelancer or independent contractor could be qualified as a regular employee. In cases of doubt it is therefore advisable to consult a specialist in order to conclude a correct agreement and to avoid financial liabilities.

3 Mistake 3: No employment contracts or conclusion of employment contracts with inadequate content

3.1 What are the risks if no employment contracts or inadequate employment contracts are concluded?

In practice, the biggest problems usually arise in the event of termination of employment or a court dispute. The lack of an employment contract or an employment contract whose content is inadequate may lead to difficulties proving what the parties actually agreed. This may result in protracted and expensive court proceedings with an uncertain outcome.

It is therefore highly advisable to issue a proper written employment contract signed by both the employer and the employee. The contents of a written employment contract are deemed to have been mutually agreed and therefore carry high probative force.

3.2 Is the conclusion of a written employment contract mandatory?

No. An employment contract may either be concluded orally or in writing. However, if the employment contract is concluded orally the employer needs to provide the employee with a written service note (Dienstzettel) documenting the main rights and duties arising from the employment relationship.

Nevertheless, a service note has very limited probative force, since the employee's signature only proves that the service note was received. In case of a court dispute, the employee can prove that the contents of the service note are inconsistent with what was agreed orally.

3.3 Is there mandatory content for employment contracts?

The mandatory content of an employment contract or a service note is exhaustively listed in the law, including (i) the parties' names and addresses; (ii) the start date (and in case of fixed-term employment the end date) of the employment relationship; (iii) notice periods and dates; (iv) the habitual place of work; (v) the field of services; (vi) minimum salary and salary details; (vi) vacation days; (vii) information on working time; (viii) applicable CBA; and (ix) name of staff pension fund.

The parties are free to include additional clauses at their discretion, such as non-compete clauses, side line activities, confidentiality, bonus arrangements and the like.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions