When an employee is hired out it is as a rule the hirer-out rather than the hirer who acts as the employer in terms of labour and social insurance law. In a ruling of 2017, the Supreme Administrative Court found that when an employee is hired out in order to act as managing director with the hirer this establishes an employment relationship (also) with the hiring company which latter becomes the employee's employer under social insurance law (Ro 2014/08/0046). The court reasoned chiefly that the employing GmbH has acquired a direct right to the work of the managing director (due to its own legal relationship from the act of appointing him/her managing director).
This legal opinion does not just contrast the fact that the social insurance category is determined solely by the in personam contract and not by the position, but it also lacks practical relevance because the third-party employment of managing directors within a group is recognised under labour law as well as under the tax code. The ruling thus caused considerable confusion. Considering that managers are frequently hired out to other companies within a group where they are appointed managing directors, the application of this court ruling would have led to substantial trouble for companies.
Legislators have responded to the problem and clarified in Section 35 (2) of the General Social Insurance Act (ASVG) that the hirer is not the employer when employees are hired out within a group of legally independent companies under a common management, especially when they take on an executive post. This provision, highly welcome from a practical point of view, entered into force on 10 January 2019.
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