What Severance Pay Rules Must Employers Follow in Austria?

Which Employees Qualify for Severance Pay?

• Employees hired on or after 1 January 2003 generally fall under the new severance scheme with monthly employer contributions.
• Employees hired before 1 January 2003 may still be under the old severance regime if they did not opt into the new system.
• Under the new system, employees qualify for severance from the pension fund mainly when employment ends other than by their own serious misconduct.
• Under the old system, employees usually qualify only if the employer terminates, refuses to renew a fixed-term, or the employee resigns for employer fault or justified health reasons.
• Employees who resign voluntarily without good cause under the old system typically lose statutory severance rights.
• Blue-collar and white-collar employees, part-time staff, and most fixed-term employees are covered, with limited exceptions for certain short-term or marginal roles.

What Are the Legal Timelines for Paying Severance?

Under the new severance scheme, you must transfer 1.53 percent of the employee’s monthly gross pay to the chosen severance and pension fund starting from the second month of employment, and these contributions must be paid on the usual social security due dates. When employment ends, the fund manages the payout or continued investment, so your company does not pay a lump sum at termination. Under the old regime, any severance owed becomes due when the employment relationship ends and is typically paid with or shortly after the final salary. In practice, Austrian employers aim to settle statutory severance within the normal payroll cycle for the month of termination to avoid disputes and interest. Always check collective bargaining agreements, which may set stricter or more detailed payment deadlines.

What Penalties Apply if Severance Is Not Paid Correctly?

If you fail to comply with Austrian severance rules, you risk administrative fines, back payments, and potential civil claims from employees. Authorities can review your contribution history, termination practices, and payroll records, and non-compliance can also trigger issues in tax and social insurance audits.

• Late or missing contributions to the severance fund can lead to administrative fines and an obligation to pay arrears with interest.
• Incorrectly denying severance under the old regime can result in court-ordered back pay plus statutory interest.
• Breaches may expose your company to claims for damages and legal costs in labor court.
• Repeated or serious violations can damage your reputation with unions and works councils and complicate future negotiations.
• Documentation failures during audits can lead to presumptions against the employer and higher assessed liabilities.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (https://www.playroll.com/employer-of-record) in Austria shifts day-to-day payroll, contribution, and documentation duties to the EOR, but it does not remove the need to follow Austrian severance law. The EOR must correctly classify workers, enroll them in the appropriate severance scheme, and make timely contributions. Your company still needs to ensure that instructions around hiring, termination, and notice periods are lawful so the EOR can calculate severance correctly. If you direct an unlawful termination or push for non-payment, you may share liability or face reputational and commercial risk even if the EOR is the formal employer.

Be 100 Percent Compliant in Offering Severance with Playroll

Playroll helps your company navigate the split between Austria’s old and new severance regimes by mapping each employee’s hire date, contract type, and applicable collective agreement. Our team coordinates the correct 1.53 percent contributions to the severance fund, monitors statutory changes, and ensures that final pay calculations align with Austrian labor and social security rules. You get clear documentation for each termination so you can show auditors and works councils how severance was calculated.

When you use Playroll as your global employment partner or via our Employer of Record solution, we standardize compliant processes for notice, documentation, and payout timing in Austria. Your HR and finance teams gain a single workflow for approvals, while we handle the local complexity with authorities, funds, and payroll providers. That way, you reduce the risk of fines, back pay, or disputes and can focus on managing performance and workforce planning instead of decoding Austrian severance law.