1. Legal Framework
Austria pursues comprehensive social policies based on a wide range and dense network of duly coordinated social benefits and services. Social insurance is based on the principles of mandatory insurance, solidarity and autonomy. It is primarily financed by employers’ and employees’ contributions under the pay-as-you-go system. Therefore, pensions paid out within a year are financed by the contributions of the same year. This system is also called intergenerational agreement. The working generation and the means provided by that generation covers the pensions of the current retirees by paying contributions and taxes from which the Austrian state subsidies are funded in order to keep federal social insurance properly financed.
Social insurance in the stricter sense is composed of three schemes:
- pension insurance
- health insurance
- work accident insurance.
2. Required Contributions
Benefits provided by The Austrian State social security system are primarily financed by contributions of the insured persons. All contributions are calculated on the basis of the total remuneration earned by the insured person, capped at EUR 4,860 gross per month (EUR 9,720 gross per year for special remuneration) only. Various risks (age, health status, number of dependents etc.) are not taken into account for the purpose of calculating statutory insurance contributions. Both employees and employers contribute to the financing of the social security system, though white- and blue-collar worker have different rates of contribution.
In addition to these contributions, both white- and blue-collar employees pay a Chambers of Labour contribution at a rate of 0,5 %. Employer are additionally charged under the Insolvency Compensation Act at the same rate of 0,5 %. Those on very low incomes are exempt from the obligation to contribute towards health and pension insurance (low-income threshold for 2016: EUR 415.72 gross per month or EUR 31.92 gross per day.
Austrian social security system covers the following: Prevention, sickness, incapacity for work/invalidity, maternity, unemployment, old age, death of a person liable to provide maintenance, survivors’ pensions, nursing care and social need. It is evident that the structure of social protection systems in Austria has a wide range to cover all these issues, such as :
4. Required Maternity/Sickness/Disability/Annual Leaves
Maternity allowance is an income replacement benefit paid by social health insurance to employed mothers for the period of maternity protection of eight weeks (in special cases like multiple birth twelve weeks) before and after birth, as defined by labour law. No minimum insurance period is required. The amount of maternity allowance paid to employed women is based on the net income earned in the last three months plus supplements for special bonus payments. In case of special circumstances and/or medical indications these periods may be extended.
99% of the population is covered by statutory health insurance schemes. In case of temporary incapacity to work, employees are entitled to sickness benefits which follow on the continued payment of wages by the employer (employers are obliged to continue paying wages for six to twelve weeks).
After accidents at work, accidents on the way to work and occupational diseases, the workers in question are entitled to disability pensions under the work accident insurance scheme, if the assessed degree of incapacity for work is at least 20% and persists for more than three months. A disability pension may be claimed in addition to another pension (e.g. invalidity pension) or in addition to income from gainful employment.
Austria has minimum periods of annual leave defined by the Annual Leave Act (Urlaubsgesetz – UrlG). All employees are entitled to five weeks (25 working days for those working five days a week or 30 working days for those working six days a week) of paid leave per working year. Employees performing heavy night work are entitled to additional holidays of up to six working days per year depending on job tenure. In order to protect workers, such leave must be taken during an ongoing employment relationship and employers may not pay financial compensation in lieu of leave.
5. Mandatory and Typically Provided Pensions
a. Statutory Pension Scheme
The major (mandatory) system for the provision of retirement income is the statutory pension scheme, which covers all former employment participants, with the exception of civil servants. The statutory pension insurance scheme includes old-age pensions, invalidity and survivors’ pensions. The statutory pension insurance is primarily financed under the pay-as-you-go system (as already described above).
The statutory retirement age is currently 60 years for women and 65 years for men. The age at which women are eligible for retiring on an old-age pension will be gradually raised between 2024 and 2033 to approach that of men.
b. Occupational Retirement Schemes
In Austria, many employers have implemented a pension scheme granting old-age pensions, invalidity pensions and survivor’s pensions to their key employees. The second form of an occupational retirement scheme in place in Austria is the new statutory severance payment scheme under the Austrian Corporate Employee and Self-Employed Retirement Act (BMSVG).
Until recently, it was mainly the employer being directly obligated to provide for the payments resulting from these schemes. Accordingly, the employer paid, for example, the old-age pensions to the employee of their survivors once they had retired after having reached a certain age and or in the event that they were either incapacitated or deceased.
“Today the so-called pension fund agreements (Pensionskassenvereinbarung) have become the widespread method of providing additional pension benefits for employees. An individual employee’s claim may thus be established in various different ways:
- the employer may be under a direct obligation to pay a pension to personnel once they have reached a certain age or they or their survivors have become incapacitated,
- the employer may enter into life insurance policies for the benefit of the personnel or their surviving dependants and undertake to make premium payments for the insurance policy or
- the employer may pay contributions into a pension fund for the benefit of the personnel or their surviving dependants.”
In Austria, there are two different systems. For the first one, the employer’s (annual) contribution to the pension fund scheme is fixed. Accordingly, the final amount of pension payments largely depends on the success of the investments the fund undertakes. These kinds of pension fund schemes are often referred to as “defined contribution schemes”. Contrary to that, the employer remains directly obligated to pay the pension (final salary schemes) in the second scheme. Accordingly, these schemes may appropriately be referred to as “defined benefit schemes”.
The Company Pensions Act governs labour and social law issues in relation to the different schemes as set out above, such as, defined benefit schemes; life insurance contracts and defined contributions schemes. The respective organizational conditions for the pension funds are dealt with by the Pension Fund Act while tax issues are governed by the Austrian Income Tax Act.