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WORKING IN AUSTRIA

What are the 13th and 14th wage packets that Austrians receive?

If you are working in Austria, you can expect to get paid 14 times a year - so what are these 'extra' payments, and how do they work?

Published: 23 February 2024 15:08 CET
Updated: 26 April 2024 12:01 CEST
What are the 13th and 14th wage packets that Austrians receive?
Pictured is a wallet full of money. Photo: Pixabay

If you are a salaried employee in Austria, you’ll be happy to know that you are likely entitled to 14 payments a year, rather than the standard 12.

You get a monthly salary of course, but there are also two ‘extras’ – one of the extra ones comes just before the summer holidays, while the other is paid ahead of the Christmas holidays.

These are the aptly named “Christmas and holiday bonuses” or sometimes the “13th and 14th salary”.

The entitlement, amount and due date of special payments are regulated in the respective collective agreement or individual employment contract, but their existence is widespread among salaried workers in the Alpine land – even those who work part-time or have ‘mini-jobs’.

READ ALSO: Six things you need to know about salaries in Austria

How much do I get?

The special payment amount depends on the collective agreement that applies to you. Usually, the holiday or Christmas bonus amounts to one month’s salary. However, there are also sectors in which less is paid. 

Regular overtime and bonuses only have to be included in the holiday or Christmas bonus if this is stated or agreed in the collective agreement.

No holiday or Christmas pay is due for parental leave, military or civilian service periods.

Holiday and Christmas payments are also taxed more favourably to the employee’s benefit, so the net amount is higher than a regular monthly wage.

Although it’s generally a good deal, your boss will of course be aware of the requirement for a 13th and 14th month when they calculate what salary to offer you as you start a new job.

When are the payments made?

When the special payments are to be paid (due date) depends on the respective collective agreement. Christmas bonuses are usually due in November or December, while holiday pay is typically due in June or July.

Holiday pay often has to be paid out in accordance with the collective agreement when employees have used up at least half of their holiday – in these cases, it may be due in January or December.

READ ALSO:  Can I take my kids out of their Austrian school during term time for a holiday?

What if I have been recently employed?

If you have been working for a whole year in a company, you are entitled to the total amount of these special payments. However, if you have recently started working there, the fee is still due but proportional to how long you have worked there.

Collective agreements for workers often stipulate that they do not receive holiday/Christmas pay after justified dismissal or unauthorised early resignation. The employer may even be able to reclaim or offset holiday/Christmas pay that has already been paid out. In the case of other types of solutions (e.g. employee dismissal), employees are generally entitled to the pro rata (= aliquot) holiday/Christmas pay.

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WORKING IN AUSTRIA

Why are people in Austria paying more taxes despite federal reforms?

Workers in Austria are still among those with the highest tax burdens in the world, with the taxes and contributions taking more than 40 percent of wages even as the country introduced sweeping tax reforms.

Published: 26 April 2024 12:21 CEST
Why are people in Austria paying more taxes despite federal reforms?

It’s often said that Austria is a country with high quality of living and high taxes, but a new OECD study shows just how high the tax burden is here compared to other OECD countries.

According to the report, Austria has the third-highest tax burden on workers and the so-called “tax wedge”, how much of a worker’s wage is taken by the government,  increased as well.

According to the OECD, in most countries, the increase in labour taxation was primarily driven by increases in personal income tax.

This is because nominal wages increased in 37 out of 38 OECD countries as inflation remained above historic levels. However, since most of these countries do not have automatic indexation of tax systems, high inflation tends to increase workers’ tax liabilities by pushing them into higher tax brackets. 

However, Austria’s federal tax reforms removed this in the country in 2023. This means that once inflation rises, the tax brackets that define how much taxes you will pay on your income will also rise – and they have risen in 2023 and in 2024 since the change. 

The measure was known as the “end of the cold progression” in Austria and should have protected workers’ incomes from inflation losses.

READ ALSO: The tax benefits that parents and families receive in Austria

What is the tax ‘wedge’?

The OECD defines a tax wedge as “income tax plus employee and employer social security contributions, minus cash benefits.” 

In other words, if an employer has a labour cost of €100, how much will they actually see in their pockets, and how much of this goes to the state? According to the organisation, the percentage is the tax wedge.

In Austria, €100 earned by a single employee without children was taxed at an average of €47.2 last year. The amount was only smaller than in Germany (47.9 percent) and Belgium (52.7 percent) and it rose compared to the previous year when it was still at 46.9 percent.

The average of the 38 OECD countries was 34.8 percent.

Married single-earner couples with two children also have high tax burdens, with a tax wedge of 32.8 percent (OECD average: 25.7 percent), which is the eleventh-highest tax and contribution burden within the OECD for this group (2022: 13th place). For married dual-earner couples, the wedge was 40.6 percent.

The tax wedge for individuals or households with children is generally lower than those without children, as many OECD countries grant households with children a tax advantage or cash benefits.

READ ALSO: Why it’s worth filling in your annual tax return in Austria

Why is Austria’s tax burden higher this year?

Despite the tax reform presented by the government, Austria’s tax wedge has increased compared to the year before. 

The reason is the relief granted in Austria in 2022 in the form of one-off state payments. With the rising cost of living, the federal government released several temporary measures to help people in the country cushion the effects, including the popular €500 Klimabonus payment every person who had been a resident of Austria for at least six months was entitled to. 

These payments and increases in family allowances reduced the tax burden in 2022 – but they no longer exist or were drastically cut in 2023. Because of that, the tax burden is rising again. 

“The abolition of cold progression and the other measures have merely prevented the tax burden from rising more sharply,” Wifo economist Margit Schratzenstaller told Der Standard.

The report said the increased tax issues show that there is still a need for action. Compared to other industrialised countries, Austria’s tax burden on work for a single person without children is ten percentage points higher. Of course, the expert noted, the fact that many industrialised countries have a different social system with fewer publicly funded benefits also plays a role here. However, labour is also expensive in Austria compared to the EU average.

READ ALSO: What foreign residents in Austria should know about taxes

“The fact that the tax burden on the middle classes has increased is due to the government’s failure. Instead of structural relief, there have been one-off payments that have evaporated,” said Lukas Sustala, head of Neos-Lab, the think tank of the liberal opposition party.

NEOS representatives have urgently called for a ‘comprehensive tax reform’ to alleviate the heavy labour burden, with a significant reduction in non-wage labour costs, according to an ORF report.

In addition, NEOS proposes the creation of ‘tax incentives for full-time work’ – including a full-time bonus and tax exemption for overtime pay. Simultaneously, NEOS aims to eliminate ‘part-time incentives of any kind’, offering a potential boost to the economy and workers’ incomes.

Economist Schratzenstaller also recommends action: She suggests reducing social insurance contributions, for example, for health insurance companies. However, it’s important to note that intervening in this area could affect the largely autonomous financing of Austria’s healthcare system, which is funded mainly through workers’ and companies’ payments via social insurance contributions. 

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