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Weekly Tip 8 #LocationAustria: Labor Laws – Severance pay

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All employees whose employment contracts in Austria took effect after January 1, 2003 are entitled by law to severance pay (“Abfertigung”), even if they resign.

This right to severance pay should not be mistaken for the negotiated termination benefits (“Abfindung”) employees receive in other countries.

Severance pay for all employees - even if they resign

Starting in the second month of an employment relationship, employers in Austria are required to pay 1.53% of the employee’s gross salary including bonus payments each month into a severance payment fund (”Abfertigungskasse“). This fund manages a severance pay account for each employee.

If the employment relationship is terminated, the employee has several possibilities in addition to (after three years of employment) receiving the accrued severance pay contributions. For example, the employee can decide to reinvest in the same pension insurance fund, or transfer the sum to which he or she is entitled to the pension insurance fund of the new employer.

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