Austria - Employment, Unemployment, and Pension Benefits

Employment, unemployment, and pension benefits

As of the early 1990s, the standard work week in Austria was forty hours, although some occupational groups have negotiated a thirty-eight and one-half hour week. Minimum wages and salaries are negotiated by trade unions and the representative bodies of employers, and individual professional groups negotiate increases in wages, salaries, or benefits on the basis of collective bargaining. Salaries are paid fourteen times a year, and two special payments, usually on June 1 and December 1, are taxed at lower rates than regular salaries. In addition, Austrians are entitled to five weeks of paid vacation annually.

All people gainfully employed, employees as well as the selfemployed , are subject to compulsory insurance, which includes unemployment, disability, retirement, and provisions for surviving dependents. The right to draw unemployment is contingent on having worked for at least one year. Unemployment benefits range from 50 to 70 percent of the recipient's previous net pay and are limited to a period of seven months. After this period expires, the unemployed can qualify for a series of different support programs depending on need.

As of the early 1990s, the legal retirement age was sixtyfive years for men and sixty years for women. However, only 10 percent of men and 50 percent of women actually work until those ages because they may qualify for disability pensions or take advantage of provisions that allow contributors to retire after paying into a pension fund for thirty-five years. Retirement pensions are generally calculated on the basis of the level of income during the last ten years of payment and the overall length of the period of contribution. For example, if a person's "full working life" is forty-five years, he or she receives a pension equivalent to about 80 percent of his or her previous net income, which is adjusted on a regular basis to compensate for subsequent increases in the cost of living. A widow receives 60 percent of her late husband's pension.

More than two-thirds of the expenditures for pensions are directly covered by payments of employers and employees into pension funds, and the balance is funded by the federal budget. However, given Austria's liberal early retirement practices and demographic trends, the ratio between the active work force and retired persons in Austria is deteriorating and could reach 1:1 by the year 2020. Because of this trend, experts recognize that a reform of the pension system is inevitable, and the financing of social security benefits, which were introduced under fortuitous conditions of economic and demographic growth in the 1960s and 1970s, is becoming an increasingly pressing issue. A reduction of the level of benefits or the introduction of a "flat-rate" pension, which does not take previous salary and contribution differentials into account, are two possible alternatives.

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