Contractor or employee in Austria? How the three contract types are told apart

Austrian law recognises three ways of engaging someone to work for you, and the label on the document is not decisive. Authorities and courts look at substance: what the person actually does, who controls it and how far they belong to your organisation.

The first is the employment contract (Dienstvertrag). It is marked by personal dependence: the worker follows instructions about how, when and where to work, and is folded into the employer’s organisation. Everything that makes Austrian employment distinctive attaches to it, from the collective agreement and 14 salaries to five weeks of leave and notice periods.

The second is the free service contract (freier Dienstvertrag). The person works for you on an ongoing basis but without personal dependence, so they organise their own time and methods. Free service contractors are still insured through the general social insurance act, under § 4(4) ASVG, so they are not outside the system the way a business owner would be.

The third is the contract for work (Werkvertrag). Here the contractor owes a defined result, delivers it with their own means and carries the business risk if it goes wrong. Contractors on this footing are self-employed and insured under a separate act, the GSVG, for the self-employed.

The distinction matters most for the middle category. A free service contractor does not receive the collective agreement pay, statutory leave and similar protections reserved for employees, yet still appears in the social insurance system, with a monthly contribution ceiling of €8,085 in 2026 where no special payments are made. That hybrid status is why the category attracts scrutiny: it is the obvious place to put someone you would rather not employ.

Foreign companies tend to arrive with one template, a consultancy or freelance agreement, and assume it lands in the third category. In practice many such arrangements look like the first, because the consultant is given a manager, a laptop, a weekly stand-up and an open-ended list of tasks.

The more the relationship resembles life inside your team, the more likely it is to be read as employment. No single factor settles it; an auditor weighs the overall picture.

• You decide working hours, require attendance at fixed meetings or approve holidays.
• The person reports to a named manager and receives task-by-task direction rather than a brief for an outcome.
• The work has no natural end point and is renewed or extended month after month.
• Equipment, software accounts and email address all come from you, and the contractor has no other clients.
• The person cannot send a substitute and must do the work personally.
• Pay is a fixed monthly sum regardless of what is delivered, with no business risk on the contractor’s side.

Signals that point the other way are a clearly specified deliverable, a fixed price for it, freedom over method and schedule, the contractor’s own tools and other customers. Where most of the list above applies, the safer assumption is that you have an employee.

A free service contract can be a defensible middle route for ongoing but independent work, such as a specialist who advises several firms and sets their own hours. It is not a way round employment for someone who in reality works like a member of staff.

Context matters as well. An experienced developer who invoices three different clients, works from their own studio and quotes per project is a long way from a former employee who left on a Friday and returned on the Monday as a consultant doing the same job. Auditors pay particular attention to that second pattern, as well as to anyone whose contractor status began at the request of the company rather than the worker.

When bogus self-employment (Scheinselbstständigkeit) is established, the employer pays what would have been owed had the person been on payroll from the start. That bill covers employer and employee social insurance contributions, wage tax (Lohnsteuer), the employer’s DB and DZ levies and the municipal Kommunalsteuer, all with interest and surcharges on top.

The worker gains claims too. Once reclassified, they can demand the pay set by the applicable collective agreement for their grade, untaken annual leave and the severance fund contributions of 1.53% that should have been paid into a Mitarbeitervorsorgekasse since their second month. Because collective agreements provide for a 13th and 14th salary, the pay difference alone can be sizeable.

Separately, a labour inspection that turns up a person at work with no ÖGK registration costs the business €1,000 per case, made up of a €400 contribution surcharge tied to the worker and €600 for the inspection. Reports filed late attract €70 per breach in 2026. Further administrative fines can apply in addition.

To put the potential exposure in context, for a white-collar Vienna hire paid €60,000, the annual bill reaches about €77,805 once contributions and levies are added, as our breakdown of the cost of an employee in Austria shows. Multiply that by several years and by several contractors and the risk becomes material.

Every Austrian employer can expect a payroll audit every three to five years. Since 1 July 2020 it has been a single joint review, known as the GPLB, covering wage tax, DB, DZ, Kommunalsteuer and social insurance together. Either ÖGK or the tax authority’s audit service carries it out, and the findings bind all the levies at once.

Auditors work from the books, so recurring invoices from individuals are an obvious starting point. A person who has billed the same amount every month for two years, with no other customers and an email address on your domain, is precisely the profile that invites questions. Interviews with the worker and a look at how tasks were assigned usually follow.

A foreign company with no Austrian payroll of its own is not invisible to this process. The contractor’s own tax and insurance filings show who paid them, and a claim by a former contractor after the relationship ends can trigger the same review.

Keep records that show how the work was actually organised: the statement of work, invoices tied to deliverables, evidence of other clients and any correspondence in which the contractor set their own schedule. If those documents are thin, an auditor will rely on interviews instead, and the account given by the worker tends to carry weight.

Some companies keep people on contractor terms because Austrian employment feels hard to undo. The rules are firmer than in many places, but they are predictable, and several features make a first hire easier to manage than its reputation suggests.

The law caps probation (Probezeit) at one month. Until that month is out, the employer and the employee can each walk away on any day, with no notice and no reason given. A first fixed-term contract needs no justification at all, which can suit a project with a known end date. Only repeated renewals, the so-called chain contracts, need an objective reason.

Severance works differently from what many foreign employers expect. For contracts started since 1 January 2003 there is no lump sum from the employer on dismissal. Instead the employer pays 1.53% of pay each month into a severance fund, and the employee can draw on that pot after three contribution years when the employer ends the contract. The cost is known in advance and spread across the employment.

Notice periods are set by statute: six weeks from the employer in the first two years of service, rising in steps with seniority. Our guide to dismissal rules in Austria covers the detail, including the protections that apply where a works council exists.

If the relationship already looks like employment, converting it is usually cheaper than defending it. There are two routes: register as an employer yourself, normally through your own Austrian company, or engage an employer of record, which then stands as the legal employer for that individual while you keep directing the work. Our comparison of an EOR or a GmbH in Austria sets out the trade-offs in time and cost.

Either way, the steps are the same. The person is placed in the right collective agreement grade and paid at least its minimum, 14 times a year. Registration with ÖGK goes through ELDA before the first working day. A written statement of terms (Dienstzettel) or full contract is issued, covering the points listed in our guide to the employment contract in Austria. A probation period of up to one month can be agreed, even with someone you already know well.

With Employer of Record Austria, the conversion follows that same sequence: we issue the Austrian contract, register the employee and run monthly payroll from then on, while you keep deciding what the person works on and how, from one day to the next. Our article on what an EOR does in Austria explains the division of roles in detail.

Conversion does not by itself settle what happened before. If the earlier contractor period could be reclassified, take Austrian legal or tax advice on that history separately.

Before engaging an individual in Austria on anything other than an employment contract, answer these questions honestly. If several come back yes, budget for an employee instead.

• Will this person work mainly or only for us for the foreseeable future?
• Will we tell them how and when to work, rather than just what to deliver?
• Will they use our systems, our equipment and our email domain?
• Would we object if they sent someone else to do the work?
• Is there an agreed result with a price, or simply a monthly fee for availability?

A genuine contract for work names the result, the price and the deadline, and leaves the rest to the contractor. If you cannot write the deliverable down in a sentence or two, the arrangement is probably about labour rather than an outcome.

Reviewing whoever you engage to run Austrian employment for you matters just as much. Before moving contractors across, put a provider through the questions in vetting an EOR for Austria, which covers cost calculations, deadlines and sample contracts.