In Austria exists a rather unique version of an employee benefit system: a mixture of severance payment and a mandatory golden handshake.
The existing law:
By law an employee is granted an additional payment, if
1) the company terminates the working contract with the employee, or
2) the employee leaves the company because he is entiteled for a disability
pension by social security, or
3) the employee leaves the company because he is entiteled for an old age pension
by social security, or
4) a female employee leaves the company after maternity leave, or
5) the employee dies.
The amount depends on the accrued period of service and the reason, why the
employee leaves the company.
The following table shows the details:
| accrued years of service | Additional payment due to reason 1) , 2) or 3) | Additional payment due to reason 4) or 5) |
| 0 to 2 | 0 | 0 |
| 3 to 4 | 2 monthly salaries | 1 monthly salary |
| 5 to 9 | 3 monthly salaries | 1,5 monthly salaries |
| 10 to 14 | 4 monthly salaries | 2 monthly salaries |
| 15 to 19 | 6 monthly salaries | 3 monthly salaries |
| 20 to 24 | 9 monthly salaries | 4,5 monthly salaries |
| 25 and more | 12 monthly salaries | 6 monthly salaries |
The basic idea of this law is to guarantee the standard of living of an employee
if he loses his job for a while. So he is not entiteled to any lump sum if he
leaves the company on his own. When this law was passed people generally stayed
with one company for the whole working life. It was completely uncommon to switch
one's emplyoer. Nowadays the situation changed completely. Only in a few parts
of business life people tend to stay with one employer until retirement. An
amendment of this law is definitely necessary.
The new proposal:
The board of the employer association and the unions agreed on the following
model: It shall be applicable only for working contracts starting after June
2002. It is a pure defined contribution system. From the first day of service
the emplyoer pays 1,53 % of the emplyoees salary to a "Abfertigungskasse",
which will be both a severance payment fund and a pension fund. The employee
can take the accrued assets in cash if his employment ends because of one of
the reasons which entiteled him for a payment under the old law. The mayor advantage
for the employee is that he does not lose his accrued benefits if he quits his
job on his own. He is able to transfer his assets to the "Abfertigungskasse"
of his new employer. At retirement age the employee can decide either to benefit
from the accrued assets in cash or he may take an annuity including a spouses
pension. The legal framework for "Abfertigungskassen" is not yet set
up, but it is expected to be similar to the pension fund regualations. To guarantee
the employer's payments the contribution of 1,53% will be paid on top of the
existing contributions to the social security administration. Both employer
and employee's board decide to which "Abfertigungskasse" the contribution
will be forwarded from the social security administration.
accounting:
Under the old system the companies had to have internal book reserves to finance
these payments. Moreover there exists a law that forces the companies to back
50% of these book reserves by a certain asset class. Some companies funded the
remaining rest by external assets or insurance contracts. Due to the fact that
the new model is a defined contribution system, there is no need for internal
book reserves any more.
tax:
The contributions to the "Abfertigungskasse" are both tax free and
excluded from the assessment basis for social security contributions. For both
employer and employee. The benefits will be taxed with a fixed rate of 6%, no
matter if the employee goes for a lump sum or an annuity.
Due to the fact that the new model was approved by employer association and
unions only there will be some modifications by the government. Nevertheless
the basis for a new employee benefit system has been set.
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