Hiring Across Borders - Employment

If you are suffering a talent shortage at your company, you don’t have to look for employees only at the local labor markets. The popularization of working from home and hybrid working models opened a lot of possibilities for local employers to hire workforce all over the world. But is it that simple? Local employers have to follow the Austrian frame of law, which makes hiring across borders not always easy.

Moreover, the employees’ requirements for accepting a job changed dramatically in the past two years. A good salary is not enough anymore to attract talent. More and more job seekers demand social benefits matching the benefits in their home countries but want to work location independently as much as possible. The living standards, work-life-balance, schools and friendly environment in the city also play a big role in accepting an employment offer.

How can both of these worlds meet in Austria? Let’s examine the possibilities for employers:

There are three different types of occupation in Austria: employment, self-employment, and a middle form called “Freier Dienstnehmer”. Which one will be the best fit for your company depends on the specific position, the needs of the company and the citizenship of the person you want to hire. Let us start with employment.

Employment within the European Union

If the perfect fit for your company has citizenship of the European Union, it will make the hiring process easier. Citizens of the European Union have access to the Austrian labor market. They can be hired here without additional procedures and be part of the social security system.

So, if you found the perfect fit in another country in the EU you can easily hire them and relocate them to Austria.

The situation gets more complicated if this person wants to work as a remote worker in their home country or anywhere else for that matter. In that case, this person will fall under the regulation of cross-border workers. Cross-border workers within the EU are workers (employed or self-employed) who live in one EU country but work in another. It should be stressed that this definition may vary for the different areas of the law (tax law, social security, etc.).

Social security contributions and taxes within the EU

When it comes to social security, there are Community rules regulating in which country the social security contributions have to be paid and which member state is responsible for the social benefits. Depending on the fact how long the employee is staying in the other country, there is a variety of different arrangements, but the main rule is that the social insurance is paid in the country where the employee is working and health care can be used in the country where they live.

This basically means that if the employee is working from home in another EU member state for a longer time (25 % or more), they will be insured in that member state.

The question of taxes is not that simple because there aren’t any Community rules. Where the taxes will be paid and who is going to pay them depends on the respective Double Tax Treaty. The regulations in these treaties are based on the negotiation process of two countries, the rules will differ depending on the other country. One of the most common regulations is that if the employee is spending more than six months in another country, they will be tax liable there. In this case, the employee and not the employer is responsible to declare income from salaried employment to the local tax authority.

Employment of third-country nationals

If you want to hire a third-country national you have to make sure that this person has access to the Austrian labor market. Here are two possible scenarios:

• If the person is already in Austria, you have to make sure that their residence permit allows access to the labor market. If that is not the case, you, as an employer, have the possibility to apply for a Red-White-Red Card for this person.

• The second possibility is if the person is not living in Austria yet. In this case, the employer can apply for a Red-White-Red Card and let the person come here after the card has been issued, or hire the person in their country of origin.

This may be tricky because the employer has to check and fit all local requirements for registering as an employer in the respective country, they want to hire someone from. Additionally, the employers have to be in compliance with all tax and social security agreements between Austria and the occupation country of the employee.

If you want to bring a third-country national to Austria there are three types of Red-White-Red Cards that may apply:

• Very Highly Qualified Workers

• Skilled Workers in Shortage Occupations

• Other Key Workers

There are a handful of requirements in regard to education, proficiency in German and English, salary, age etc. For each of the categories, the future employee will receive a different number of points. The residence permit will be issued only if the future employees collect the minimum number of points needed for the permit over all of the categories combined.

With the latest changes of the immigration law in Austria, the government tried to make the process of hiring foreign talent easier.

Making the decision and the procedure to hire third-country nationals easier, however, does not solve one important problem, when it comes to remote work: According to Austrian law, you can’t hire a third-country national and let them work remotely from another country.

Why? Because of the regulations of the residence permit.

The working permit in Austria is bound to the residence permit. Third-country nationals can relocate to Austria only with a certain purpose (in our case employment and permanent emigration to Austria). Furthermore, if they stay longer than six months in another country, they will lose the rights given by the Red-White-Red Card.

Entirely remote third-country nationals

Here another important question must be taken into consideration: What happens if an employer wants to hire entirely remote third-country nationals who will not come to Austria?

The law doesn’t explicitly forbid hiring remote third-country nationals. Furthermore, the law explicitly says that it is applicable only within Austria. Theoretically, there should be no legal restrictions to hiring third-country nationals in their country of origin and letting them work remotely, as long as the local legislation has been followed.

The problems that may arise in this case are the following:

• If Austrian employers want to hire remote employees from different countries, they have to be aware of the legal frame in those countries (social insurance, taxes) and have a supportive network there to help with the whole administrative process.

• A company that only consists of remote employees from third countries may be considered a company that tries to avoid Austrian labor law and immigration regulations, especially if living standards and salaries there are lower. This will raise questions about salary dumping and avoiding Austrian law regarding access to the labor market and tax evasion.

In conclusion, I want to say that for the past years we have been living through a severe change in the way we understand and do work. It was a forced change, but it opened possibilities for employers and employees. If we want to make the most of the new situation, we have to explore our options and prepare properly.

If you are in a struggle to find the best talent for your team and want to expand your search outside Austria, get in touch and we can find a solution together!