Currently, there are hardly any wage increases remaining, so Austria urgently needs reform in this area. In this context, the €1,000 employee bonus proposed in the 2025 Budget Act is a farce, and it remains to be hoped that the government will implement even more "significant" measures!

Everyone is talking about the declining productivity figures (due to the substantial salary increases achieved so far) in Austria. To remain competitive, labor taxation will also have to be analyzed. For this reason, we examined how much the employee retains after a certain salary increase and what burden employers can expect.

This was calculated using an example of a salary increase of 100 euros gross per month.

Wage increase in comparison

In Austria, a gross wage increase of €100 (based on a gross salary of €2,500) costs the employer a total of approximately €130, of which the employee receives only €57 net. This means that approximately €73 is "lost" in income tax, social security contributions, and non-wage labor costs – for a €100 gross wage increase!

For an employee with a gross salary of 4,000 euros, the same gross wage increase of 100 euros costs the employer in Austria around 130 euros, of which the employee only receives 49 euros net, thus the tax deduction amounts to 81 euros (for a gross wage increase of 100 euros).

Tax trap wage increase: Non-wage labor costs as a brake on growth

Austria has one of the highest labor taxes in the world, reducing its attractiveness as a business location for skilled workers and companies. In Austria, far too little remains for employees from wage increases. This is likely one of the reasons for the extremely weak economic performance. For this reason, these figures should serve as a real wake-up call for politicians!

Need for reform in Austria

The calculations clearly demonstrate that Austria urgently needs a reform of wage taxation to remain competitive. It is necessary to examine whether non-wage labor costs can be reduced and tax allowances increased in order to secure Austria's long-term competitiveness and make it a more attractive location for skilled workers and companies.

Budget Accompanying Act 2025 – Introduction of an employee bonus of 1,000 euros

The current draft of the budget accompanying legislation proposes the introduction of a tax-free employee bonus of €1,000 per year. However, the current draft legislation is far too limited in this context, as startups, in particular, primarily have salary costs in their P&Ls. Therefore, startups are among the most affected by Austria's "labor tax madness"! Often, the only option left is to flee abroad...

This article was written by David Gloser (Partner, Tax Advisor and Auditor) and Markus Fahringer (Senior Manager and Tax Advisor) of ECOVIS Austria. ECOVIS Austria is one of Austria's leading tax consulting firms in the startup sector. www.ecovis.at