Non-Wage Labour Costs in Austria – Definition, Trends and Burden Sharing

Employers' non-wage labour costs in Austria are high by international standards and have barely been reduced since 2003. They comprise a wide range of individual levies, most of which are earmarked and finance a variety of benefits. Recent international empirical studies show that the extent to which employer-side labour taxes and contributions are passed on to employees increases with the degree of the contribution-benefit link and decreases with collective bargaining coverage. The analysis of the economic incidence of the changes to labour-related levies envisaged in the Austrian Budget Accompanying Act 2027-28 also covers the employee-side measures intended to partly offset the reduction in employers' non-wage labour costs. Drawing on the new international evidence on economic incidence, the employer-side measures – the cut in the FLAF contribution net of the abolition of the exemption for employees aged over 60 – relieve firms by around 1.25 billion € annually once all pass-through has worked itself out. The corresponding relief of around 0.25 billion € for employees is more than offset by the increase in unemployment insurance contributions for low earners of around 0.35 billion €, which they cannot shift onto firms. On balance, employees bear an additional burden of around 0.1 billion €.