The Welfare State

Austria provides a comprehensive system of social security and welfare schemes. The network operates at two levels. First, there is the principle of insurance, which provides cover for all gainfully employed persons, and to a large extent for their dependents in cases of sickness, accident, unemployment, parental leave, and pensions, and, secondly, there are public welfare benefits made available by the federal, provincial and municipal authorities to citizens in need, who are not covered by the insurance system.

Social protection systems in Austria can be broken down as follows:

  • Social insurance: primarily includes social pension, health and work accident insurance
  • Unemployment insurance: primarily covers unemployment benefits, unemployment assistance and active labour market policies
  • Universal schemes: family allowance and tax credit for children, childcare allowance, long-term care system (and, de facto, the benefits in kind offered by the health care system)
  • Means-tested benefits (means test on income): primarily include minimum income levels under the pension insurance scheme (equalization supplements), unemployment assistance under unemployment insurance, the means-tested minimum income scheme (social assistance until 2010) and grants to pupils and students
  • Social protection for civil servants (tenured civil servants subject to special pension law)
  • Social compensation systems: primarily for victims of war, military service and crime
  • Protection under labour law: e.g. continued payment of wages in case of illness
  • Occupational pension schemes
  • Social services



Social insurance in Austria is based on the principles of mandatory insurance, solidarity and autonomy. It is primarily financed by employers’ and employees’ contributions under the pay-as-you-go system. Social insurance in the stricter sense is composed of three schemes:

  • pension insurance
  • health insurance
  • work accident insurance.

A total of 22 social insurance institutions provide health, pension and work accident insurance cover. They are organised in an umbrella organisation called ‘Main Association of Austrian Social Security Organisations’ (Hauptverband der österreichischen Sozialversicherungsträger). Important functions of this association include:

  • long-term planning
  • drafting guidelines (for uniform implementation)
  • central data management
  • conclusion of contracts with physicians, dentists, etc.
  • publication of a register of medicinal products (Heilmittelverzeichnis)
  • comparison of indicators between insurance institutions
  • public representation of social insurance institutions
  • liaising at intergovernmental level.

The social insurance institutions are organized according to fields of activities, occupational groups and/or regions. The most important institutions are the pension insurance institution, the nine regional health insurance funds, the general work accident insurance institution, the social insurance institutions for the self-employed i.e. for trade and business and for farmers; and the insurance institution for public-service employees.

The individual social insurance institutions are managed by self-governing bodies composed mainly of representatives of the social partners. These bodies are granted a certain scope of independent action within the framework of legal requirements. Since most entitlements are governed by law, autonomy is largely restricted to the management of the institutions’ own facilities. With the exception of some minor groups, almost the entire active population is covered by these social insurance institutions.

In recent years, social insurance cover has been widened to include a large part of non-standard employment relationships (marginal part-timers, quasi-freelancers, new self-employed) under compulsory or voluntary schemes providing benefits against payment of contributions. As health insurance cover also extends to family members of the insured party, Austria’s social insurance system provides largely comprehensive health care for the entire population.



Unemployment insurance (UI) is not under the umbrella of the Main Association of Austrian Social Security Organizations. It is managed by the public employment service (AMS), which is also responsible for measures of active labour market policy.

The AMS is a three-tiered system comprising one federal organization, nine states and 99 regional organizations. The social partners’ involvement in AMS activities extends across all three levels, where representatives of Austria’s Economic Chamber (WKO), Chamber of Labour (AK), Austrian Trade Union Federation (ÖGB) and Federation of Austrian Industry (IV) play a major role in labour market policy design (work programmes of the Laender) and in supervising the AMS organisation (controlling).

An administrative board is established at the federal level, with board members including employees’ and employers’ representatives as well as government representatives. This specific composition of AMS bodies aims to ensure that the most important stakeholders of the labour market are involved in Austrian labour market policy making. Executives are responsible for the implementation of AMS functions: the chairman of the AMS board at federal level, the managers of the AMS’s Laender offices at Laender level, and the heads of the AMS’s regional offices at regional level.

The executives in question are assisted by their organisational units in implementing labour market policies. Unemployment insurance is primarily funded by wage-related contributions made by employers and employees.



The three major monetary social benefits where entitlement is independent of activity and income status are the following:

  • family allowance and tax credit for children
  • childcare allowance, and
  • long-term care benefits. Health insurance also covers co-insured persons and persons on means-tested minimum income, thus, it largely meets the criteria of a universal system.


Family Allowance and Tax Credit for Children

Family allowances are universal cash benefits for children irrespective of the recipients’ income levels. The amount of family allowances primarily depends on the age and number of children in a family. It is financed by the Family Burdens Equalisation Fund (FLAF) and dis-bursed by the tax offices. Most of the FLAF’s resources are derived from wage-related contributions and some from general tax revenue.  Family allowances are supplemented by a uniform tax credit, which may also be paid out as a negative tax. This tax credit is due for all children irrespective of the parents’ activity status.


Childcare Allowance

All mothers and fathers are entitled to childcare allowance: depending on the chosen option, it may be claimed for the first 12 months (14 months if also claimed by the second parent) to 30 (36) months of the child. Disbursement is in the hands of the health insurance funds. The allowance is financed by the Family Burdens Equalisation Fund.


Long-Term Care Benefits

All persons in need of (nursing) care are eligible for long-term care benefits. The amount of long-term care benefits will depend exclusively on the extent of care needed. The system is primarily run by seven decision-making bodies at the federal level. Long-term care benefits are funded from tax revenue.


Health Insurance

Health insurance covers all employees, their family members and most of the recipients of social benefits. 99% of the population are currently covered by social health insurance schemes. The schemes are primarily funded by wage-related contributions made by employers and employees. Claimants of means-tested minimum income are subject to mandatory health insurance unless they are already covered by health insurance.

Registration of these minimum income claimants with the statutory health insurance and payment of contributions is in the hands of the Laender. Alongside social health insurance schemes, Austria’s territorial (i.e. federal, Laender, local) authorities are major players in this field, specifically in terms of providing and co-financing inpatient care. Hospitals are financed from health insurance contributions and general tax revenue.



Social pension insurance provides for means-tested minimum benefits. Pensions are topped up with an equalisation supplement to reach a threshold value (called ‘equalisation supplement reference rate’). Under the unemployment insurance system, the long-term unemployed are entitled to unemployment assistance (Notstandshilfe) if they are financially destitute. However, such assistance benefits are not supplemented by other benefits to reach a minimum threshold value. Other means-tested benefits of note are housing assis¬tance and student grants.

A modern version of the former ‘extramural’ social assistance scheme, the means-tested minimum income scheme is a subsidiary safety net of last resort within the social security system. Legislation on former social assistance was different in each of the nine Austrian Laender. With the introduction of the means-tested minimum income scheme, the same minimum standards, i.e. minimum benefit thresholds, are ensured for all claimants, although the Laender may award additional benefits going beyond these minimum standards. With the exception of unemployment assistance, all means-tested benefits are financed from tax revenue.



An increasing number of public-service employees (contract staff) are subject to the same social insurance legislation as private sector employees. Tenured public-service employees (civil servants), in turn, are subject to special regulations in certain areas of social protection.

These regulations differ according to employer, i.e. federal, Laender, local governments, Austrian federal railways, etc. What tenured civil servants have in common is that they are neither covered by unemployment nor by social pension insurance. Rather, they accrue direct entitlements vis-à-vis their employers. Under the 2004 pension reform, the provisions of the statutory pension insurance system will increasingly apply to civil servants under the age of 50 (2005).

Pensions of civil servants given tenured status as from 1 January 2005, and of civil servants born on or after 1 January 1976, will be assessed in accordance with the same rules as the ones used under the statutory pension scheme (ASVG). Most civil servants are covered by social health insurance, i.e. by the insurance institution for public-service employees, some of them are covered by special health care schemes. Part of pensions and health care benefits for civil servants are financed by the latter’s contributions, but most of the money comes from the state budgets of territorial authorities.  



Special social protection systems are in place for risk situations for which the government takes special responsibility. They provide benefits (primarily pension benefits) to victims of war, military service, Fascism, crime or vaccinations. These schemes are managed by the Federal Ministry of Labour, Social Affairs and Consumer Protection and/or the Federal Social Office (an agency subordinate to the ministry) and its nine Laender offices. Social compensation systems are funded exclusively from the federal budget.



Entitlements vis-à-vis employers constitute an important element of social policy in Austria. They include, inter alia, financial support in case of illness and pregnancy, employee income provision funds, special provisions for working parents (e.g. paid care leave), dismissal protection for certain groups, periods of notice, rules on work¬ing hours and rest periods, etc. Collective agreements are sustained by law and guarantee minimum pay at sectoral level. In a principle agreement the social partners resolved to increase any minimum wages of under EUR 1,000 (14 times per year) to at least EUR 1,000; this floor level was fully met or even exceeded by 1 January 2009.



Occupational pension schemes are called ‘the second pillar’ of retirement income provision in Austria. In general, they refer to pensions funded by employers to supplement the statutory schemes. Austria’s Company Pension Act governs the protection under labour law of benefits and entitlements accrued under retirement, invalidity and survivors’ pension commitments (defined benefit schemes) made voluntarily by employers under private law employment relationships to supplement statutory pension insurance schemes.

As a matter of principle, the BPG covers all employees under private law employment relationships as well as all other eligible parties (i.e. also spouses and children). The act regulates four types of defined occupational pension schemes: » defined pension schemes managed by domestic or foreign pension funds » defined benefit schemes managed by occupational group insurance schemes (Betriebliche Kollektivversicherung – BKV) » direct defined benefit programmes » life insurance schemes.



Social services accounted for EUR 7.2 billion in 2011 (with the exception of health care), i.e. 8% of social benefits or approx. 2.4% of GDP. The major areas of social services include labour market policy measures, non-school childcare, homes for the elderly and nursing homes, day-structuring and extramural services, hous¬ing and/or employment schemes for people with special needs, as well as counselling and assistance to individuals with special problems (e.g. women exposed to domestic violence and their children, drug-dependent or drug-addicted persons, homeless persons or persons at risk of losing their homes, persons released from prison or asylum seekers).

According to ESSPROS data for 2011, EUR 1.2 billion were spent on services related to unemployment, EUR 2.2 billion on services related to children and families, EUR 1.4 billion on extramural, intramural and daycare services for the elderly and those in need of nursing care, EUR 1.6 billion on facilities for people with disabilities and EUR 0.8 billion on other social services. With the exception of labour market-related measures, responsibility for most of the social services is in the hands of Laender, local and municipal authorities.

Whereas individuals enjoy legal entitlements to most cash benefits and health care services, they enjoy no such entitlements to the majority of social services. Regional differences exist in the quality and quantity of services and their organisational delivery. This is partly due to the fact that Austria has one Land (Vienna) that is fully urban in structure, whereas the other eight Laender only have a few smaller urban areas. Territorial authorities run some of the social services themselves, while others are outsourced to non-profit organisations, associations or private providers.

Overall, the public sector plays a dominant role in the areas of childcare, homes for the elderly and nursing homes. Other providers are private and non-profit organisations, including large organisations with a long-standing tradition in this field (church-related associations, associations affiliated with political parties, other supra-regional welfare organisations) and numerous smaller entities.


(Source: Federal Ministry of Labour, Social Affairs and Consumer Protection, Social Protection in Austria 2012)