Ana Strmšnik, postgraduate student, Faculty of Law, University of Maribor, Slovenia, contact:

Service providers from the EU Member States, who use their workers to carry out constructional work in Austria on a temporary basis, face many problems with the Austrian authorities. Each day, it seems that there are new obstacles with which Austria prevents free movement of services. Because of the condition and the restriction imposed by Austria, the employers are becoming much more concerned. Their working places are constantly subjected to numerous controls by the financial police and in the case of construction companies, by the fund BUAK. Penalties of a few thousand euros for bizarre formal violations are constant and the risk foreign employers must take if they want to operate and provide their services in Austria are big. When it seems that employers have obtained all the information concerning the documentation and procedures to protect themselves from being penalized, the legislation in Austria tightens again.

In Austria a new Prevention Act of the payment and social dumping – LSD-BG is coming into force on 1.1.2017 and it will put foreign employers at a disadvantage compared to Austrian employers. Penalties for formal offenses will be doubled. Minimal fines for small offenses (missing one paper) will be from 1.000 EUR to 10.000 EUR per employee, and it can be up to 20.000 EUR per employee in cases of repeated offence. Many legal consequences and abnormal high fines are intended only for service providers from other EU Member States. In addition to the fines, employers may be prohibited from providing services in Austria for 5 years.

In order to understand common problems foreign employers are facing in Austria, some of the special regulations which need to be observed, when employees are temporarily posted in Austria, especially in construction sector are presented below.

When an employer temporarily posts the company employees to perform construction work in Austria, the employer is required to:

Submit a notification for work permit to the Federal Ministry of Science, Research and Economy (the notification forms can be found on the internet but in German language only), in case his business is in the field of a regulated trade; report the posting workers to the Central Coordinating Agency with Investigating Illegal Employment – containing specific details on every employee (procedure and necessary details are laid down in Art.18 LSD-BG), before carrying out work; pay the employees at least the minimum wage in Austria as stipulated in the collective agreement, for the duration of the period deployed (in Austria there are more than 500 collective agreements, employers must invest a great deal of effort to find the right one);  grant their employees the pay for annual leave as specified in the Construction Workers Holidays and Severance Pay Act (BUAG). The Austrian Construction Workers Holiday and Severance Pay Fund (BUAK) issues the employer a monthly payment order, based on the monthly reports employers have to provide for each employee (personal information, date of first and last day of work, occupational qualification, hourly wage based on the collective agreement applying to the business).

Moreover, on the workplace, the employers must have many documents available in German language for each employee. For instance, a copy of the posting notice, the social insurance document, a copy of the work permit, several salary documents which prove that they are paid in accordance with collective agreement, the employment contract, wage slip, documentary evidence of salary payment or bank transfer documents, salary records, working time records and documents relating to wage category. These are just some of many documents that are required, all are listed in Art. 21 LSD-BG. Art. 22 LSD-BG lists the documents which verify that the employees are paid according to the Austrian collective agreement during their work in Austria. The most problematic evidences are evidences regarding appropriate classification of employee under the correct salary grade taking into account his education and experience, of course in accordance with the Austrian law.

In case of control by competent authorities all documents for each employee must be submitted immediately. Penal provisions and administrative proceedings are specified in section 5 LSD-BG. The fine for failure to provide notice of posting workers on time (before the work starts) is up to 10.000 EUR and in case of repeated offence up to 20.000 EUR per employee (Art. 26 LSD-BG). If all the required documents in case of an inspection are not submitted, the responsible person is punished with a fine of up to 5.000 EUR (Art. 27 LSD-BG). If there are no documents relating to salary, documents relating to classification of employee under the correct salary grade and where there are more than three employees affected the fine can be up to 50.000 EUR (Art. 28 LSD-BG), etc.

High fines for employers from other EU Member States (like missing one paper of evidence of salary payment or bank transfer documents) are not proportionate to seriousness of the violation. Employers are subject to multiple controls on the working place every day. Financial police, BUAK and Labour Inspectorate are the main competent authorities for those controls. They always find something to penalize the employers, even though the majority of them do not deprive their employees of any of their rights provided by the Austrian law. All things considered, it seems reasonable to assume that their true purpose is not to fight payment and social dumping, but to eliminate foreign service providers from their market. For instance, penalties for under-payment of wages can be avoided by paying the difference until the beginning of the official procedure, however penalties for missing documents cannot be avoided.

Such legislation constitutes the major problem to those employers who sends their employees to Austria to carry out shorter assembly (for example build prefabricated houses, execution of electrical installations, etc.). Their employees frequently migrate back home every day, which is not a posting in the truest sense of the word, however they are still bound by those provisions.

As can be seen, punishment framework with disproportionately high fines is contrary to the EU law and is significantly interfering with the freedom to provide services and fair competition. Employers from other EU Member States should provide services, under the same conditions as are imposed by Austrian employers. Because the Austrian national legislation is not harmonized with the EU legislation, the Commission should start proceeding against Austria, for impeding the free movement of services.

The aim should be to create an open single market of services within the EU, not the restriction of competition and closing of national borders for abroad service providers.