In this article:
Why is there obligatory registration with the social security system for the self-employed and for employees?
When does my compulsory insurance start?
Are there any exceptions from compulsory insurance?
When does my compulsory insurance end?
What do I receive for my contributions?
Are there additional options in the health and pension insurance
In Austria, each person, who works as an employee or is self-employed, is subject to
obligatory social security contributions. Of course, there are exceptions to this rule,
but we will discuss them later on.
Let’s start with the question:
Why is there obligatory registration with the social security system for the self-employed and for employees?
The answer to this question lies in the structure of the Austrian social security
system. It is built and works according to the solidarity principle. This means that
social security benefits are financed using the pay-as-you-go system. In this model,
the incoming contributions are not saved in the long term for each person, who pays
them. They are used directly to finance the services and pensions for the insured
community. To make that possible, the system follows some strict rules:
Compulsory insurance: who will be insured and under what circumstances is
regulated by the law. Certain groups of people (employees, self-employed,
administration, etc.) are brought together into the insurance community by law and
assigned to a specific social security provider (ÖGK, SVS, BVA, etc.)
No risk assessment: the occurrence of legal requirements is the only
relevant factor for obtaining insurance coverage, distinguishing it from private
insurance where risk largely determines whether an insurance contract is
established. Individual risk does not influence insurance coverage or premium
amount in social insurance, whereas in private insurance, risk is crucial in
determining the premium level.
Funding through contributions: Austrian social insurance is primarily
financed through contributions from insured individuals and employers.
The amount of insurance contributions is determined by the level of income
and not by the risk of being insured.
Principle of Solidarity: the principle of solidarity states that benefits for the
insured generally correspond to their needs. Social insurance benefits thus
aim to balance the needs of healthy and sick individuals, as well as those of
the elderly and the young. Additionally, social insurance contributions ensure a
redistribution of resources between higher and lower earners, as the
contribution amount is based on income level.
Based on these principles and legal regulations Austria created a social security
system, which will allow you access to health care, social security benefits, and
pensions. In some cases, it is important to know that the payments you will receive
will depend on the amount of your contribution and the duration of your insurance.
When does my compulsory insurance start?
When your compulsory insurance will start depends on the type of self-employment
you belong to.
If you are new self-employed (neue Selbständige), you are obligated to inform SVS about the starting
days of your activity within 4 weeks. In this case, you will be insured from the starting
date. If you surpass this deadline, you will be insured from the day your application
form was filed with SVS.
If your business requires a business license, you will be insured from the day the
license has been registered to the public system.
Are there any exceptions from compulsory insurance?
An exemption from mandatory insurance means that you are neither insured nor
required to pay contributions. Once the reason for the exemption ceases to exist, you
are obligated to be insured again.
You will be automatically exempt from paying social security contributions, when
- You register your business license as dormant – usually dine when you want
to pause your activity for e period of time
- You register your business license as dormant during your maternity sick leave
(Mutterschutz) and the period of maternity leave.
You can apply to opt-out from paying social security contributions if you have a
business license and:
- You have not been insured for more than twelve months as self-employed in
the last 60 calendar months before the start of the requested exemption
- Your annual income from self-employment will not exceed EUR 6,221.28 in
the year 2024. Additionally, your turnover from all entrepreneurial activities will
not exceed EUR 35,000.00.
If you are new self-employed you can opt-out from paying social security
contributions if your income for 2024 does not exceed EUR 6.221,28.
When does my compulsory insurance end?
The compulsory insurance ends with the day your activity ends, respectively when
you deregister your business license.
What do I receive for my contributions?
Health insurance
If you're under mandatory social insurance, it covers health insurance, granting
access to healthcare providers contracted with the SVS. Depending on your
contributions, you'll receive benefits in kind or cash benefits. Benefits in kind entail
SVS payment for services if your contribution basis is below the current maximum.
You'll typically only pay a prescription fee. You're responsible for 20% of costs, but
this can be reduced to 10%. Cash benefits require you to pay upfront, and then apply for
reimbursement from the SVS, which covers up to 80% of costs. Hospital stays are
free unless you opt for a private room or a specific doctor.
Pensions Insurance
Your pension amount is determined by your contributions to social insurance.
Throughout your working years, all payments are allocated to a dedicated pension
account. The pension calculation follows the "65-45-80" formula: if you reach 65
years of age with 45 years of combined employment and self-employment within the
EU, along with paid social insurance contributions, you're entitled to receive 80% of
your average monthly income from Austria.
Accident insurance and severance pay.
Accident insurance offers financial benefits in the event of work-incapacitating
accidents, alongside a range of other benefits such as rehabilitation and sanatorium
services. Since 2018 there has been a mixed public-private insurance model known as
"severance pay”. This involves an extra contribution calculated based on your
monthly social insurance payment, directed to private pension fund companies,
called "Vorsorgekasse" in German.
Are there additional options in the health and pension insurance
Additional health insurance (sick leave pay)
This additional insurance will provide you with an insurance payment in case you
have to interrupt your work due to sickness. The additional insurance will start from
the day you apply for it, but you will be entitled to payments after a 6-month waiting
period.
The contribution for this insurance and the sick leave pay are also based on your
monthly contribution base. The daily sick leave payment is 60% of the preliminary
daily contribution basis (Monthly contribution basis ÷ 30 = daily contribution basis).
The monthly contribution for the additional insurance is 2,5% of your preliminary
contribution basis, with a monthly minimum contribution of 30.77 euros. Depending
on your contribution basis, the costs for the supplementary insurance range between
30.77 and 176.75 euros.
Higher insurance in pension insurance
This type of additional insurance is voluntary supplementary insurance. It provides an
additional pension with tax benefits, similar to those offered by private institutions.
You can take this option if you are mandatory or voluntarily insured as self-employed.
Payments are possible at any time. You can adjust them monthly.
When you start receiving your pension, you will receive a special increase in addition
to your actual pension. You can freely choose the timing and amount of your
contributions up to an annual maximum limit of EUR 12.120,00 euros for 2024).
Unemployment insurance
Since 2009, self-employed individuals can voluntarily join the unemployment
insurance to improve their social protection. This is a genuine unemployment
insurance, granting entitlement to all benefits of the unemployment insurance. You
can opt into unemployment insurance within 6 months from your initial registration. If
you surpass this deadline, the next possibility to opt in will be after 8 and then after
16 years etc. Once you've decided to join the unemployment insurance, you must
pay contributions for the duration of the mandatory insurance. The first possibility to
terminate it will be after 8 years.
The duration of the benefits depends on your current work experience and the
chosen contribution basis. You can choose between three options:
• €28.43 (at ¼ of the maximum contribution basis)
• €46.35 (at ½ of the GSVG maximum contribution basis)
• €64.11 (at ¾ of the GSVG maximum contribution basis)
In summary, Austrian social security system operates on solidarity and mandatory
insurance, ensuring access to healthcare, pensions, and other benefits. Contributions
determine the extent of benefits, including health coverage, pensions based on work
history, accident insurance, and optional additional insurance like sick leave pay and
higher pension benefits. Self-employed individuals can also opt into voluntary
unemployment insurance. Overall, the system aims to provide comprehensive
support and protection to self-employed individuals.