In the past months, also Austrian companies faced major challenges. Declines in business have made short-time work (Kurzarbeit) and the conversion of staff deployment schemes necessary. Many companies now face the task to implement further staff adjustments. They should be as legally secure, efficient and socially acceptable as possible. In the following, we provide answers to 6 of particularly important questions.

My company is still on short-time work. Does this exclude terminations for operational reasons?

No, not necessarily. As a general rule, employees who are on short-time work can only be given notice for operational reasons one month after the end of short-time work ("retention period").

However, there are exceptions. For example, in the event of considerable economic difficulties, terminations are also possible during short-time work and the retention period, provided that the works council or trade union and the Labor Market Service agree.

Do economic difficulties which have led to short-time work justify terminations for operational reasons?

Yes, such economic difficulties can be used to justify terminations for operational reasons. However, in case of dispute, the employer should on a case-by-case basis be able to provide arguments why precisely these difficulties have led to the termination of certain employees. If such approach is successful, it is difficult for employees to challenge such termination before court.

My company did not implement short-time work. Does this make terminations easier?

Yes, but only in terms of timing, as there is no retention period to be observed. Also in this case, there should be a business justification for terminations, such as a decline in orders or the postponement of projects and the resulting overcapacity of staff. The stronger such justification, the greater the chances of success in the event of dispute.

How high are market-practice voluntary severance payments in the event of mutual terminations?

There are no binding rules here. In practice, the amount of voluntary severance payments depends on the risk that a company faces if the employees challenges the termination before court. As a rule of thumb, the stronger the operational reasons, the lower the risk and the lower the severance payments. Therefore, a risk analysis should be carried out before any reduction in staff.

What role do social plans play?

Advantages: A social plan allows redundancies to be implemented in a particularly peaceful and socially acceptable manner. In particular, social plans avoid that terminations are challenged by employees before court. In addition, social plan benefits are tax-privileged.

Disadvantages: A reduction in staff which leads to a social plan typically has a higher media presence, which is not desired by all companies. In addition, the costs related to a social plan can be quite high. Furthermore, in order to conclude a social plan an agreement must be reached with the works council, which is often challenging in practice.

Costs: In practice, the costs of a social plan depend on the company’s economic performance and the company’s risk in the event of terminations for operational reasons.

Avoidance of a social plan: If the number of employees to be made redundant is kept below a certain threshold and if certain timing requirements are observed, a social plan can be avoided.

Social plan without a works council - is this possible? Even in companies without a works council, models similar to a social plan can be established. Under certain conditions, tax-privileges for employee benefits may also apply here.

What is the best timing for a reduction in staff?

If staff reductions are necessary, it should be considered to plan such as soon as possible. In the context of Corona, terminations are particularly well justifiable with operational reasons. This increases legal certainty and reduces termination costs (keyword: social plan). The works council should be involved in the planning as early as possible.


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