Employment of external parties in FWF projects
There are various ways to employ/involve other people in an FWF project. However, it is important to differentiate between the different
forms of employment, especially due to the differing legal consequences (under contract law, labour law, social security law, tax law)
associated with each form.
The following forms of employment are possible:
A Contract of employment
B Independent contracts of employment (in justified exceptional cases)
C Independent work contract
D Marginal employment
F Grants for undergraduate research assistants / thesis grants
A. Contract of employment
Contracts of employment in FWF projects can generally be concluded for a limited term only. Exceptions are possible for persons who
already have an employment relationship with the research institution prior to the start of the project. In such cases, an additional
agreement on the employee’s specific work activities can be concluded for the duration of his/her involvement in the project.
In these contracts, the employer is the university or research institution in cases where the institution has concluded the relevant payroll
accounting agreement with the FWF. Otherwise, the principal investigator / project leader himself/herself is the employer.
Under the contract of employment, the employee is obliged to work certain hours and to make efforts to complete their work
successfully. However, s/he cannot be held liable for the successful completion of the work itself. The work is to be performed by the
employee himself/herself, and the relationship is characterised by “personal and economic dependence”. Additional criteria for the
conclusion of an employment agreement may include the employee’s involvement/integration in the research institution or mandatory
physical presence at the place of work. The essential working conditions are prescribed by the employer (principal investigator / project
leader).
All applicable taxes and contributions are paid/deducted by the employer.
Administrative handling: Project leaders are to report planned contracts of employment to the unit in charge of payroll accounting
before concluding the contract. The unit in charge of payroll accounting is to calculate the total costs of the employment relationship; the
FWF’s consent is then required in order to conclude the contract. Payroll accounting and payments are handled only by the personnel
department at universities or research institutions which have concluded a payroll accounting agreement with the FWF. In the case of
research institutions which do not have such an agreement with the FWF, payroll accounting and payments are handled by the FWF’s
payroll agents (i.e. accounting firms). In such cases, the personnel department or payroll agency is responsible for registering and
deregistering employees at the relevant social insurance institution, for deducting income tax, social insurance contributions and other
taxes, for transferring the net salary to the employees, and for keeping a payroll account for each employee.
FWF cost centre: Personnel costs
For employees, the contract of employment provides the highest level of legal and social security (two months’ salary paid out as a
bonus [“13th and 14th salary payments”]; right to unemployment benefits if requirements are met).
Important note: The work of the personnel department or payroll agency can only be as good as the information they receive from the
project leader. Project leaders are required to report the starting date as well as any extensions or interruptions to the personnel
department or payroll agency. Please give the personnel department or payroll agency advance notice of any new employees, leaves of
absence, interruptions, etc. – do not wait for the last minute to do so.
B Independent contract of employment
This is a hybrid form which incorporates elements from contracts of employment and from independent work contracts. Independent
employees are not integrated into the employer’s process organisation, are not bound to specific working hours or by instructions, and
they may appoint substitutes in many cases (unless substitution is prohibited by the contract). The employer (i.e. the university, research
institution, payroll agency) is required to register the independent employee with the relevant social insurance institution, but the
employee himself/herself is responsible for deducting income tax. Due to the different criteria used by Austria’s high courts to assess
these employment relationships under labour law and social security law, this form of employment is often associated with substantial
risks. Therefore, any project leaders planning to conclude independent employment contracts in their projects are to consult the FWF
well in advance.
Administrative handling: Payroll accounting and the deduction of social insurance contributions are handled by the personnel
department at universities or research institutions which have concluded a payroll accounting agreement with the FWF. In the case of
research institutions which do not have such an agreement with the FWF, these tasks are handled by the FWF’s payroll agents (i.e.
accounting firms).
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FWF cost centre: Personnel costs (direct charging between FWF and research institution or payroll agency; funds cannot be remitted to
the project leader’s account or the university’s material costs account).
C Independent work contract
Under this type of contract, the independent contractor is obliged to complete a separate work (package) which is described as such
from the outset and which can also be presented as such (project guidelines: “It is especially important to ensure that the work to be
performed is described clearly and that the description indicates how the work is related to the project. It must be possible to present this
separate work (package) as such in the case of an audit.” The independent contractor assumes liability for the successful completion of
the work, meaning that full remuneration is only due in cases where the agreed work package is successfully completed and delivered
without defects.
The independent contractor is not integrated into the client’s organisation. The independent contractor is not bound by instructions and
may – unless otherwise agreed – have the work carried out by third parties (subcontractors). However, the independent contractor
assumes liability for the successful completion of the work (i.e., no payment without performance/completion). In this context, it is also
necessary to note that certain activities can only be carried out by licensed professionals. According to the guidelines for the use of funds
in FWF projects, it must be possible to present the work (package) at any time in the case of a review (for details, see Section 6 of the
relevant guidelines).
Administrative handling: The project leader is to conclude a written work contract with the independent contractor. The independent
contractor himself/herself is responsible for all matters related to social security and taxation. Since January 1, 1998, independent
contractors who exceed a certain revenue threshold have been subject to an obligation to pay social security contributions to the
competent social insurance institution (Sozialversicherungsanstalt der gewerblichen Wirtschaft, or SVA). Please note that the use of
one’s own materials and equipment is an essential criterion for classification as an independent contractor.
FWF cost centre: Other costs. The project leader can request that the funds be transferred to the project account and can then pay the
fee once the work package has been delivered. In the case of large work packages, down payments may be stipulated. In the case of
projects carried out at a university research facility pursuant to the Austrian Universities Act (UG) 2002, the funds are to be requested
from the FWF (by the project leader) and transferred to the internal account for material resources at the research facility; the project
leader must then instruct the relevant unit within the research facility to pay out the funds.
The standard forms provided by the FWF must be used for independent work contracts. In the case of work contracts concluded with
individuals and involving amounts up to EUR 750.00, contractors need only present a bill for services which indicates the name or
address of the independent contractor, the nature and scope of the work performed for the FWF project, the agreed amount, a
confirmation of receipt, and the date and location at which the bill was issued.
In the context of independent contracts, please note that a bill for services rendered constitutes an invoice for the completed work, which
implies that the work was carried under an independent contract.
D Marginal employment
Marginal employment refers to dependent activities (i.e., actually small contracts of employment) in which social insurance contribution
obligations are limited due to the size of the contract. The employee is integrated into the organisation and bound by instructions from
his/her superior(s). Employees with contracts of marginal employment must be registered with the social insurance institution, but no
contributions to health or pension insurance are required. However, the employer’s contribution (4.5%) to the Family Compensation
Fund (Familienlastenausgleichsfonds, or FLAG) must be paid to the Austrian tax authorities. A payroll account must be maintained for
each employee with a contract of marginal employment, and these employees have a right to bonus payments (2 additional months’
salary payment, also known as the “13th and 14th monthly salary payment") and to paid vacation time. Any missing or incomplete records
of hours worked may prompt the social insurance institution to demand payment of additional contributions, and any “forgotten” or
incorrectly calculated FLAG contributions will be demanded in the case of an audit by the tax authorities. Therefore, the FWF requires
that these payments be handled by the personnel department of the university or research institution which has concluded a payroll
accounting agreement with the FWF. In the case of research institutions which do not have such an agreement with the FWF, these
tasks are handled by the FWF’s payroll agents (i.e. accounting firms). Hourly compensation rates must not be lower than the comparable
wage/salary scales required by the FWF or the research institution.
In the case of an audit by the tax authorities or social insurance institutions, errors in the selection of contract types (small independent
work contract or contract of marginal employment) may lead to considerable additional costs.
New compensation limits for employees with contracts of marginal employment from January 1, 2014 onward:
EUR
395.31 per month (2013: EUR
286.80)
EUR
30.35 per day
29.70)
(2013: EUR
Ulrike Varga, December 2013
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The weekly limit used in the past has been eliminated completely. Hourly compensation rates must not be substantially lower than the
comparable wage/salary scales within the organisation. The limits have been set in such a way that revenues from marginal employment
do not render these employees ineligible for family allowances, student allowances or pensions.
Administrative handling: Payments under these contracts are also handled by the personnel department at the relevant university or
research institution or by the FWF’s payroll agents (i.e. accounting firms).
FWF cost centre: Personnel costs.
As for social insurance contributions, it is only necessary to pay accident insurance; due to this particular requirement, tasks such as
laboratory work performed by individual persons must never be assigned under small independent work contracts. Instead, marginal
employment contracts must be used.
Note: In cases where multiple persons are employed under marginal contracts and where the limit for marginal employment is exceeded
by a factor greater than 1.5, an additional contribution of 16.4% must be paid. Naturally, this makes marginal employment more
expensive, and the project leader must ensure that sufficient project funds are available to cover these additional costs. In our
experience, this situation only arises at universities or research institutions which have concluded a payroll accounting agreement with
the FWF. When you register employees under marginal employment contracts, your research institution will probably notify you that the
contracts will incur additional costs which are to be covered by project funds.
However, this additional social insurance contribution does not give the employee the right to health insurance or pension insurance
claims. Since January 1, 1998, however, employees under marginal employment contracts have been allowed to apply for insurance
independently (monthly costs in 2014: EUR 55.79).
F Grants for undergraduate research assistants (thesis grants)
Grants for undergraduate research assistants (thesis grants) may not exceed EUR 440.00 per month and are paid out to undergraduates
whose theses are closely related to the content of the project. In effect, this is a form of direct FWF funding for the student which is paid
out by the project leader in the course of the project. This type of grant does not involve a contract of employment or an independent
work contract; the purpose of these grants is to give recipients an opportunity to familiarise themselves with the workflows in research
projects.
Administrative handling: Grants for undergraduate research assistants are paid out by the personnel department at universities or
research institutions which have concluded a payroll accounting agreement with the FWF. In the case of research institutions which do
not have such an agreement with the FWF, these grants are paid out by the FWF’s payroll agents (i.e. accounting firms). These grants
are not associated with separate social insurance obligations, meaning that students must be insured independently or co-insured with
their parents. The grants do not affect the students’ eligibility for family allowances.
FWF cost centre: Personnel costs
Taxation and treatment under social security law: The Austrian Federal Ministry of Finance ruled that FWF grants for undergraduate
research assistants are not subject to taxation as long as the grant amount per year does not exceed the maximum annual student
allowance (see Decision No. 07 0600/1-IV/7/96 of March 29, 1996). This means that FWF thesis grants (grants for undergraduate
research assistants) are tax-free. From a tax perspective, students who receive such grants are still permitted to receive family
allowances at the same time.
FWF grants for undergraduate research assistants are not subject to separate social insurance requirements, meaning that students can
be insured independently (which involves lower costs) or co-insured with their parents.
Effects of other income: In cases where grants for undergraduate research assistants are received in parallel to other revenues (other
grants, orphans’ pensions, marginal employment), the FWF cannot provide information about the effects of such income under Austrian
tax or social security law.
For more information on the following topics, please contact:
Contracts of employment / independent employment contracts / grants for undergraduate research assistants: Ulrike Varga, Tel: +431/505 67 40 / ext. 8841, e-mail: ulrike.varga@fwf.ac.at
Independent work contracts / marginal employment contracts / grants for undergraduate research assistants: Ingrid Jandl, Tel: +431/505 67 40 / ext. 8851, e-mail: ingrid.jandl@fwf.ac.at
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