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🇦🇹 Austria /Economy & Trade

‘Risk of Perverse Incentives’: Court of Audit Criticizes Austria’s Insolvency Pay System

From Die Presse · () German

Translated from German and summarized by DistantNews. Read the original for the full story.

At a glance

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  • Austria’s insolvency compensation fund expects €350 million in payouts in 2027 against projected revenues of €162 million.
  • The Court of Audit says the system covers employee claims more broadly than EU minimum standards and may create incentives to delay returning to work.
  • The auditors recommend limiting compensation for unpaid wages and notice periods, after some recipients received unusually large payments.

Austria’s insolvency compensation fund faces a widening financial gap, but money is not its only problem. A draft report from the Court of Audit identifies broad coverage and weakly verifiable claims as sources of possible abuse.

The fund replaces claims for employees whose employers become insolvent, including wages, salaries, holiday entitlements, company pensions and compensation for an ongoing notice period. The Social Ministry expects payouts of €350 million in 2027, compared with only €162 million in revenue. The Austrian Trade Union Federation wants employers to pay higher contributions, while the ÖVP and Neos oppose the increase because it would reverse cuts to wage-related labor costs.

substantially more comprehensive

· Austrian Court of AuditThe auditors’ assessment of Austria’s insolvency compensation system compared with EU minimum standards.

The fund, managed by IEF-Service GmbH, paid €270.3 million to 33,000 people in 2024. Payments rose above €300 million in 2025. Employees can currently seek compensation for claims from up to six months before insolvency proceedings open and three months afterward.

The Court of Audit describes Austria’s protection as “substantially more comprehensive” than EU minimum standards. It recommends limiting unpaid wage compensation to four months and notice-period compensation to three months. In some cases, notice compensation covered seven months or more, with individual payments reaching €56,843. The auditors warn of a “risk of perverse incentives,” saying some dismissed employees may have reason to wait up to seven months before taking a new job. Notice compensation accounted for 26% of all payouts during the review period. In individual cases, 151 employees received at least €100,000, while some company-pension payments reached €250,000 or more.

risk of perverse incentives

· Austrian Court of AuditThe warning concerns generous notice-period payments and claims that are difficult to verify.
About this summary

Originally published by Die Presse in German. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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