In Austria the conclusion of collective agreements is essentially confined to the private sector. These agreements are negotiated, almost without exception, at multi-employer sectoral level. Whereas up till the early 1950s there were still central pay agreements, since then bargaining on pay and other terms and conditions of employment has been focused on the sectoral level.

However, the central level is not entirely without significance. The peak employers' and employees' organizations possess the capacity to conclude collective agreements, although such national general agreements (Generalkollektivverträge) are very rare and almost never regulate pay. The classic instrument through which the peak organizations exert direct influence is the Parity Commission for Pay and Prices, which is composed of delegates from the Austrian Trade Union Federation (ÖGB), the Federal Chamber of Labour (BAK), the Economic Chamber of Austria (WKÖ) and the Standing Committee of Presidents of the Chambers of Agriculture (PKLWK). The sectoral employers' organizations and trade unions are obliged to apply to the Commission's Subcommittee on Pay for approval before they can commence their pay negotiations. The Commission always refrained from influencing the content of these negotations and confined itself to controlling the timing of bargaining rounds, the intention being to exert a moderating effect during periods of relatively high inflation. Since the end of the 1980s this control function has lost its practical importance, and the influence of the central level is restricted to the internal co-ordination of sectoral bargaining within the framework of the ÖGB and WKÖ. In the case of manufacturing industry, on the employers' side this co-ordination is effected through similar activities within the Federation of Austrian Industry (VÖI), which is linked with the WKÖ through multiple office-holding. Co-ordination is not imposed authoritatively by way of directives or recommendations emanating from the peak organizations but takes place horizontally, through the development of shared, general principles and the exchange of experience and information between the collective bargaining parties and the representatives of their peak organization. In addition to this internal co-ordination, overall co-ordination of collective bargaining (particularly pay negotiations) is primarily based on the pattern-setting role played by the metal industry and some other industries. This role is due to the fact that the GMBE, the union representing the highly unionized manual workers in the metal industry, co-ordinates its bargaining with the parallel negotiations of the GPA white-collar workers' union. Informally, the resultant agreements set a guiding framework for pay negotiations in all other sectors (see pay framework-setting), including the public sector. This alignment of pay trends in the sheltered sector with pay agreements in the exposed sector, i.e. the metal industry, is an important precondition for the synchronization of pay and incomes policy with the requirements for the Austrian economy's international competitiveness.

The sectoral pay bargaining system is differentiated according to employee category (manual workers and white-collar workers) and also, in the area of goods production, according to manufacturing industry (Industrie) and small-scale craft production (Gewerbe). This reflects the internal differentiation within the ÖGB (separate unions for manual workers and white-collar workers) and the WKÖ (separate sectoral subunits for employers in manufacturing industry and in small-scale craft production). Most of the sectoral agreements concluded cover the whole of national territory, with a minority also concluded at Land level. company agreements in the strict sense of an agreement concluded by an individual employer are the exception in Austria, owing to the legally established priority accorded to employers' organizations as parties to a collective agreement (Tarifparteien). More than 400 collective agreements are concluded per year, the majority comprising small numbers in narrowly defined sectors and separate agreements on specific issues.

Despite the overall co-ordination of pay policy, (sectoral) pay differentials in Austria are among the highest in Western Europe. The primary reason for this is not the large number of collective agreements. A more important factor is that, given the organizationally centralized nature of the trade unions, the latter have not opted for an egalitarian pay structure policy and co-ordination is therefore restricted to average rates of increase. The strongest unions have been able to include in their collective agreements not only standard rates of pay but also actual-pay clauses. The basis for this is the pay drift which results both from unilateral pay concessions by management and from informal pay agreements (see informal works agreement) between managements and works councils.

Such agreements are necessarily informal, in the sense that the Labour Constitution Act (Arbeitsverfassungsgesetz) prohibits the works council from concluding agreements on pay increases, thereby granting the unions a monopoly over pay bargaining. Nevertheless, in companies with strong works councils a practice has grown up whereby such a second, informal pay bargaining round takes place. This is tolerated by the unions and employers' organizations since it poses no threat to their precedence in the collective regulation of pay and at the same time allows a flexible adjustment of pay to the specific circumstances of company performance.

Since the mid-1980s there has been a tendency for the unions and employers' organizations to include in their sectoral agreements delegation clauses which leave the regulation of explicitly defined issues to managements and works councils. In such cases, the collective agreement lays down a certain framework within which management and the works council are able to establish, by means of a works agreement, a more detailed solution specifically tailored to their company situation, allowing more flexible regulation of terms and conditions of employment. The collective agreements concerned mainly relate to working hours, and combine delegation clauses on greater flexibility as regards working time schedules (which suits employers) with a reduction in weekly working hours (which for the unions represents an objective from the point of view of employment policy). Since the 1990s collective agreements concluded for the metal industry and other industries have, however, also included delegation clauses relating to pay.

Please note: the European industrial relations glossaries were compiled between 1991 and 2003 and are not updated. For current material see the European industrial relations dictionary.