The system of social partnership is the salient feature of industrial relations in Austria. Based on close voluntary co-operation between employers, employees and the state, it constitutes the specifically Austrian manifestation of the system of reconciling interests which in the social sciences is called corporatism. By international standards, Austria is one of the countries in which corporatist structures are most highly developed.
Within this system employers and employees are represented by a small circle of major organizations (the “social partners”). On the employees' side these are the Austrian Trade Union Federation (ÖGB) and the Federal Chamber of Labour (BAK), and on the employers' side the Economic Chamber of Austria (WKÖ), the Standing Committee of Presidents of the Chambers of Agriculture (PKLWK) and the Federation of Austrian Industry (VÖI). Although membership overlaps on the one side between the ÖGB and BAK and on the other between the WKÖ and VÖI, in their mutual relationships co-operation predominates over competition, for two reasons. First, the ÖGB and BAK (like the WKÖ and VÖI on the other side) are linked, within their overlapping membership domains, by numerous instances where key positions in both are occupied simultaneously by one and the same individual (see multiple office-holding). Second, a system of division of labour operates. On behalf of employees, collective agreements are concluded exclusively by ÖGB, with BAK acting as a source of expertise. In dealings with the government, they function as joint representatives of employees' interests. Similarly, on the employers' side collective bargaining is conducted only by WKÖ, while VÖI makes no use of its right to conclude collective agreements. Compared with WKÖ, which with the exception of the liberal professions and agriculture takes in more or less the whole of the employers' side, VÖI sees itself as specifically representing the exposed sector.
The collaboration between state and social partners is an important connecting link between industrial relations and government policy. It provides the means of attuning collective bargaining to national economic and social policy and, conversely, opens up all aspects of that policy to possible influence by the social partners. Accordingly, two subsystems of social partnership can be differentiated: bipartite consultations and negotiations between the social partners, and tripartite consultation and concerted policy-making (Konzertierung) between the social partners and the state. Bipartite social partnership encompasses three arenas: 1) the informal practice of negotiations and discussions at cross-sector level as institutionalized within the Parity Commission; 2) the collective bargaining system, focused on the sectoral level and representing the core institution of bipartite social partnership; and 3) co-determination as founded in the works constitution, providing the basis for consultations and negotiations between management and the works council at establishment and company level. Tripartite social partnership relates to all social and economic policy issues which in formal terms fall within the purview of state powers and responsibilities. In accordance with the structure of the Austrian state, a distinction is made between the Federal Government and the individual Länder, with most social and economic policy issues falling within the purview of the Federal Government's legislative powers. Accordingly, the focus of social partnership lies at Federal Government level, although its importance at individual Land level (mainly in the area of national labour market policy) has increased in recent years. The influence of the social partners on public policy is formally institutionalized in a wide range of corporatist councils and committees. In addition to this formal aspect, there are the informal discussions which take place at central level between representatives of government and the social partners. In cases where the social partners, in this context, are able to present a united front on a given issue, their influence amounts to far more than just consultation; their joint position usually becomes the guideline for government policy. In addition to tripartite concertation, the social partners have individual opportunities to influence government opinion, through their right to be consulted on all matters affecting their members. Compared with other structures of interest representation, the social partners are accorded a de facto privileged voice in social and economic policy. As a result, in order to gain support for their particular interests organizations outside the social partnership system have to direct their lobbying at the social partners rather than at the government.
The origins of social partnership lie in the violent class struggles and high unemployment of the years between the two world wars, culminating in the civil war of 1934 and the annexation of Austria to Nazi Germany in 1938. These bitter experiences prompted employers' and employees' representatives, after 1945, to give shared interests and co-operation precedence over class interests and conflict. The fact that since these beginnings social partnership has developed into a permanent and stable element of Austrian society is due to a number of factors. One such factor is the predominance of small firms in Austria's economic and enterprise-size structure, which favours a system of collective regulation by the social partners. Similarly, after the overthrow of the Nazi regime the employers' and employees' representatives resolved not to restore the ideologically and sectorally divided system of organizations that had existed under the First Republic but to create, instead, unitary and comprehensive collective interest organizations which are better suited to the needs of social partnership. The ÖGB, BAK, PKLWK and WKÖ are linked with the political parties through the practice of simultaneous office-holding mentioned above, particularly with the Austrian Social Democratic Party (Sozialdemokratische Partei Österreichs, or SPÖ) and the conservative Austrian People's Party (Österreichische Volkspartei, or ÖVP), which have dominated successive governments since 1945, and these personal links foster tripartite concertation. The most important condition underlying social partnership is that it carries with it comparative advantages for Austria, and this explains the system's stability. It is mainly true of pay and incomes policy in the social partnership context, which enables the trend in labour costs to be attuned to economic requirements. If there appears to be comparatively little evidence of active labour market policy in Austria, the reason lies in the fact that the country's extremely low unemployment rate (by European standards) is mainly attributable to social partnership and the associated pay policy.