Railway employees found liable for unemployment insurance contributions

Austrian railway employees are likely to lose around 2% of their net monthly income from August 1997 because a court has found them liable for unemployment insurance contributions. They may also have to pay contributions for the whole period from the beginning of 1995. The workers' trade union has warned of possible strikes.

Owing to a decision issued by the Constitutional Court (Verfassungsgerichtshof), published in mid-July 1997, employees of the Austrian Federal Railways (Österreichische Bundesbahnen, ÖBB) may have to pay unemployment insurance contributions, amounting to 3% of gross pay, from August 1997. Because the deduction is made before tax, the tax base shrinks and the net result for the employee is a reduction of take-home pay by roughly 2%. Average net income will be reduced by about ATS 600 per month. This compares with a pay increase of ATS 250 per month set by collective agreement from 1 July 1997 (plus a one-off payment of ATS 1,750).

In addition, the court decided that contributions became due from January 1995 and, if no other solution is found, employees will become liable for the back payments. These would amount to about ATS 28,000 per employee on average, equal to between one and two and a half net monthly incomes for most of the 50,000 employees affected, before the tax refund they would then be entitled to is taken into account. Likewise, the company will have to pay 3% of the total wage bill in unemployment insurance contributions, also backdated to January 1995.

In return, the employees will then be entitled to unemployment insurance benefits. This, however, is of little benefit to them. Most of the ÖBB's employees had civil servant status until the end of 1994 and could not be dismissed. Therefore they were exempt from unemployment insurance contributions. Both the protection and the exemption were maintained in the act of Parliament making the ÖBB an independent company. The court has now found the continued exemption unconstitutional.

The Union of Railway Workers (Gewerkschaft der Eisenbahner) is up in arms over the ruling. Its chair has predicted that measures will be taken, possibly going as far as a strike, if the company starts to deduct unemployment insurance contributions from wages in August. It is not without irony that he is also the chair of the Insurance Corporation of Railway Workers, which will have to issue the payments order to the company.

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