Austria's coalition divided over how to plug insolvency fund gap without raising payroll costs

The dispute burst into the open after it became known that the Ministry of Labour expects a financing gap of 160 million euros in 2027, with projected payouts of 350 million euros that year. ÖGB president Wolfgang Katzian said that by the end of the current year only 30 to 40 million euros would remain in the fund. The IEF's equity has fallen from 979 million euros in 2021 to 481 million euros in 2024, roughly half its pre-cut level.

AK expert Ines Stilling put the annual revenue loss caused by the lower contribution rate at close to 700 million euros, a figure that has fuelled calls from employee representatives for an immediate reversal. GPA chairwoman Barbara Teiber demanded an unbureaucratic return to the 0.2 percent rate, while AK board member Andreas Huss argued that what was once celebrated as a reduction in non-wage labour costs now shifts the burden onto contributors and taxpayers.

Government pushes back

Economics minister Wolfgang Hattmannsdorfer, an ÖVP politician, told the KURIER that raising non-wage labour costs again would be the wrong approach. "Deshalb haben wir die Lohnnebenkosten gesenkt – sie jetzt wieder zu erhöhen, wäre der falsche Weg", he said. He added: "Der beste Insolvenzschutz ist eine wettbewerbsfähige Wirtschaft." The minister declined to spell out what alternative financing the coalition might consider.

Neos economics spokesman Markus Hofer echoed that line. "Eine pauschale Beitragserhöhung wäre jetzt der falsche Weg, denn Unternehmen noch stärker zur Kasse zu bitten würde das Problem weiter verschärfen", he said, and added that the coalition had agreed to examine the issue in the autumn with up-to-date figures and, if necessary, agree on measures. He too declined to detail how an alternative financing model for the IEF might work.

Unions demand restoration

Inside the ÖVP-led ministry of social affairs, which oversees the IEF, minister Korinna Schumann did not confirm details of the 160 million euro gap publicly, but made clear she would not remain idle. "Ich werde nicht tatenlos zusehen, wie ein bewährtes Sicherheitsnetz für Arbeitnehmerinnen und Arbeitnehmer Risse bekommt", she said. Her intervention has made the situation politically delicate for the coalition.

From the union side, Katzian pointed to the law itself: "Die Lösung ist im Gesetz verankert: Die Arbeitgeberbeiträge müssen angehoben werden." Huss went further, insisting that the IEF should in future cover all social-insurance contributions, including the employer's share. "Es kann nicht sein, dass die Gemeinschaft der Beitragszahler auf einem Teil der Kosten sitzen bleibt", he said, adding: "Deshalb muss der Insolvenz-Entgelt-Fonds künftig sämtliche Sozialversicherungsbeiträge ersetzen – auch die Arbeitgeberbeiträge."

Political stakes for the coalition

The political stakes are sharpened by the coalition's own recent record. From 2028, employer contributions to the Familienlastenausgleichsfonds (FLAF) will fall by roughly two billion euros, a measure presented as relief for businesses. A rise in the IESG surcharge from 2027 would partially undo what the coalition markets as its signature achievement on non-wage labour costs.

Beyond the rate debate, insolvency practitioner Georg Kahlig has proposed shortening the period during which the IEF pays out wages from the current longer window to two months, arguing that this would roughly halve the fund's spending. "Dieser enorm überschießende Leistungszeitraum begünstigt den Missbrauch nicht nur, sondern fordert ihn geradezu heraus", he wrote in a letter to the KURIER. His suggestion hints at a structural reform that could reduce pressure on contributions without raising them.

A reform alternative on the table

The IEF's payout record underscores the scale of recent claims. Around 200 million euros were disbursed in 2023, rising to 270.3 million euros in 2024, with the ministry projecting 350 million euros for 2027. High-profile insolvencies involving KTM and Kika/Leiner have fed the upward trajectory, and have put the question of long-term financing back on the political agenda.

The 2022 cut had a long prehistory. Between 2004 and 2007, the employer contribution stood at 0.7 percent, far above today's 0.1 percent. Critics of the reduction argue that successive cuts, each presented at the time as relief for companies, have steadily transferred risk from employers to the contributory community and to taxpayers.

Huss framed the issue bluntly: "Die Senkungen wurden jahrelang als Entlastung der Unternehmen verkauft. Was kurzfristig als Senkung der Lohnnebenkosten gefeiert wurde, belastet nun die Beitrags- und Steuerzahlerinnen und -zahler." Katzian added a pointed reminder of principle: "Die ausreichende Finanzierung des Insolvenzentgeltfonds ist kein Goodwill, sondern gesetzlich vorgeschrieben."

What comes next

Huss also challenged the logic of the current partial coverage: "Arbeitnehmerinnen und Arbeitnehmer sind nicht nur zur Hälfte krank, gehen nicht nur zur Hälfte in Pension und sind auch nicht nur halb arbeitslos." In other words, the unions argue that workers should be treated as whole persons, not as half-clients of the welfare system, when their employer becomes insolvent.

For now, the coalition has bought time. Both ÖVP and Neos point to an autumn review with current data before any decision is taken, and Schumann's reserved stance suggests the government is weighing options rather than committing to either a contribution rise or a structural reform. The unions, for their part, warn that waiting much longer risks leaving the IEF unable to meet its statutory obligations.

The underlying question is whether Austria wants to fund a robust wage-guarantee system through higher employer contributions, through general taxation, or through tighter eligibility rules such as Kahlig's two-month cap. The answer, when it comes, will determine both the financial shape of the IEF and the political balance between the coalition's non-wage-cost agenda and its commitment to worker protection.