Tips are an essential part of the income in some industries, particularly in hospitality, but also for taxi drivers and hairdressers. Various sector-specific and regional flat rates for contributions, established by the Austrian Federal Economic Chamber (WKÖ) and the Austrian Health Insurance Fund (ÖGK), currently exist. According to the government program, this system is set to be evaluated and unified across the country. However, industry representatives have raised concerns about the increasing checks and backcharges.
“Tips must remain exempt from taxes and contributions,” demanded Mario Pulker, head of the WKÖ Gastronomy Department, in an interview with APA. Previously, Marko Fischer, head of the Social Democratic Economic Association (SWV) in Vienna, stated to APA: “The tip flat rate was originally intended as an ease for businesses to avoid the complex management of tip records. It is unacceptable that the ÖGK is now simply making adjustments and threatening businesses with absurdly high backcharges.” He stressed that any adjustment should not overwhelm businesses and should take the specifics of each sector into account.
The Freedom Economic Association (FW) warned in a press release on Monday that “the additional financial burden on businesses will inevitably lead to rising prices.” FW gastronomy spokesperson Simon Schnell sees this as “a targeted attack by the ÖGK” on the “hard-earned additional income of hospitality staff,” attempting to collect this through employers. “Tips are a sign of appreciation from guests, and now the state is grabbing them as if they were an additional source of tax revenue. This is an unbearable burden on the entire sector.” He emphasized that tips should remain “100% tax-free,” calling them a “gift from the guest, not a hidden tax source.”
Card Payments Make Tip Flow Transparent
The ÖGK’s backcharges affect businesses, not employees. However, this also impacts sole proprietors (EPUs). “During wage tax audits, you can see through the register how much a waiter or waitress has received in tips, especially as more tips are being paid via card,” Pulker explained. “Then the social security contribution is calculated.” He had received information about increased inspections in the hospitality sector, especially from Styria. The backcharges were “sometimes in the five-digit range.”
WKÖ and Health Insurance Fund in Negotiations
For Pulker, the approach in service industries should not be like this. “The Ministry of Finance and the health insurance fund cannot just stand by and take money from employees for good service to guests. That’s simply not acceptable.” Even if card payments are used, it must remain this way. After an internal coordination with representatives of other affected sectors, Pulker is currently negotiating with the health insurance fund. He acknowledged that the issue is complex, “but a solution is needed so that employees are rewarded for their service to the guest and not penalized by having to tax or pay social security contributions on their top performance.”
Concerns About Economic Impact on Small Businesses
“We are not talking about corporations, but about sole proprietors and family businesses that are being threatened in their economic existence by these new demands,” said Martina Haslinger-Spitzer, head of tourism at SWV Vienna. “Tips are an important part of the income for many employees.” Gülten Karagöz, head of the SWV hairdressing division, pointed out that the issue not only affects businesses but also customers, as increased charges on tips would inevitably lead to higher prices. At the same time, the incentive for employees to work in sectors where tips are an important part of their wages is reduced.
How a solution will ultimately look is still open. According to Pulker, a new law or amendment may not necessarily be required.
