AK demands tougher penalties for social fraud

The Vienna Chamber of Labour is calling for significantly tougher penalties to combat what it describes as a growing, systematic form of social fraud by companies, ORF reported. It says targeted insolvencies and complex corporate structures are being used to shift wage costs onto the public.

The demands were presented on Tuesday as the chamber’s anti-fraud unit released its half-year figures. By the end of July, the unit had handled 96 cases, including 57 reports of underpayment. About 500 employees were affected, with outstanding claims totalling 3.6 million euros, already 20 percent above last year’s figure.

“The cases handled by our unit are becoming increasingly complex,” said employment law expert Andrea Ebner-Pfeifer. Companies were continually changing their structures and names and re-registering employees without their knowledge, she said.

Chamber criticises insolvency fund financing

The chamber is focusing particularly on deliberate insolvencies, which it says are being misused as a business model to shift wage costs onto the public. It cited the example of a construction company that continued operating under a new name after going bankrupt, while retaining the same address and management. The case has caused more than 800,000 euros in damage to the Insolvency Remuneration Fund, which covers employees’ claims when companies become insolvent.

Ludwig Dvořák, head of a department at the Vienna Chamber of Labour, said the fund had been systematically underfinanced by cuts to contributions in recent years. Halving the contribution from 0.2 percent to 0.1 percent of the wage bill had created a funding gap of about 160 million euros and threatened employees’ protection in the event of insolvency, the chamber said.

Call for penalties for each violation

The chamber is calling for the reintroduction of the cumulative penalty principle in the law combating wage and social dumping. Under the proposal, each individual violation would be punished separately when several offences were committed.

It also wants liability for principal contractors to be extended to wages, a five-year cooling-off period for managing directors who receive serious administrative penalties or are involved in repeated bankruptcies, and the amount owed to employees to be doubled when wages are not paid on time.

Economic chamber rejects demands

Rolf Gleißner, head of the social and health policy department at the Austrian Economic Chamber, rejected the proposed return to cumulative penalties, saying the European Court of Justice had already classified the principle as disproportionate. The result, he said, would be that even minor violations could threaten companies’ existence.

Gleißner also rejected the demand to double employers’ contributions to the Insolvency Remuneration Fund. He said companies needed relief rather than additional burdens to prevent insolvencies, including a reduction in payroll-related costs from 2028.

Effective action against social fraud had to address the entire system and all those involved, Gleißner said. This explicitly included employees who participated in fraudulent acts, abuse of sick leave and fraud involving social benefits.