Executive Dismissals in Austria 2026: Terminating Senior Executives, Severance, Garden Leave and Non‑compete Enforceability

For HR directors, general counsel, remuneration committees and boards deciding or advising on senior executive exits. This guide provides practical steps, regulatory checks, negotiation guidance and illustrative sample clauses for Austrian executive terminations. It is intended for guidance only and does not constitute legal advice, contact a qualified Austrian employment lawyer before acting.

Introduction: why executive exits are different (risk and governance)

Executive dismissal Austria is one of the highest-risk decisions a board or HR function will handle, because the financial exposure, reputational stakes and governance scrutiny attached to a senior exit far exceed those of an ordinary termination. In 2026, that scrutiny is intensifying: pay transparency expectations, stakeholder-governance frameworks and heightened works council attention mean that employers can no longer treat a high-value severance as a quiet commercial matter to be settled behind closed doors. Every element of the exit, the rationale for termination, the size of any payout, the enforceability of restrictive covenants, and the consultation of statutory bodies, now needs a documented, defensible trail.

Getting this wrong invites litigation, invalid dismissals, unenforceable non-competes and, increasingly, questions from supervisory boards and shareholders about whether payments were justified.

The core difference is that executives sit at the intersection of employment law, corporate governance and commercial risk. A managing director may simultaneously be an employee, an organ of the company and a shareholder or option holder. That layered status means executive dismissal in Austria demands coordination across HR, legal, the supervisory board and, where triggered, the works council. Practical experience of advising on terminations, restructurings and executive exits in Austria consistently points to one lesson: the employers who prepare the paperwork, model the numbers and sequence the stakeholders before opening any conversation are the ones who exit executives cleanly and cost-effectively.

Key statutes, case law and stakeholders to check first

Before any conversation about executive dismissal Austria takes place, the employer needs a clear map of the applicable law, the courts that interpret it, and the people who must be involved. Austrian employment law is not codified in a single act; it is spread across statute, the civil code, collective agreements and a substantial body of Supreme Court jurisprudence.

Primary statutes to check

The principal sources an employer must review are:

• Arbeitsverfassungsgesetz (ArbVG). The Labour Constitution Act governs collective employment relations, including the co-determination and consultation rights of the works council that can be triggered even on individual senior exits.
• Allgemeines Bürgerliches Gesetzbuch (ABGB). The Austrian Civil Code contains the general contract-law framework governing service and employment relationships and the validity of restrictive covenants agreed between the parties.
• Angestelltengesetz (AngG). The Salaried Employees Act governs many white-collar employment relationships, including notice periods and post-termination non-compete rules (Konkurrenzklauseln) for salaried employees.
• Betriebliches Mitarbeiter- und Selbständigenvorsorgegesetz (BMSVG). The “Abfertigung neu” system, applicable to employment relationships starting on or after 1 January 2003, provides for employer contributions to a severance fund rather than a lump-sum entitlement paid directly by the employer.
• Working-time and employee-protection statutes. The Arbeitszeitgesetz (AZG), the Arbeitsruhegesetz (ARG) and related protective legislation bear on how notice runs and how garden leave and suspension operate.

The consolidated texts of these statutes are published on the Austrian Legal Information System (RIS), which is the authoritative primary source for the exact statutory wording an employer or its counsel must rely on.

Relevant courts and decisions

The Oberster Gerichtshof (OGH), Austria’s Supreme Court, is the decisive authority on how the statutes are applied to executive terminations, severance disputes and, critically, the enforceability of post-termination non-competes. Its jurisprudence sets the tests that determine whether a restrictive covenant will survive judicial challenge. Where constitutional questions about labour rights or statutory interpretation arise, the Verfassungsgerichtshof (VfGH) may also be relevant. The Arbeiterkammer (Chamber of Labour) publishes practical guidance that, while employee-facing, is useful for anticipating how the other side will frame its position.

Stakeholders to identify early

The people who must be consulted or must sign off are as important as the law:

• Works council. Where a works council exists, ArbVG consultation duties can attach to the dismissal, and skipping them carries serious consequences.
• Supervisory board. For managing directors and board members, the supervisory board or shareholders, not HR, often hold the power to remove the individual from office.
• Shareholders. Corporate-law steps to revoke an appointment may require shareholder involvement, distinct from ending the employment or service contract.

This maps directly onto the common employer question, “What are the main labor laws in Austria?”, the practical answer is that the ArbVG, the ABGB, the AngG, the BMSVG, applicable collective agreements and employment-protection statutes together form the framework, all accessible through RIS.

Types of executive departure: dismissal, resignation, termination agreement and retirement

Executive termination Austria can take several legal forms, and choosing the right route is the first strategic decision. Each carries different cost, risk and speed profiles.

Dismissal and for-cause termination

An employer can terminate an executive by ordinary notice (Kündigung) or, where serious cause exists, summarily for cause (Entlassung). Ordinary notice-based termination is generally the cleaner route but triggers notice periods and any contractual protections. Summary dismissal for cause avoids notice but sets a high evidential bar: the employer must be able to prove conduct so serious that continuing the relationship is unreasonable, and the documentation supporting that conclusion must be assembled before the dismissal is served, not afterwards. A for-cause dismissal that fails at trial can convert into a very expensive claim.

Termination agreement (settlement)

A negotiated termination agreement (einvernehmliche Auflösung) in Austria is frequently the preferred exit for senior people. It converts an uncertain, litigable dismissal into a defined, mutually signed exit with agreed severance, releases and post-termination obligations. The benefit is certainty and confidentiality; the risk is cost and the danger of agreeing terms that are commercially generous but poorly documented from a governance standpoint. A well-drafted termination agreement Austria should record the severance formula, mutual releases, treatment of restrictive covenants, benefits continuation, confidentiality and the tax handling.

Retirement and buy-outs

Where an executive is close to retirement, a structured retirement or buy-out can be the least contentious path, allowing the relationship to be wound down with dignity while managing pension and incentive-plan considerations.

A simple decision tree helps: if there is provable serious cause and the evidence is airtight, a for-cause dismissal may be defensible; if not, model the litigation risk and cost of an ordinary dismissal against the cost of a negotiated termination agreement, and in most senior exits the settlement route wins on certainty. Useful opening lines for the negotiation include:

• “We have reached a decision about the future of the role and want to discuss an orderly, dignified transition.”
• “Our preference is a mutually agreed departure with a fair package, rather than a contested process.”
• “Let’s discuss the terms that would allow you to move on constructively, severance, references and timing.”

Notice periods, due process and grounds for dismissal (executives vs employees)

The mechanics of executive dismissal in Austria differ from those for rank-and-file employees, primarily in the interplay between statutory notice, contractual enhancement and the special status of corporate organs.

Statutory notice versus contract notice

Notice periods for salaried employees derive from the AngG and can be extended by the individual employment contract. Senior executive contracts routinely provide notice materially longer than the statutory floor, and it is that contractual notice that usually governs the exit. Employers must read the executive’s contract carefully: an unusually long notice period is itself a cost driver and a negotiation lever, because the value of that notice, paid out or worked, often forms the anchor for the whole settlement. The precise statutory framework is set out in the AngG and, for managing directors’ service contracts, the ABGB, both published on RIS.

Conduct and performance dismissals

Where the employer relies on conduct or performance, the burden of substantiation falls on the employer. Performance concerns should be evidenced through documented objectives, appraisals and warnings; conduct issues need a contemporaneous record. The recurring failure in disputed executive dismissals is a decision that is commercially sound but evidentially thin. Build the file first.

Special rules for board members and managing directors

Managing directors (Geschäftsführer) of a GmbH and board members (Vorstand) of an AG are not straightforward employees. Removing them from office is typically a matter for the shareholders or the supervisory board under corporate law, and it is legally distinct from terminating any underlying service or employment contract. An employer may need two parallel processes: revoking the appointment as an organ of the company, and ending the contractual relationship. Conflating the two is a common and costly error.

This is where the employer question “How much are lawyers paid in Austria?” becomes practically relevant. Executive exits are complex precisely because they combine employment, corporate and tax dimensions, so specialist fees reflect that complexity. Austrian lawyers work on hourly, fixed-fee or capped arrangements. For a high-value executive dismissal, the cost of experienced counsel is small relative to the exposure created by an invalid dismissal or an unenforceable non-compete.

Severance for executives Austria, benchmarks, calculating payments and tax considerations

Severance is the commercial heart of most executive exits, and it is the area where employers most often overpay or underprotect themselves. Understanding how severance for executives Austria is actually determined allows a board to negotiate from a defensible position.

Statutory severance and the “Abfertigung neu” system

For employment relationships that began on or after 1 January 2003, statutory severance is handled through the “Abfertigung neu” system under the BMSVG: the employer pays a defined percentage of gross monthly pay into an employee provision fund (Betriebliche Vorsorgekasse), rather than owing a lump sum on termination. For older relationships, transitional “Abfertigung alt” entitlements may still apply. Beyond these statutory arrangements, there is no automatic contractual “golden handshake” for executives; any additional severance is a matter of negotiation.

Benchmarks and negotiation levers

Senior executive severance in Austria is, in practice, largely contractual and negotiated on top of any statutory entitlement. That means the number is a function of what the contract provides, what the employer is willing to pay to secure certainty and releases, and what the executive can credibly threaten if no agreement is reached. The main levers that move a severance figure are:

• Tenure. Longer service generally supports a larger package and longer notice.
• Role and seniority. C-level and board-adjacent roles command higher settlements, reflecting both contract terms and reputational sensitivity.
• Litigation risk. A weak evidential file for the dismissal increases the price of a clean exit; a strong file reduces it.
• Restrictive covenants. Where the employer wants an enforceable non-compete, adequate consideration for that restraint often forms part of the package.
• Timing and confidentiality. A fast, discreet exit before a sensitive event may justify a premium.

An illustrative severance calculation shows how these components combine, the figures below are for structural illustration only and must be adapted to the individual contract and circumstances:

Tax and social security considerations

How a severance is characterised affects its tax and social-security treatment, and the net position for the executive is often as important to the negotiation as the gross figure. Certain termination payments benefit from preferential income-tax treatment under the Austrian Income Tax Act, while others are taxed at ordinary rates; the applicable rules and thresholds should be confirmed with a tax adviser at current rates. Structuring the payment, distinguishing contractual notice, statutory entitlements and settlement premiums, should be modelled with tax advice before terms are offered, because a poorly structured package can cost both sides more than necessary.

Red flag: agreeing a headline severance number before modelling the net-of-tax position and the cost of restrictive-covenant compensation. Always negotiate against a fully costed model, not a single gross figure.

Garden leave, working notice and suspension, mechanics and employer controls

Once the decision to exit an executive is taken, the employer must decide what happens during the notice period. Garden leave Austria (Dienstfreistellung), working notice and immediate suspension each serve different objectives and carry different legal consequences.

Garden leave mechanics

On garden leave, the executive remains employed and continues to receive full salary and contractual benefits, but is relieved of duties and typically excluded from the workplace and systems. Because the employment relationship subsists, the employer’s obligations, remuneration and benefits, continue throughout, and the executive remains bound by duties of loyalty and confidentiality. Garden leave under Austrian labour law therefore requires continued remuneration and the maintenance of the employer’s contractual obligations; it is not a costless way to sideline someone. Its principal advantages are keeping the individual out of the market and away from clients while still under contract, and preserving the ability to enforce obligations during the period.

Working notice versus immediate suspension

Working notice keeps the executive engaged and productive during the notice period, which is cheaper in the sense that value is still being delivered, but it carries risks around morale, information access and the possibility of damaging conduct. Immediate release from duties is more abrupt and should be reserved for situations where the executive’s continued presence poses a genuine risk; it must still respect the employer’s pay and contractual obligations.

Confidentiality, company property and IT access

Whatever route is chosen, the employer must control confidentiality, recover company property and manage IT and systems access proportionately. Cutting access must be handled carefully so as not to breach the ongoing employment relationship, but leaving a departing executive with full access to sensitive systems is a serious risk.

Red flag: imposing garden leave or release from duties where the contract does not clearly permit it. Where the right is not contractually reserved, an employer forcing an executive off duty may expose itself to claims, so the ability to place someone on garden leave should be built into the contract at the outset.

Restrictive covenants and non-compete enforceability Austria (post-termination)

Non-compete enforceability Austria is one of the most misunderstood areas of executive dismissal, and it is where boilerplate clauses most often fail. A restrictive covenant that looks robust on paper may be worthless if it cannot survive the statutory limits and the tests applied by the courts.

The legal test for enforceability

For salaried employees, post-termination non-competes (Konkurrenzklauseln) are subject to the statutory limits in the AngG. Among other things, such clauses are only permissible where the employee’s salary exceeded the statutory threshold at the time the relationship ended, the restraint must relate to the employer’s field of business, it is generally limited to a maximum of one year after termination, and it may not unfairly impede the employee’s professional advancement. Austrian courts assess restraints for reasonableness and legitimate interest, and overbroad restraints, those covering too long a period, too wide a territory, or activities beyond the employer’s legitimate concern, are vulnerable to being reduced or struck down.

Importantly, where the employer terminates without the employee having given cause, the covenant may not be enforceable. The OGH’s jurisprudence provides the interpretive framework, and the statutory foundation sits in the AngG (and the ABGB for service contracts), all on RIS.

Drafting tips and red flags

To maximise the prospects of enforcement:

• Confirm the statutory eligibility conditions are met, in particular the salary threshold under the AngG in force at the relevant time.
• Tie the restraint to a defined legitimate interest, client relationships, confidential information or a genuine competitive threat, rather than a blanket ban on working in an industry.
• Keep duration within the statutory ceiling and proportionate to how long the protected interest actually persists.
• Limit geographic and activity scope to where the employer genuinely competes.
• Consider whether the exit route (employer-led dismissal) will disable enforcement, and address consideration where appropriate.

An illustrative clause structure, illustrative only; adapt and review with counsel, might restrain the executive, for a defined and limited period (not exceeding the statutory maximum) after termination, from engaging within a specified territory in activities that directly compete with the identified business interest. Every element in that sentence is a variable that must be calibrated to the facts and tested against current AngG limits and OGH doctrine.

Remedies and court approaches

Where a covenant is valid and breached, remedies may include injunctive relief, damages, or enforcement of any agreed contractual penalty, though the practical outcome depends heavily on how the clause was drafted and whether the statutory conditions were met. The consistent theme in the case law is that the courts will not rescue an overreaching employer: proportionate, statutorily compliant and narrowly targeted covenants stand the best chance.

Red flag: relying on a standard-form non-compete carried over from a template. Executive covenants should be individually drafted for the role and reviewed against the AngG and the latest OGH position before the exit.

Works council and co-determination: process steps when exiting senior management

The works council executive dismissal question catches many employers by surprise. Where a works council exists, ArbVG consultation rights can be triggered, and ignoring them can undermine the process.

When the works council must be consulted

Under the ArbVG, the works council must generally be notified before an ordinary dismissal and has a right to comment within a short statutory period; it may agree to, remain silent on, or object to the dismissal, and that position affects the employer’s and employee’s ability to challenge the termination in court. Note, however, that the general dismissal-protection and works-council notification regime does not apply to managing directors and other leading employees who fall outside the personal scope of the ArbVG. The employer must therefore check whether the specific senior individual is covered before serving notice, using the ArbVG provisions published on RIS.

Timing, written information and consultation

Where the pre-dismissal notification applies, it must precede the dismissal, provide the works council with the relevant information, and allow the council its statutory opportunity to respond. This is a process, not a mere formality, and rushing it can affect the strength of the employer’s position.

Risks of failing to follow the process

Where the works council process is required but omitted or defective, the dismissal can be challenged, and the consequences can be significant. That risk alone justifies verifying the works council position, and whether the individual is even within scope, at the very start of any senior exit.

A practical seven-step works council timeline:

1. Confirm whether a works council exists and whether the individual falls within the ArbVG’s scope.
2. Prepare the information the council is entitled to receive.
3. Notify the works council before serving notice on the executive, where required.
4. Allow the statutory response period to run.
5. Consider and document the council’s response.
6. Finalise the dismissal or settlement route in light of the process.
7. Retain the full record as part of the governance trail.

Special categories: board members, managing directors and C-level with share plans

The rules for exiting the most senior individuals diverge from ordinary executive dismissal Austria, because these people hold corporate roles and often complex incentive arrangements.

Board member removal mechanics

Removing a board member (Vorstand of an AG) or managing director (Geschäftsführer of a GmbH) from office generally requires corporate-law steps, a supervisory board resolution for an AG board, or a shareholders’ resolution for a GmbH managing director, that are separate from ending the employment or service contract. The dismissal of board members Austria therefore proceeds on two tracks: revoking the appointment as an organ, and terminating the contractual relationship. Both must be handled correctly, and in the right order, to avoid leaving the individual in office while their contract is ended, or vice versa. The relevant corporate frameworks (the AktG and GmbHG) are accessible via RIS.

Treatment of share options and long-term incentives

Share options, restricted shares and long-term incentive plans are governed primarily by the plan rules, which typically dictate what vests, what lapses and what accelerates on departure. Whether unvested awards are forfeited or preserved is frequently a central negotiation point in a senior exit, and the treatment of these instruments should be resolved explicitly in the termination agreement rather than left to be argued later.

Cross-border issues

Executives with foreign contracts, secondment arrangements or duties spanning several jurisdictions raise questions of governing law, jurisdiction, social security and tax that can materially change the exit strategy. Within the EU, instruments such as the Rome I Regulation and the Brussels Ia Regulation are relevant to governing law and jurisdiction, but cross-border exits require jurisdiction-specific advice on both sides.

Practical playbook: template timeline, negotiation script, risk matrix and checklist

Bringing the elements together, the following playbook gives HR and legal a repeatable structure for managing an executive dismissal in Austria.

Ten-point pre-exit checklist:

1. Read the executive’s contract in full, notice, severance, covenants, incentives.
2. Confirm corporate status: employee only, or also an organ of the company.
3. Assemble the evidential file supporting the rationale for exit.
4. Model severance net of tax, including any non-compete compensation.
5. Decide the route: for-cause dismissal, ordinary notice, or negotiated termination agreement.
6. Check whether ArbVG works council notification applies to the individual.
7. Identify supervisory board and shareholder steps for board members and managing directors.
8. Decide garden leave, working notice or release from duties and confirm the contractual basis.
9. Plan confidentiality, property recovery and IT access.
10. Prepare the governance sign-off trail and document retention plan.

Indicative 30/60/90-day timeline:

• Days 1–30. Contract review, evidence gathering, severance modelling, works council and supervisory board mapping, route decision.
• Days 30–60. Works council process where required, corporate steps for organs, negotiation of the termination agreement, garden leave or notice arrangements.
• Days 60–90. Execution of documentation, treatment of incentives, confidentiality and property recovery, retention of the full governance record.

Escalation matrix: line manager and HR prepare and support; legal validates statutory and corporate steps; the CEO or relevant executive approves the commercial terms; and the supervisory board or shareholders sign off where a board member or managing director is involved. Documenting who approved what, and when, is central to defensible governance in 2026.

Closing and next steps

Executive dismissal Austria rewards preparation and punishes improvisation. The employers who succeed in 2026 are those who read the contract, model the severance net of tax, map the works council and supervisory board steps, calibrate any non-compete to the statutory limits and reasonableness standard the courts actually apply, and build a documented governance trail before the first conversation takes place. Each stage, from choosing between a for-cause dismissal and a negotiated termination agreement, to structuring garden leave, to enforcing restrictive covenants, carries specific legal tests and specific risks that reward specialist attention.

Given the financial exposure and the intensifying governance scrutiny around senior severance, the sensible course for any board or HR function facing an executive dismissal in Austria is to instruct qualified Austrian employment counsel early, retain the full decision record, and treat documentation as the foundation of a defensible exit rather than an afterthought.

This guide is for general information and does not constitute legal advice. Executive exits turn on their specific facts and on current statute and case law. Contact a specialist employment lawyer before acting.

Sources

1. Austrian Legal Information System (RIS), Bund
2. Oberster Gerichtshof (OGH), Austrian Supreme Court
3. Verfassungsgerichtshof (VfGH), Constitutional Court of Austria
4. Arbeiterkammer (Chamber of Labour)
5. oesterreich.gv.at, Official Austrian public administration information portal
6. International Labour Organization (ILO)