The legacy severance entitlement needs its own calculation.
Record the start date, qualifying service, current pay and applicable legacy rule. A later transfer into an employee provision fund requires a written agreement under section 47 BMSVG.
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Severance pay and occupational pensions in a business transfer
Mag. Bernhard Brandauer, Rechtsanwalt
Severance pay and occupational pensions in an Austrian business transfer: legacy system, BMSVG, pension promises and liability.
A business transfer does not settle severance rights and occupational pensions through a general family agreement. The decisive questions are whether an employment relationship moves to a new owner, whether severance belongs to the legacy system or the BMSVG system and which pension promise exists in the individual case. If these levels are mixed, provisions, the data room and liability can be assessed incorrectly.
Section 3 AVRAG provides for the acquirer to enter existing employment relationships. Section 5 AVRAG contains special rules for occupational pension promises. Section 6 AVRAG adds a liability regime for transferor and acquirer. Severance must be separated into legacy entitlements and entitlements under the BMSVG.
This article focuses on employee benefit positions in a business transfer. The business transfer in succession topic covers the wider process. The article on open employee claims provides a further personnel checklist.
Personnel check
Which benefit position needs review at the transfer?
The check separates legacy severance, BMSVG severance and occupational pension promises. The result shows which documents should be obtained.
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Which benefit position appears in the personnel file?
One employee may have several entitlements from different periods.
All paths at a glance
Overview of all answers.
The employee provision fund is central to new severance.
Review the accession agreement, contribution account, employer account numbers, default interest and transferred entitlements. The severance entitlement remains a separate personnel position.
An occupational pension must be reviewed by promise type.
Classify an individual promise, pension fund arrangement, insurance contract or company collective insurance. Section 5 AVRAG may trigger a vested amount if the promise ends. A blanket provision does not replace the calculation.
The benefit position can be included in the closing documents.
Record the model, amount, cut-off date, provider, security and responsible person for each employee. Then review section 6 AVRAG separately from any internal indemnity.
A blanket liability clause is not enough for benefit positions.
Create a list of the model, entitlement, calculation basis and security. Only then can the internal allocation of future costs be drafted in a useful way.
Contradictory benefit data should be resolved before the cut-off date.
Compare the employment contract, payroll records, employer statement, fund statement and pension promise. Assign each difference to a person and support it with a reliable calculation.
Separate legacy and new severance at the transfer
Legacy severance is based on the former statutory system or on a related arrangement. The review normally includes the start date, qualifying service, relevant pay and the reason for a future termination. The entitlement should not be equated with the current balance of an employee provision fund.
New severance is built under the BMSVG through an employee provision fund. Section 3 BMSVG distinguishes a legacy severance entitlement from a severance entitlement. A move under section 47 BMSVG can transfer legacy entitlements into the fund if the statutory conditions are met. It requires a written agreement and a traceable transfer calculation. The practical handover within a family is also covered by the article on family business transfer.
The data room should assign every employee to a system. A move from the legacy system into the BMSVG is not merely an accounting entry. It changes the basis of calculation, the provider and the later right of disposal.
Review occupational pension promises at transfer
An occupational pension may be structured as an individual agreement, through a pension fund or through an insurance contract. These models are not assessed in the same way. The promise, amendments, vesting, indexation, contributions and benefit event must be read together.
Under section 3(3) AVRAG working conditions generally remain in place. Section 5 AVRAG contains the special rule for occupational pension promises. If the acquirer is a universal successor, an individual promise becomes part of the employment contract with the acquirer. Without universal succession, the acquirer may reject the assumption subject to the statutory requirements and timely reservation.
If the promise ends as a result, the employee stops acquiring new pension entitlements under section 5 AVRAG. A vested amount may arise for rights already acquired. The calculation depends on the promise type and should not be fixed without the complete promise and actuarial basis.
Classify transferor and acquirer liability
Section 6 AVRAG generally provides joint liability for employment obligations established before the transfer. It expressly refers to benefits from occupational pension promises that are already being paid at the time of transfer. An internal indemnity between family members does not automatically change this external position.
For severance claims arising after the transfer, the transferor remains liable for five years under section 6(2) AVRAG with the amount of the fictitious entitlement at the transfer date. A similar limit applies to a business pension claim arising from a benefit event after the transfer, based on the pension entitlements existing at the transfer date.
If securities or equivalent security are transferred, the transferor liability can be treated differently under section 6(2) AVRAG. The transfer must be recorded. The acquirer must hold the security during the relevant statutory period.
Prepare the data room and payroll records
For severance the data room should contain the employment contract, start date, qualifying service, current pay, bonuses, previous transfers and fund communications. Open contributions require payroll records, payment evidence and any default interest.
For an occupational pension include the original promise, amendments, fund or insurance documents, contribution records, service periods and information on benefits already in payment. For a defined benefit promise, compare the provision with the promise. A single balance sheet number does not show what was promised to an employee.
The review ends with more than document collection. Each discrepancy receives an owner, a decision and a due date. The transfer agreement can then state who bears additional contributions, which security is transferred and what information employees receive.
Terms to include in the transfer agreement
The agreement should identify the affected employees or a clearly determinable group. For each group it should record the system, cut-off date, calculation, provider, security, liability share and responsibility for later claims.
For new severance state who checks open contributions and how an old entitlement was treated. For legacy severance record the valuation method. For occupational pensions describe promise type, assumption, vested amount and the treatment of benefits already in payment separately.
This is not a blanket assignment of employee rights. Section 48 BMSVG makes statutory BMSVG rights mandatory. The agreement between transferor and acquirer can allocate economic cost. It cannot reduce the statutory position of employees.
Common mistakes with severance and pensions
A common mistake is to assume that every employee belongs to the same severance system. One business can have legacy entitlements, BMSVG contributions and individual pension promises at the same time.
Another risk is an assumption statement without reviewing the promise. An occupational pension may include employee contributions, contractual vesting or a benefit event that has already occurred.
It is also risky to treat a balance sheet provision as the claim itself. A provision, fund balance, fictitious severance amount and vested amount answer different questions.
Finally, an internal indemnity is often treated as if it removed external liability. It can allocate cost between family members. It does not automatically replace section 6 AVRAG.
Complete the personnel position before the cut-off
Start with the complete personnel list including active and dormant employment relationships. Record the severance model and pension promise for each person. Only then should amounts and liability provisions enter the transfer agreement.
Before the cut-off date identify open contributions, inconsistent service records, missing promise documents and security that has not yet been transferred. Information under section 3a AVRAG must match the changes actually planned.
After the transfer obtain a readback from payroll, the employee provision fund and the pension documents. The new owner must know which payments continue. The transferor should be able to show which legacy positions were transferred or economically settled.
Questions about severance pay and occupational pensions
Is a severance entitlement automatically lost in a business transfer?
No. The treatment depends on whether the employee has a legacy entitlement or an entitlement under the BMSVG. The personnel file should show the system and the position at the transfer date.
Must the acquirer assume an occupational pension promise?
That depends on the promise type and the legal structure of the transfer. Section 5 AVRAG contains special rules for individual pension promises. A blanket assumption or rejection without reviewing the promise is not sufficient.
Is an indemnity in the transfer agreement enough to settle liability?
An indemnity can allocate economic cost between transferor and acquirer. Statutory liability towards employees remains relevant. Section 6 AVRAG should therefore be reviewed separately from the internal agreement.
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