Germany: Short-Time Work (Kurzarbeit) During Covid-19 Crisis

Germany: Short-Time Work (Kurzarbeit) During Covid-19 Crisis

To protect German businesses and their employees against the economic impact of Covid-19, the federal government has introduced a package of measures designed to soften the effects of the current pandemic. One of the key measures is the increased flexibility of short-time work compensation, making it simpler and quicker to access.

Q&A: Short-Time Work and Coronavirus

What is the short-time work allowance?

Referred to in Germany as ‘Kurzarbeitergeld’, the short-time work allowance is paid for by the employment agency (Agentur für Arbeit) as partial compensation for loss of earnings as a result of a temporary cut in working hours. The allowance reduces the costs faced by the employer in the context of employing workers and allows businesses to continue to employ their workforce, preventing the need to dismiss staff.

What conditions should be met in order to receive the short-time working allowance?

The allowance should be granted if an agreement has been reached between the employer and the employee representative body, or by the employer and the employees affected, to cut working hours within the company in accordance with the provisions of the labour law, with this resulting in a large loss of working time and salary. The below conditions should be met:

  • The loss of working hours must be caused by economic reasons or circumstances out with the employer’s control.
  • The deduction in working hours must be unavoidable, meaning the company has to have done everything possible to reduce or resolve it.
  • The deduction in working hours must be temporary in nature, a return to normal working hours can be expected during the period for which the short-time allowance is available.
  • The employment agency must have been informed of the deduction in working hours.
  • Staff members must remain in employment subject to social insurance contributions after the cut in working hours and not be made redundant.
  • The deduction in working hours must be substantial, at least one third of the company’s staff must face a reduction of more than ten percent of their gross monthly salary.

How are the rules on short-time working being relaxed during the coronavirus crisis?

With the lockdown now extended until 19 April 2020, the federal government is issuing a statutory instrument relaxing the conditions of the allowance. The changes will apply until 31 December 2020. Employers are also being given relief on the payment of social security contributions.

The changes are outlined below:

  • A business can register for short-time work if at least 10 percent of its workforce is affected by a significant deduction in working hours. The normal threshold is one third of the workforce.
  • It is not required for a business to build up negative working time balances before the short-time allowance is paid. Normally, the law requires businesses which use agreements to introduce changes to working hours to also utilise these agreements to avoid short-time work.
  • Temporary workers can also receive short-time allowance.
  • Social security contributions which have to be paid solely by employers for employees working short-time are reimbursed in full by the Federal Employment Agency.
  • For recipients of the seasonal short-time allowance, known in Germany as Saison Kurzarbeitergeld, the social security contributions are reimbursed not from the winter employment levy, but from social security contributions.

How does a company prove that economic reasons exist for short-time work compensation?

A company must provide an explanation in as much detail as possible as to why they have had to cut working hours, this will be done on a form that notifies the local Employment Agency about the cut in working hours. The form includes a declaration by employers that the information they have provided is true to the best of their knowledge. If there is an employee representative body, it must state its agreement with the information the employer has provided or they may submit a separate statement.

Who can receive the allowance and how quickly can it be introduced?

An employee can receive the allowance provided if:

  • They have not been made redundant
  • They have lost more than 10 percent of their monthly salary due to short-time working
  • They remain in employment subject to social insurance contributions

Short-time work does not need to be introduced to an entire business, it can be limited to individual departments within the business. Until 31 December 2020, the threshold for a “substantial” cut in work hours has been reduced from one third to ten percent of the workforce.

In the circumstance of a loss of orders, agreements to cut working hours in the company allow short-time work to be introduced and the local Employment Agency to be notified very quickly. After the employer calculates the short-time allowance and pays it to the employees, an application for reimbursement is submitted to the local Employment Agency. After analysing the application, they will reimburse the employer without delay.

Further information on short-time working can be found here.