All about short-time work

Short-time work- The most important facts in a nutshell:

  • Entitlement to short-time working compensation exists if at least 10% of the employees have a loss of earnings of more than 10%.
  • 100% compensation of social security contributions for lost working hours
  • Short-time working allowance can be drawn for up to 12 months
  • Temporary workers can also go into short-time work and are entitled to short-time allowance

What is short-time working allowance?

In the event of temporary economic difficulties, a company may be entitled to order short-time working. This would mean:

  • reduction of working time of individual or all workers
  • reduction of gross pay for these workers in line with the reduction in working time
  • Payment of short-time working compensation by the employment agency to the affected employees equal to the reduction in working hours

The aim of the short-time working allowance is to keep employees in employment and to avoid dismissals for operational reasons.

What requirements must be met in order to receive short-time work benefits?

1. Significant absence from work in connection with a loss of earnings:

  • for economic reasons or due to an unavoidable event, e.g. corona virus
  • temporary and unavoidable
  • in any given month, at least 10% of employees must be affected by a loss of earnings exceeding 10% of their gross monthly earnings

All these conditions are generally met in the case of a Corona-related loss of working hours, unless other reasons (e.g. mismanagement, insolvency unrelated to the pandemic, etc.) are the cause.

2. Employment law requirements

  • Orders for short-time working must be effectively provided for in the employment contract or in a works agreement
  • BUT: Individual agreements are always possible with the consent of the employee, even if short-time work is not
  • If there is a works council, it must have a say in the introduction of short-time work

3. Operational requirements

  • Company employs at least one employee liable for social security contributions

4. Personal requirements on the employee side

  • Employees who are still subject to compulsory social security after short-time work (i.e. employees already in employment and not freelancers)
  • The employment relationship may not be terminated or dissolved by a termination agreement
  • workers must not be in continuing vocational training or receive sickness benefit
  • Not applicable, inter alia, to marginally employed persons and pensioners

5. Notification to the Bundesagentur für Arbeit

  • Short-time work must be notified accordingly by the employer or the works council (possible online at: www.arbeitsagentur.de)
  • Short-time working allowance is granted from the month in which the notification is made to the Bundesagentur für Arbeit

6. Payment of short-time working allowance

  • The employer must make advance payments, i.e. he must first calculate the short-time working allowance (free of charge) and pay it to the employees
  • The reimbursement of short-time working allowance paid by Bundesagentur für Arbeit- PDF
  • The application must be submitted to the responsible employment agency (address of the employer's payroll office) within three monthsI
  • It is not yet clear how long it will take to process the applications and thus to obtain reimbursement (better be prepared and save costs!)

Current changes to short-time work compensation due to Corona

Companies can use short-time work compensation retroactively to 1 March if 10% of employees are already affected by the loss of work - instead of 1/3 of the workforce as before. In addition, social contributions are reimbursed in full by the Federal Employment Agency. Short-time working allowances can now even be paid for temporary workers.

Maximum receipt of short-time working allowance

The statutory subscription period is 12 months. In some cases, however, this can be extended to a maximum of 24 months. If the conditions within the short-time work system return to normal, the short-time work can be interrupted. The good news is that the "unused months" can be added to the approved duration. If short-time work was interrupted for three months, a new application must be submitted.

Calculation and amount of short-time working allowance

The amount of the short-time working allowance is the net loss of earnings. As a rule, short-time workers receive 60% of the difference in net remuneration. For households with at least one child, the benefit rate increases to 67%.

Costs for the employers (social security contributions):

The employment agency pays short-time work compensation only for hours lost. As a result of the change in the law, the Federal Employment Agency fully reimburses the social security contributions incurred for the lost working hours. Previously, employers had to share the costs of short-time work - 80% of the social security contributions for the lost gross pay (employer and employee contributions to health, nursing care and pension insurance, but not unemployment insurance).

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