Everything about short-time work

The most important thing in a nutshell:

• There is a right to short-time work allowance if at least 10% of employees have lost pay of more than 10%
• 100% social security contributions for lost working hours are compensated
• Short-time work allowance can be received for up to 12 months
• Temporary workers can also go on short-time work and are entitled to short-time work allowance

What is short-time work allowance?

In the event of temporary economic difficulties, a company may be entitled to order short-time work. That means:

• Reducing the working time of individual or all employees
• Reduction of gross pay for these workers in line with the reduction in working time
• Payment of short-time work allowance by the employment agency to the affected employees to the extent of the reduction in working hours

The aim of short-time work allowance is to continue employing employees and to avoid work-related layoffs.

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

‍1. Significant loss of work in connection with loss of pay

• for economic reasons or due to an unavoidable event, e.g. corona virus
• temporary and unavoidable
• In each month, at least 10% of employees must be affected by a loss of pay of more than 10% of their monthly gross salary

All of these requirements are generally met in the event of a loss of work due to corona, unless there are other reasons (e.g. mismanagement, insolvency independent of the pandemic, etc.).

2. Labor law requirements

• Order for short-time work must be effectively provided for in the employment contract or in a works agreement
• BUT: Individual agreements are always possible with the employee's consent, even if short-time work is not provided for in the employment contract
• 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 subject to social security contributions

4. Personal requirements on the employee side

• Employees who continue to be employed under compulsory social security contributions after short-time work (i.e. employees already employed and not freelancers)
• Employment relationship must not be terminated or terminated by termination agreement
• Workers must not be undergoing continuing vocational training measures or receive sickness benefits
• Does not apply to, among other things, marginal employees and pensioners

5. Report to the Federal Employment Agency

• Short-time work must be reported accordingly by the employer or the works council (available online at: www.arbeitsagentur.de)
• Short-time work allowance is granted from the month in which the advertisement is filed with the employment agency

6. Payment of short-time work allowance

• The employer must advance, i.e. he must first calculate the short-time work allowance (free of charge) and pay it out to employees
• Reimbursement of short-time work allowance paid by the Employment Agency — PDF
• The application must be submitted within three months to the responsible employment agency (address of the employer's payroll office)
• It is still unclear how long it will take to process the applications and thus also the reimbursement (it is better to dress warmly and save costs!)

Current changes to short-time work allowance due to corona

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

Maximum withdrawal of short-time work allowance

The legal subscription period is 12 months. In some cases, however, this can be extended to a maximum of 24 months. If conditions normalize during short-time work, short-time work may be interrupted. The good thing: The “unused months” can be added to the approved duration. If short-time work has been interrupted for three months, a new application must be submitted.

Calculation and funding amount of short-time work allowance

The amount of short-time work allowance is the net loss of pay. Short-time workers generally receive 60% of the net pay difference. For households with at least one child, the benefit rate rises to 67%.

Costs for the employer

The Employment Agency only pays short-time work allowance for lost working hours. As a result of the legislative amendment, the Federal Employment Agency fully reimburses the social security contributions incurred for lost hours. Previously, employers had to cover the costs of short-time work — 80% of social security contributions for lost gross pay (employer and employee share of health, long-term care and pension insurance, but not unemployment insurance).