Getting through the Corona Crisis by Short-Time Work

Many companies and their employees experience the repercussions of the corona pandemic on business operations and their options to work tightening every day. Consequently, the Federal Government has set the course at an early stage to make short-time work more attractive. Companies are making extensive use of this.

What is short-time work?

Short-time work means that due to a considerable loss of work, the working hours and, as a consequence, the remuneration are temporarily reduced. The main attraction is that the loss of remuneration is partly compensated by the employment agency in the form of short-time work compensation.

Which corona implications result in a granting of short-time allowance?

Short-time work compensation can be applied for at the employment agency if, due to the epidemics, the workload declines dramatically because, for instance, companies are not allowed to open or supply chains or sales opportunities collapse.

How many employees must be affected and to what extent?

Short-time work may be introduced for all or just some employees. The extent of the reduction in working hours can also vary depending on the employee. Even a reduction of working hours to zero is possible. According to the latest legislative amendments, short-time working compensation can already be drawn if at least 10 percent of the employees of the company or a department of the company suffer a loss of earnings of more than 10 percent in each case.

What other requirements does the short-time work compensation have?

The loss of work due to the corona pandemic and its economic implications, for instance, must be temporary and unavoidable. This presupposes that the holiday entitlements carried over from the previous year must be reduced as a matter of priority. In addition, working time credits must be reduced to the extent permitted by the company. However, there is no longer a need to build up negative balances due to recent legislative amendments. Furthermore, some operational and personal requirements such as the continued existence of the employment relationship without termination notice, must be observed. Finally, the employer must properly report the loss of work to the employment agency.

What is the amount of short-time work compensation and how long is it paid?

Depending on the maintenance obligations, the short-time work compensation amounts to 60 or 67 percent of the net salary difference. The maximum payout period is currently twelve months. It can be extended up to 24 months by the Federal Ministry of Labour through statutory order.

What costs remain with the employer?

If the working time is not reduced to zero, the employer continues to pay the remuneration for the remaining working time base together with the employer's social security contributions.

In addition, social security contributions are due on - non-technically speaking - 80 percent of the remuneration lost as a result of short-time work. Although the employer must first raise and pay this, it is subsequently reimbursed by the Federal Employment Agency - this is also a result of the current legal facilitations to promote short-time work. Depending on the legal basis of short-time work, the employer may ultimately be obliged to make top-up payments on the short-time work compensation.

How is short-time work introduced?

Employers cannot introduce short-time work on their own authority. Rather, this requires a basis in a collective agreement, a works agreement, an employment contract or a supplementary agreement to the contract. The introduction is subject to co-determination pursuant to section 87 (1) No. 3 German Works Constitution Act (BetrVG). Short-time work compensation must be applied for by the employer at the local employment agency.

Conclusion

Short-time work has proven its worth in the 2008/2009 banking crisis and helps companies to save jobs. Today - thanks to the new regulations adopted in record time - it is more in demand than ever.

Dr Corinne Klapper