Frankfurt, 17 November 2025 - The international law firm ADVANT Beiten elects Dr…
Germany has turned to short-time work. Thanks to the relaxation of the short-time work allowance (KUG) in response to the coronavirus crisis, more than 720,000 companies are currently using short-time work, according to media reports. And the longer the crisis lasts, the more companies will likely do so. The advantage for companies: It reduces remuneration costs and liquidity shortage when there is a drop of workload. The employer has to pay the employees less or no remuneration, and the net loss of the employee is compensated (to a certain extent) by the state. During the coronavirus crisis, the employer does not even have to pay the social security contributions that it would normally have to pay for the gross difference to a certain extent. In other words: Liquidity risk recognised, liquidity risk averted.
Or maybe not? Due to the large number of companies that have applied for or will apply for short-time allowances, there are fears that the approx. 600 branches of the Federal Employment Agency could be so overburdened in processing the applications that the short-time allowance will be paid only with a considerable delay. This would be a problem for companies as they usually advance the short-time allowance but currently do not make any turnover or do not get their invoices paid. It is true that the short-time allowance plan provides that the employment agencies initially only check the short-time allowance application for plausibility, and only months later carry out random detailed checks. These checks will then finally verify whether the employer has correctly calculated and applied for short-time allowance. This is to ensure that the employment agencies do not have to check for too long before the short-time allowance is paid out. Nevertheless, according to the law they must carry out this plausibility check before payment and may not simply "wave through" an application. Recording of applications and instructing the payments alone ‑ irrespective of any checks on the content ‑ will already take up a considerable amount of time.
Therefore, some fear that the short-time allowance will not be paid within 15 days of the application ‑ as envisaged by the responsible ministry ‑ but only after a few weeks or even months. This is too long for many companies. The situation is aggravated by the fact that for the month in which short-time work is in effect, the application for payment of the short-time allowance can only be made in the following month.
Unfortunately, there is still a lack of sufficient experience to verify or refute these fears. Most of the companies which have sent their employees into short-time work in response to the coronavirus did so in March of this year and were therefore only able to submit corresponding applications for short-time allowances at the beginning/middle of April. So it remains to be seen how quickly payments will actually be made. This may vary from case to case, and finally also depends on the respective branch office of the Employment Agency.
For companies which are not willing or able to wait for the compensation payment of the short-time allowance by the Employment Agency, the question arises whether their main bank could refinance the short-time allowance already paid to employees. In principle, this should be possible if the main bank is secured accordingly. For this purpose, the short-time allowance compensation claim that the company has against the Employment Agency could be pledged or assigned as collateral to the main bank. This is legally possible and, in our opinion, does not require the express consent of the respective employee. Due to the payment of the short-time allowance, the employer has its own seizable claim against the Employment Agency under section 670 German Civil Code (BGB). However, the consent of the employees should be obtained if the main bank so requests (see Brand/Kühl SGB III 2018 section 108 margin no 7, 21). Due to the special provisions under insolvency law applicable until 30 September 2020, the claim for reimbursement pledged or assigned by way of security to the main bank would be insolvency-proof.
In view of the uncertainties that arise with regard to the correct calculation of the reimbursement claim against the Employment Agency, a security deduction may be made. The amount of such a deduction will depend on the complexity of the claims to be applied for (e.g. in the case of variable remuneration components). This way, however, it should be possible to have a substantial part of the short-time allowance reimbursement claim financed by the main bank.
