Short-time work (STW) is defined in a 2010 European Commission report (781Kb PDF) a temporary reduction in working time intended to maintain an existing employer/employee relationship.
It can involve either a partial reduction in the normal working week for a limited period of time – for instance a partial suspension of the employment contract – or a temporary layoff, such as a full suspension of the employment contract. In both cases, the employment contract continues and is not broken.
While much of the focus concerning short-time work has been on schemes that are publicly financed, short-time work can also include company-initiated reductions in overtime, the use of working time accounts and holiday entitlements, and numerous other types of bilateral arrangement between employers and employees.
Short-time work is intended to help employers achieve numerical flexibility during periods of temporary economic downturn without resorting to layoffs. For the employer, this also has the advantage of keeping trained labour, rather than needing to recruit once the economic situation picks up.
For the employee keeping a job, even at a reduced level of working time and pay, it means they remain in the labour market and may avoid a deterioration in their skills.
During the economic crisis of 2008–2010, short-time working was used extensively in a number of EU Member States. It was used in Germany and Italy – which both have well-established public short-time working systems – the Netherlands, Slovenia, Austria and Belgium. Short-time working in those countries was thought to have been a major factor in ensuring that unemployment did not increase as rapidly as had been expected during that time.
According to the European Labour Force Survey, during 2009 almost two million European employees said they worked fewer hours due to a lack of work for technical or economical reasons – 55% of those workers were from Germany and Italy.
There is general agreement among policymakers that training should be provided during short-time work, and in some schemes training is mandatory. Despite this, uptake of training is limited and there are concerns regarding the quality of the training. Workers are not always motivated to take part and firms may have limited experience of training methods, while the capacity for training, particularly in small and medium-sized enterprises (SMEs), has proved a problem. The fragmented nature of training systems in some countries is also a concern.
More information is available in the ERM Report 2010 Extending flexicurity – The potential of short-time working schemes (2.45Mb PDF).
Recent case law has clarified the relationship between short-time working schemes and annual leave entitlement. In joined cases Alexander Heimann (C-229/11) and Konstantin Toltschin (C-230/11) v Kaiser GmbH, the European Court of Justice (ECJ) ruled that national legislation and provisions can apply a pro-rata approach to entitlement to annual leave during short-time working. In these cases, the workers concerned had claimed financial compensation for annual leave while on a fixed-term period of zero hours short-time working following redundancy, as provided for by a company agreement.
The ECJ has essentially ruled that the employer is not liable for compensation for paid leave for workers on zero hours short-time working contracts. For more details, see EU1211011I.