- Response to COVID-19
- Income support for workers
- Working time flexibility
Short-time working allowance
All workers who pay social security contribution are entitled to short-time working allowances, including temporary agency workers and people on a fixed-term contract. This excludes workers holding so-called ‘mini-jobs’ who are therefore exempt from social security contribution (earnings up to €450 per month). In the calendar month for which short-time working support is applied for, the application must concern at least one third of all employees (trainees are not considered) of the company (or one or several specific unit(s)). Moreover, the wage cut has to amount to more than 10% of their monthly gross wage. In this case, all workers (including those experiencing an income reduction of less than 10%) are eligible for short-time working allowance.
Reduction of working time needs to be temporary and unavoidable. For example, it must be due to economic conditions (that is a sharp decline in demand), unforeseeable accidents, force major or structural changes. With a few exemptions, the company must have exhausted all other options that might help to avoid using short-time working, such as balancing working time accounts or granting leave days (only holiday entitlements for the previous years to be used - the current year’s entitlements need to be aligned with workers’ preferences).
Response to COVID-19
Since 1 March 2020, companies that are faced with a decline in orders due to the COVID-19 crisis can apply for short-time working support if at least 10% of their workforce are affected by lack of work and remaining hours on working time accounts have been depleted. In September 2020, the Federal Government prolonged the maximum duration period to 24 months (ending on the 31 December 2021).
The measure applies to private and public companies and institutions.
Three short-time working arrangements exist:
short-time working due to economic reasons/temporary shortfall of orders (konjunkturelle Kurzarbeit);
seasonal short-time working (Saisonkurzarbeit); and,
short-time working in the event of restructuring (Transferkurzarbeit).
As laid down by Social Security Code III, the employer pays for the effective working time and the Federal Employment Agency contributes a short-time working allowance of 60% of the missing net wage (or 67% if the worker has children). In 2020, this allowance is provided for monthly wages that do not exceed €6,900 in Western Germany and €6,450 in Eastern Germany.
Introduction of short-time working has to be agreed upon by management and the works council. If no works council exists, all affected employees have to grant their approval.
The maximum duration of state-funded short-time working allowances is six months. According to the legislation, this maximum duration can be extended by ministerial decree to up to 12 months in cases of exceptional circumstances in the labour market in specific industries or regions. It can be extended even up to 24 months in cases of exceptional circumstances on the general labour market.
While a company is receiving public short-time working support, new employees can only be recruited for sections of the company that are not subject to short-time working. Moreover, it has to be proven that the intended job cannot be filled by other employees (short-time workers) of the company. Dismissals during short-time working are possible, but the worker has to return to full-time employment during the notice period, and the employer is not entitled to the public short-time working allowance.
Response to COVID-19
The maximum duration of receiving the short-time working allowance has been extended to 12 months (in specific cases to up to 21 months), and employers' contribution to social insurance are fully reimbursed by the public employment service.
Furthermore, the short-time working allowance has been raised to 70% or 77% after the fourth month of short-time working and to 80% or 87% after the seventh month of short-time working.
For public sector workers and those employed with companies in public ownership, the United Services Union ver.di and the Civil Servants Union dbb settled an agreement on short-time working stipulating that municipal employers can proceed in the same way as private employers on the condition of the consent of the staff council. Short-time working must be announced seven days in advance. The short-time working allowance is raised from 60% or 67%, respectively, to up to 90% or 95% of the net monthly income. Dismissal protection applies during and until three months after the end of the short-time working period. Employees on fixed-term contracts whose contract is not renewed due to short-time working shall have priority in hiring after the crisis.
For the hotel and restaurant sector, the Food, Beverages and Catering Industry Trade Union (NGG) and the employer organisation Federal association of the system catering industry (BdS) reached a 'Corona protection agreement' specifying that the short-time working allowance of 60% or 67%, respectively, is raised to up to 90% of the net monthly wage and that workers are protected from dismissals until two months after the end of the short-time working period.
In the audiovisual sector, the employer organisation Produzentenallianz and the trade unions ver.di and BFFS agreed on the use of short-time working until 31 December 2020 in case of disruptions or halts of film productions. Actors employed on fixed-term contracts can refer to short-time working rather than being dismissed. The short-time working allowance of 60% or 67%, respectively, is increased to up to 90% of the wage level of the collective wage agreement for actors, or up to 100% of the agreed wage level of managerial staff (up to the maximum of the income threshold for social security contribution assessment).
The government delegates the administration of short-time working schemes to the Federal Employment Agency (BA). Employers must apply to the local employment agency (Agentur für Arbeit, AA) if they want to introduce short-time working. In order to align the procedures among all local agencies, a substantial guideline is provided by the BA, specifying the administrative process as well as clarifying contents.
- National funds
- European funds
- European Funds (ESF)
Funding; legal framework.
Public employment services
Federal Employment Agency (BA)
Employer or employee organisations
In addition to the legal regulations, there are sectoral collective agreements on working time arrangements, including short-time working, in most sectors. Some collective agreements provide for supplements to these public short-time working allowances.
In the wake of the COVID-19 crisis in 2020, many companies applied for short-time working due to economic reasons. In their application companies have to indicate how many employees might be affected by short-time working in the future. This number increased drastically within a four-month timeframe. While in February 2020, 42,206 employees were included in companies' applications, this number rose to 2,639,866 (March 2020), 8,025,939 (April 2020) and 1,059,467 (May 2020). Similarly, the number of companies applying for short-time working increased from 2,031 to 163,640 to 624,977 to 66,817 in the same timeframe. It remains to be seen to which extent companies will in the end realise short-time working. However, by September 2020, numbers of potentially affected workers decreased to 107,000.
Short-time working peaked during the economic crisis. Numbers of affected employees rose from 68,317, to 101,540, to 1,144,407 in the three-year period from 2007 to 2009. Similarly, the number of establishments using short-time working increased from 8,333 to 10,052 to 55,937 in the same time span. After 2009, numbers decreased from 502,694 affected workers in 2010 to 112,685 workers in 2017. The same trend holds for employers: In 2010, 49,121 establishments were affected, compared with 13,878 in 2017. The publicly supported short-time working arrangements are calculated to have accounted for about 300,000 to 350,000 saved jobs during the economic crisis.
Drawing a short-time working allowance does not affect eligibility periods for unemployment benefits. The measure offers companies cost and productivity advantages by adjusting working time to the market situation and volatile demand. The measure may also increase workers’ commitment towards the company, thereby strengthening their motivation and engagement. The measure makes it possible to react quickly and flexibly to volatile production levels, by enabling an immediate return to full-time work when order levels improve. The need for severance payments and costs related to hiring and induction of new staff that may arise in case of dismissals is avoided. At the same time, workers benefit from job security. The public support partly compensates workers for their loss of income and allows them to maintain a certain level of social security; which in turn results in higher purchasing power and willingness to spend available funds. Finally, the measure creates a strong and constructive partnership between the representatives of employers and employees.
The measure is only feasible for financially strong firms: non-wage labour costs are not proportionally reduced as it is the case with wage and working time reduction. It is difficult to combine short-time working with training. An administrative burden is involved in the implementation of short-time working.