Sozialgesetzbuch (SGB) III
Social Code Book III
The Social Code Book III provides for three forms of short-time working arrangements (Kurzarbeit).
- The first, structural short-time working (Konjunkturelle Kurzarbeit, KUG), is applicable in case of a temporary and unavoidable shortfall of orders due to economic downturns/crises or due to unavoidable disasters. This form was extensively used during the brief economic crisis and is still promoted for mitigating impacts of the European crisis on export-oriented industries. At the peak of the crisis, 5.2% of all workers worked short-time compared to only 0.2% in 2015.
- The second form is short-time working in the event of restructuring (Transferkurzarbeit, Transfer-KUG). In this case, the duration of short-time working is used for training or job transfer measures.
- The third arrangement, seasonal short-time working (Saisonkurzarbeit, Saison-KUG) is a sector-related instrument to weather typical seasonal downturns (such as in the construction sector, for example).
In all of these cases, if an employer wants to introduce short-time working, she/he must first consult the works council and then apply to the Federal Employment Agency (Bundesagentur für Arbeit) for approval.
The company has to have exhausted other options that might help to avoid using short-time working, such as granting leave days, use of holiday entitlements of previous years or of 10% of the working time account of the running year.
Short-time working may be set in place if one third of the workforce is affected by a wage drop of over 10% due to a temporary decrease in workload. The workforce in this case is defined as including standard and non-standard workers (excluding temporary agency workers and home workers). In the calendar month for which short-time working support is applied, at least one third of a company's employees (or one of several specific units) must be concerned.
If short-time working is approved by the Federal Employment Agency, the employer pays for the actual working time and the Federal Employment Agency contributes a short-time working allowance of 60% of the missing net wage. This increases to 67% if the worker is a parent. Short-time working allowances are granted to standard and non-standard workers liable to social security contributions for monthly wages that do not exceed €6,500 in western Germany and €5,800 in eastern Germany (since 2018). Workers with so-called ‘mini-jobs’, who are not liable to social security contributions (earning up to €450 per month), temporary agency workers (holding a work contract with another employer) and trainees are excluded.
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. Currently short-time working allowances are granted for 12 months (2018).
While a company is receiving public short-time working support, new employees can only be recruited to sections of the company that are not subject to short-time working. Moreover, it has to be proven that the vacancy cannot be filled by one of the company's current short-time workers. 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 then no longer entitled to the public short-time working allowance for that worker.
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.
The maximum duration of receiving the short-time working allowance has been extended to 12 months, and employers' contribution to social insurance are fully reimbursed by the public employment service.
This measure is a central instrument for preventing dismissals. The measure offers companies cost and productivity advantages by adjusting working time to the market situation and volatile demand. It makes it possible to react quickly and flexibly to volatile production levels by enabling an immediate return to full-time work in case 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 are 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 level of social security. Drawing a short-time allowance does not affect eligibility periods for unemployment benefits. The Federal Employment Agency supports low skilled workers in undertaking training during the time of short-time working.
The Federal Employment Agency provides monthly data on short-time working. The number of workers receiving short-time working allowance stood at 37,443 in October 2018 and a year later in October 2019 the number accounted 50,150. In 2018, the average number of affected establishments through the year was 1,349, whereas in 2017 there were 1,943 cases on average.
Cost covered by
- National government
Involved actors other than national government
- Public employment service
- Works council