EMCC European Monitoring Centre on Change

Short-time working allowance

Germany
Phase: Management
Type:
  • Income support for workers
  • Training
  • Working time flexibility
Last modified: 15 June, 2020
Native name:

Kurzarbeitergeld

English name:

Short-time working allowance

Coverage/Eligibility

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 (i.e. a sharp decline in demand), unforeseeable accidents, force majeur 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).

Main characteristics

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 is a parent). in 2018, this allowance is provided for monthly wages that do not exceed €6,500 in western Germany and €5,800 in eastern Germany.

Introduction of short-time work has to be agreed upon by management and 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. In 2018, short-time working allowances are granted for 12 months.

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.

Funding

  • National funds
  • European funds
  • European Funds (ESF)
  • Employer

Involved actors

National government
Funding; legal framework.
Public employment services
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.
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.
Other
Companies (funding); European Structural Fund (ESF) co-funding.

Effectiveness

Short-time work peaked during the 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 work 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 crisis.

Strengths

Drawing a short-time 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.

Weaknesses

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.

Examples

Praktiker, Lufthansa.
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