FAQ Short-time Work

The short-term compensation is a compensation for a temporary cut of working hours, which is paid by the employment agency (Bundesagentur für Arbeit).

It is frequently used by employers in times of economic crises in order to avoid redundancies and help carry the wage costs employers are facing. It also serves to enable companies to keep working even in case of weaker order situations.

For employers wishing to apply for short-time allowances, there is a two-step procedure in place.

1. Report the loss of working hours to the employment agency

In order to receive short-term compensation, the employer has to report the loss of working hours to the local employment agency. There is a form for this here.

This needs to be done as soon as possible, as the short time allowance can only be granted for the month in which the loss of working hours has been reported to the employment agency. Short time work in April 2020 must be reported by 30 April 2020 at the latest.

It is important to give as much detail as possible about the specific reason for the loss of working hours. Rather than just stating „because of the Corona virus“, employers should explain which factors specifically have lead to a loss of work.

The employment agency then decides immediately whether or not the conditions for short-term compensation are met (see below for the conditions), and notifies the employer.

The employer is obliged to calculate the amount of the short-time compensation and pay it to the employee. There are tables and calculating tools available on the website of the employment agency.

2. Apply for reimbursement at the employment agency

The employer then submits an application for reimbursement of the short-time compensation to the employment agency in which their payroll office is located. The earliest point at which this application can be submitted is the end of the calendar month in which there have been shortened working hours. They then have a period of three months to submit the application.

In general, the short-time compensation (Kurzarbeitergeld) can be granted if either the employer and the works council or the employer and each individual employee affected by the loss of working hours, have explicitly agreed to cut the working hours in the company in accordance with the provisions of labour law, and if the company is, in fact, affected by a substantial and inevitable loss of working hours.

The following conditions must be met:

• The loss of work is caused by economic reasons or circumstances beyond the employer’s control (e.g. flooding, orders issued by the authorities).
• The loss of working hours can not be avoided and the company hasmade use of every possibility to reduce or resolve it (e.g. use of the credit in working time accounts, within certain limits).
• The loss of working hours must be temporary, i.e. a return to the normal working hours can be expected during the period in which short-time compensation is granted.This conditions is generally assumed to be met in cases of short-time work due to the Corona virus.
• The Employment Agency (Agentur für Arbeit) has been notified of the cut in working hours (see above, step 1).
• The employee remains in employment subject to social insurance contributions after the cut in working hours, and is not to be made redundant.
• The loss of working hours must be substantial. This means that at least onethird of the company’s employees must face a reduction of more than ten per cent in their gross monthly pay.

The above mentioned conditions are relieved during the Corona crisis as follows:

• The number of employers who must be affected by the loss of working hours is set at 10%
• Employees do not have to build up minus hours before short-time work compensation can be paid
• Social security contributions are fully reimbursed by the Federal Employment Agency in the event of short-time work
• Temporary employment agencies can also apply for short-time compensation

Simply put:

In order to calculate the amount of the allowance, you have to first determine the difference in net remuneration between the so called „Soll-Entgelt“, i.e. the net pay (including in the event of illness or holiday) that the employee would have earned without the short time work, and the „Ist-Entgelt“, i.e. the amount the employee has earned for hours actually performed during the entitlement period.

This difference is called „Nettoentgelddifferenz“. The short-time compensation paid by the employment agency covers 60 % of the „Nettoentgeltdifferenz“, and 67 % if the employee has at least one child liable for maintenance.

As a rule, this depends on the amount of lost working hours and the respective agreements in the company. It is also possible to reduce working hours by 100 per cent (this is called “short-time work zero”).