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.
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.
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 above mentioned conditions are relieved during the Corona crisis as follows:
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”).
An employer can not simply prescribe short-time work without a prior agreement with the works council or the employees. The employer always needs a cotnractual basis to arrange short-time work. This could be a clause in a collective labour agreement, an agreement with the employee representative body, or in the individual work contract between the employer and the employee. In all other cases, the employer has to negotiate a supplementary agreement with their employees. The agreement on short-time work must precede the introduction of short-time work, otherwise it is invalid.
This agreement should contain the reason for the loss of work, as well as the beginning and end of the short-time period and the amount of working hours that are being cut – as far as this is foreseeable. It should also leave the option to reduce the amount of working hours to zero („Kurzarbeit Null“) or call employees back to work in case the economic situation improves.
Short-time allowance does not apply to marginal part-time employees.
Marginally employed persons (450 €) are not entitled to short-time work benefits, as these are only paid to employees who are also subject to compulsory unemployment insurance. Employees working in minijobs (up to 450€/month) are not subject to compulsory insurance in the unemployment insurance and are therefore not entitled to short-time work benefits.
No, working hours can be cut individually for each employee, depending on how strongly individual departments/work areas are affected by the loss of working hours. Short-time work can also be limited to individual departments within the company. It is not permitted, however, to arbitrarily allocate short-time work differently or in a dicriminishing manner among employees.
If an employee becomes unfit for work while receiving short-time work compensation, his or her entitlement to short-time work compensation remains intact – for as long as he or she is also entitled to continued remuneration during sickness.
However, if the employee was already ill before the beginning of the short-time work period, then the employee’s entitlement to continued remuneration is reduced to the wage the employee would have earned, when taking into consideration the reduction of their working hours during the short-time period. They also receive sickness benefits in the amount of the short-time compensation benefits.
This, again, depends on whether the secondary employment is taken up before the short-time period or during the short-time period.
If the second job is taken up – even one day – before the beginning of the short-time arrangement, it has no effect on the entitlement to short-time compensation.
However, if the second employment begins during the short-time period, the income earned from the second job is credited against the short-time working allowance.
The Social Protection Package of 27 March 2020 (Act on Facilitated Access to Social Security and the Use and Protection of Social Services due to the Coronavirus SARS-CoV-2) temporarily relaxes this additional income regulation. From April 1 to October 31, 2020, the following special regulation will apply: Earnings from additional work in system-relevant areas newly taken up during short-time working will not be credited against the short-time working allowance. The only condition is that they may not exceed the level of pay they received before short-time work.
MAYR Kanzlei für Arbeitsrecht provides this article as an orientation guide. For an individual consultation, advice should always be obtained from a specialist lawyer for labor law. We would like to draw your attention to the fact that we therefore cannot assume any liability for the correctness and completeness of this contribution.
Holiday entitlements after short-time work are calculated as if the employees had been employed part-time during the short-time work. The holiday entitlement is based on the actual days worked. This means that if an employee was on short-time work for 2 months, the leave for these 2 months can be reduced in proportion to the work lost. The holiday entitlement for the remaining 10 months is calculated separately.
The holiday pay is not affected by the short-time pay. It is based on the remuneration that the employee received in the last 13 weeks before the start of the holiday. The remuneration that would have been earned without the short-time work is taken as a basis.
During short-time work “zero”, the employee has no holiday entitlement, as he does not perform any work. If the employee takes leave during short-time work “zero”, he is no longer entitled to short-time allowance for this period.
Here it depends on whether the leave is from the current year or the previous year. Employees must always use their remaining leave from the previous year before receiving short-time allowance. The reason for this is § 96 IV 2 SGB III (German Civil Code), which requires that all holiday entitlements of employees must be used up before applying for short-time allowance, as otherwise the loss of work is not considered unavoidable. However, if employees have already planned their leave for the period in which they receive short-time allowance, this has priority and does not have to be taken before the short-time work.
Since 1 January 2021, recreational leave must be brought in to avoid short-time work. If the employees’ holiday wishes do not conflict with this. This is the case if a holiday plan has already been established. In principle, it is therefore advisable to establish a holiday plan before the introduction of short-time work.
The remaining leave from 2020 must be brought in to avoid short-time work before it expires. If this is not done, there is no unavoidable loss of working time.
Yes, short-time allowance can be successfully applied for in the case of fixed-term employment contracts. This also applies if the employment relationship is about to come to an end. Of course, the possibility of receiving short-time allowance ends with the end of the fixed-term employment relationship. Thus, a termination of the employment relationship during the period of short-time work due to a fixed term and also an extension of the fixed-term employment relationship agreed during short-time work does not prevent the receipt of short-time allowance.
A fixed-term employment relationship may be extended under certain conditions without detriment to the (unchanged) fixed term. In such cases, the short-time allowance is also not affected by the mere fact that the fixed-term is extended, i.e. continued receipt of short-time allowance is possible.
At the moment, the employment agency is mostly only superficially checking whether the conditions for receiving short-time allowance are actually met. However, we assume that there will again be comprehensive checks after this wave of short-time work has subsided, as soon as capacities are available again. The last time short-time work was applied for on a larger scale was during the financial crisis about 10 years ago. At that time, separate departments were set up at the employment agency to investigate possible cases of fraud.
The Employment Agency already carries out spot checks and uses analysis software to detect patterns of abuse. In addition, tips are received from employees and trade unions, which are forwarded by the Federal Employment Agency to the respective main customs office or the public prosecutor’s office.
The conditions for receiving short-time allowance according to §§ 95 ff. SGB III (German Civil Code) must be met during the entire period of entitlement.
Companies often introduce short-time work, for example at 50%, which is approved by the employment agency for twelve months. However, after three months, contrary to expectations, there is more work to be done, so that the work can no longer be done in 50% of the working time. If employees then work overtime or return to fulltime work, they are no longer entitled to short-time allowance. After all, they are no longer affected by the loss of work.
1. Labour Law Risks
The existence of a work stoppage is a prerequisite for the introduction of short-time work. If there is no (more) loss of working time, short-time work cannot therefore be effectively introduced. If an employee then offers to perform the full amount of work, the employer is in default of acceptance and must pay the full remuneration as default of acceptance wages.
According to the Federal Labour Court (BAG ruling of 18 November 2015 – 5 AZR 491/14), a literal offer by the employee is sufficient for this.
With regard to the default of acceptance wages, any forfeiture clauses and limitation periods must also be observed.
2. Social Law Risks
If there is no effective basis under labour law for the introduction of short-time allowance, there is also no entitlement to short-time allowance from the Federal Employment Agency.
The same applies if the loss of working hours – as in the above example – does not exist or no longer exists.
In these cases, short-time allowance that has already been reimbursed was wrongly granted and can be reclaimed, including fringe benefits, from the Federal Employment Agency. Anyone who applies for reimbursement of short-time work allowance even though there is no (longer) a loss of working hours is usually acting in bad faith, as he or she has confirmed the existence of the preconditions or the correctness and completeness of the information by signing and has taken note of the corresponding leaflet of the Federal Employment Agency.
The fact that in both cases a claim for default of acceptance wages has arisen is also reflected at the level of social law. This is because social security contributions must be paid for the so-called “phantom wage” – regardless of whether this claim is asserted by the employee. This is because the “principle of origin” (Entstehungsprinzip) applies here according to the German Criminal Code (§ 22 SGB IV).
The employee’s share of the social security contributions must then be paid in arrears. If necessary, late payment surcharges will be added.
3. Criminal Law Risks
From a criminal law perspective, there is a risk of committing fraud under § 263 of the German Criminal Code (intentional offence) or subsidy fraud under § 264 of the German Criminal Code by providing false or incomplete information to the employment agency – the latter does not require intentional action, but recklessness is sufficient.
Employees can also be prosecuted for aiding and abetting.
With regard to the aforementioned “phantom wage”, a possible intentional offence of contribution evasion under § 266a of the German Criminal Code and a criminal offence of reckless conduct under § 8 section 3 of the German Undeclared Employment Act (SchwarzArbG) may be considered.
MAYR Kanzlei für Arbeitsrecht provides this article as an orientation guide. For an individual consultation, advice should always be obtained from a specialist lawyer for labor law. We would like to draw your attention to the fact that we therefore cannot assume any liability for the correctness and completeness of this contribution.
