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Coronavirus - FAQ short-time work - Germany

  • Germany
  • Employment law

23-03-2020

What is short-time work?

One is speaking about short-time work when working hours and correspondingly also remuneration are temporarily reduced due to a considerable loss of work. Short-time work is introduced in an establishment if full capacity utilisation of employees cannot be ensured due to economic difficulties, but there is a chance to bridge this period by reducing working hours. Terminations shall thereby be avoided.

The advantage of short-time work is that if the order situation improves, working hours can be increased or it can be switched back to regular working hours. The employees are immediately available again and do not have to be recruited, hired and trained first. In the event of termination, employees are entitled to full pay until the end of notice period - regardless of whether they can still be employed full-time or not. Short-time work reduces costs for the company immediately and the loss of remuneration is partly compensated by the Employment Agency in the form of short-time work allowance.

How many employees must be affected and to what extent?

Short-time work can affect the entire workforce or only parts of the workforce. The extent of the reduction in working hours can also vary from employee to employee. Whether the loss of work comprises hours, days or even weeks depends on the order situation and the agreements in the company. In some cases, this may even mean that employees do not work at all during short-time work (this is known as "short-time work zero").

What is short-time work compensation?

The short-time allowance as paid by the Employment Agency if certain requirement are fulfilled is intended to partially compensate the loss of salary that employees experience as a result of the reduced working hours during short-time work. The employer is thereby relieved and can continue to employ his employees even if orders are cancelled. The employer pays the short-time work allowance to the employees; the employer applies to the Employment Agency for reimbursement.

Which conditions must be met for the reimbursement of short-time work allowance?

The reimbursement of short-time work allowance can be applied for with the Employment Agency if the following conditions are met (but please see below - current facilitation for short-time work allowance):

  • The loss of work is caused by economic reasons (e.g. due to a poor order situation) or by an unavoidable event (e.g. flooding). In connection with COVID, there are two possible scenarios in which companies can apply for short-time work allowance from the Employment Agency if the other requirements are fulfilled: (i) if the workload is significantly reduced due to an epidemic, e.g. because supply chains or sales opportunities collapse, or (ii) if employees are not allowed to work due to official orders.
  • The establishment has previously tried everything possible to avoid or reduce the loss of work. In principle, this also requires that at least the accrued holiday entitlements carried over from the previous year must be reduced as a matter of priority and, in the case of working time accounts, this may mean that not only credit balances must be reduced but negative balances built up before short-time work allowances can be claimed for.
  • It is assumed that the loss of work is only temporary and it is expected that regular working hours can be resumed in the foreseeable future.
  • The company has announced the loss of work to the employment agency.
  • The employees who shall be announced as affected by short-time work are still in an employment relationship subject to compulsory social security insurance even after the loss of work and notice has not been served.
  • At least one third of all employees of the company or an establishment or a department of the establishment are affected by short-time work in the respective calendar month (entitlement period) and have a loss of earnings of more than 10% of their monthly gross salary in each case.

    However, the total number of employees must take into account all employees in the establishment who are on short-time work on at least one day in the month. This also includes employees who are not subject to compulsory social security insurance.

    Accordingly, part-time employees, employees who are sick or on holiday, and employees during maternity leave. Not included, however, are trainees and employees whose employment contracts are suspended, for example, due to parental leave.

Must holiday and working time accounts be reduced as a matter of priority?

Holiday entitlements must be planned for the current calendar year before the start of short-time work. If there are still holiday entitlements transferred from the previous year, these generally must be reduced in order to avoid payment of short-time work allowance. This is not the case if employees' wishes for using the remaining holiday for other purposes prevent them from use the holiday.

If holiday are already agreed for a period covered by short-time work and the planned holiday is to be deviated from only because of short-time work, this constitutes an avoidable loss of work.

If a flexible working time arrangement exists in the establishment, working time credits (plus hours) must in any case be used proportionately in order to avoid loss of work, unless other rules from collective bargaining agreements do apply.

Does the current situation make it easier to receive short-time work allowance?

Yes, facilitations for the short-time work allowance will be introduced by the Federal Government by decree. They will initially be applicable for a limited period until 31.12.2020. The requirements for access to short-time work will be eased and employers will be released from the payment of social security contributions.

In detail:

  • The minimum threshold of employees affected by short-time work will be reduced to 10% of an establishment or a department of an establishment as part of the planned changes in law. This threshold was so far set at one third of the workforce.
  • There is no need to build up negative working time balances before payment of the short-time allowance. The law in force to date requires that in companies where agreements on working time fluctuations are used, these are also used to avoid short-time work.
  • Temporary employees can also receive short-time work compensation.
  • The Employment Agency will reimburse employers completely for that part of the social security contributions for their short-time workers they have to bear alone.
  • For recipients of seasonal short-time work allowances, social security contributions are not reimbursed from the winter employment levy, but also from contribution funds.

Who can apply for short-time work and what is required?

The employer applies for short-time work. Two steps are required to register for short-time work and apply for short-time work allowance:

  • The employer notifies the loss of work in writing to the Employment Agency competent for the district in which the establishment is located. An oral (telephone) notification does not fulfil the formal requirements by law. However, a fax or e-mail notification (scanned and signed) meets the legal requirements. As a rule, the decision as to whether the conditions for reimbursement of short-time work allowance are met is made immediately. The notification of short-time work must be received by the Employment Agency no later than at the last day of the month in which it first occurred.

    In case of companies with several establishment region wide or nationwide, a "key customer advisor" can be made available on request by the Employment Agency to coordinate short-time work issues between the Employment Agencies involved and the establishments concerned.

    The employer must provide credible evidence of the conditions for the granting of short-time work compensation (substantial/unavoidable loss of work and operational/personal requirements); the respective form contains a declaration by the employer that the information has been provided to the best of its knowledge. However, all other requirements for the entitlement must be proven. The necessary documents must be submitted to verify these requirements (e.g. announcement of short-time work, agreement on the introduction of short-time work with the works council or employees, amendment notices).

    The Employment Agency assesses the reasons and then takes a fundamental decision on whether short-time work allowance can be granted. The establishment receives a written notice in this regard.
  • The employer calculates the short-time work allowance and pays it out to the affected employees. He then submits a written application to the employment agency for reimbursement of the short-time work allowance. The exclusion period for this is 3 months, starting at the end of the calendar month for the days of which the short-time allowance is claimed.

    The granting of short-time work allowance is only permissible in establishments in which at least one employee (including trainees) is employed. An establishment within the meaning of the regulations on short-time work allowance is also a department of an establishment. According to the Employment Agency, a department of an establishment is a "group of employees equipped with technical resources forming a closed working group that is separated from the rest of the company in organisational respect for factual reasons (particularly by its own technical management) and pursues its own company purpose - including an auxiliary purpose".

    As a rule, the benefit is paid to the employers within 15 working days of the application being submitted. Due to the current special situation, however, it cannot be excluded that the pre-financing period for the employer will be longer.

The necessary forms for registering short-time work are provided by the Employment Agency on its website. Open questions can usually be clarified quickly with the local Employment Agency.

Who is entitled to short-time work allowance?

All employees who have not been given notice and who are who are subject to compulsory social security insurance are entitled to short-time work allowance. Social security insurance is usually compulsory when employed as an employee for remuneration. This also applies to managing directors if the clearing office of the German Pension Insurance has determined that they are employed and not self-employed. The following applies here: “external managing directors” without shares in the company's assets are regularly subject to social security contributions; the “shareholder managing director” whose shares in the company are amounting to 50% or more (so-called controlling shareholder) is generally not subject to social security contributions. A lower capital participation only leads to exemption from social security if a genuine blocking minority exists on the basis of the articles of association, which enables the minority shareholder-managing director to hinder decisions and instructions of the shareholders' meeting he does not like.

However, the following employees are excluded from the principle of compulsory insurance:

  • who have reached the age required for the regular old-age pension within the meaning of the statutory pension insurance, from the beginning of the following month;
  • during the period for which they are entitled to a pension for full incapacity or a comparable benefit from a foreign benefit provider;
  • who are in marginal employment within the meaning of § 8 SGB IV;
  • who are in an unregular employment on a professional basis.

Incidentally, marginally employed staff do not have to be laid off before short-time work can be introduced. The question arises, however, whether a working time account can be agreed with these employees to bridge the loss of working hours.

Trainees do not normally receive short-time work allowance because, as a rule, training should be continued even if the volume of work is reduced. However, if an interruption in training is unavoidable - for example, if a COVID-19 related closure occurs - trainees can be included in short-time work. However, the training allowance must continue to be paid in full for at least six weeks because the training allowance is not considered to be wage for working activities but financial assistance for the trainee to carry out the training (§ 19 para. 1 No. 2 Vocational Training Act (BBiG)).

Furthermore, participants in a continuing vocational training measure who receive unemployment benefit for continuing vocational training or transitional allowance are also excluded from short-time work allowance if this benefit is not paid for a part-time measure carried out alongside employment or during the period in which they receive sickness benefit.

Priority job placement?

The Employment Agency may attempt to place the employees affected in other reasonable jobs (secondary or permanent employment) prior to pay short-time allowance. If the employee, despite being informed of the legal consequences, has not accepted or has not taken up a reasonable employment offered by the Employment Agency, naming the employer and the type of work, without good reason, the regulations applicable to unemployment benefits must be applied and a blocking period imposed. If such circumstances exist, the employer will be notified in good time by the Employment Agency.

In addition, employees do not receive short-time work allowance if and as long as they do not participate in a job placement measure in the required and necessary manner. If, for example, the employee is requested by the responsible Employment Agency to report about non-working days and does not comply with the request without good cause despite being informed of the legal consequences, the short-time work allowance is suspended for a period of one week during the period of default.

Are employees covered by social security insurance while receiving short-time work allowance?

Membership in the statutory health, nursing care and pension insurance schemes as well as in the unemployment and occupational accident insurance schemes remains in place. This applies even in the event of short-time work zero.

As usual, employers and employees jointly pay the contributions payable on the reduced remuneration.

In order to avoid disadvantages as regards the later pension payments, social security contributions are also paid on the basis of 80% of the loss of earnings. These are solely borne by the employer.

Periods during which short-time work allowances are paid do not have a negative effect on an entitlement to unemployment benefits either, and like "normal" periods of employment count towards the qualifying period for an entitlement to unemployment benefits and are also taken into account when determining the period of entitlement. If employees remain unemployed after receiving short-time work allowance, unemployment benefits are calculated on the basis of the remuneration that would have been earned without the loss of work.

What happens during sickness?

Employees whose incapacity to work occurs while they are receiving short-time work allowance and as long as they are entitled to continued remuneration in the event of sickness or would be entitled to such remuneration without the loss of work are also entitled to short-time work allowance. For insured persons who become incapacitated while receiving short-time work allowance, the sickness benefits are calculated according to the regular pay that was last earned before the loss of work occurred.

If the employee falls sick before the start of the entitlement period or on days on which no short-time work allowance was granted for a continuous period of at least one month, he/she receives sickness benefits in the same amount (§ 47b, para. 4 SGB V) for periods of absence from work instead of short-time work allowance, as long as there is an entitlement to continued payment of remuneration in the event of sickness in accordance with the Continued Remuneration Act. In this case, the service provider is the health insurance competent for the employee; however, the employer must calculate and pay out the sick pay. If an entitlement to continued remuneration does not exist or no longer exists, the sickness benefits are calculated according to the regular pay that was last earned before the loss of work occurred.

How much short-time work allowance is paid and for how long?

The short-time work allowance is calculated on the basis of the net loss of remuneration. It basically replaces around 60% of the net salary difference. If there is at least one child living in the household, the short-time work allowance amounts to around 67% of the net loss of remuneration. The maximum duration of entitlement is currently twelve months. It can be extended to up to 24 months by statutory regulation.

Short-time work allowance can be granted again for the above-mentioned period if 3 months have passed since the last calendar month for which short-time work allowance was granted and the eligibility criteria are again met. To do this, however, a new notification of loss of work must be submitted.

The calculation of the short-time work allowance is based on the difference between the actual remuneration (actual gross remuneration in the month of reduced hours) and the planned remuneration (gross remuneration subject to social security contributions that the employee would have earned in the entitlement month without the loss of work). The planned remuneration is therefore the regular pay as defined by the social security insurance up to the social security ceiling. This also includes the following remuneration components: capital-forming benefits, attendance bonuses, performance and hardship bonuses, public holidays, bonuses subject to contributions for Sunday, public holiday and night work, paid vacation, company car provided (non-cash benefit) and additional employer's benefits subject to social insurance contributions for company pension plans. Remuneration for overtime and one-off payments as well as tax- and contribution-free bonuses for Sunday, public holiday and night work are not taken into account. As with unemployment benefits, the loss of earnings is thus covered up to the level of remuneration up to which contributions are paid. If, even during reduced hours, the actual remuneration earned is above the social security ceiling, short-time work allowance is not paid.

A secondary employment only has an effect if employees take it up while receiving short-time work allowance; in this case, the remuneration earned from it is offset against the short-time work allowance, as there is an increase in the actual remuneration earned. However, if the secondary employment was already performed before the start of reduced working hours, it is not offset against short-time work allowance.

Top-up amounts paid by the employer or supplements for short-time work are not taken into account when calculating the short-time work allowance. They do not reduce the short-time work allowance as long as there is still a loss of remuneration. Supplements paid by the employer to the short-time allowance are also not to be added to the remuneration subject to social security contributions, as long as they do not exceed the fictitious remuneration (which normally corresponds to 80% of normal gross earnings). However, if these supplements, including the reduced hours compensation, exceed the fictitious pay, the excess part of the supplements is subject to social security contributions.

In many companies, the short-time work allowance is calculated by using a respective software. If such software is not available, the table compiled by the Employment Agency can be used to calculate the short-time allowance.

Which costs must be borne by the employer?

As long as the working time is not reduced to zero, the employer continues to pay the remuneration for the remaining working time together with the employer's social security contributions. In addition, social security contributions are payable on 80% of the remuneration lost as a result of short-time work. According to the current legal situation, the employer must pay these in full. However, the federal government plans to introduce reimbursement options for this part of the social security contributions. Depending on the legal basis of short-time work, the employer may also be obliged to make supplement payments on the short-time allowance.

What happens to individual compensation components?

Employees affected by short-time work are often asking about individual compensation components: These are based on contractual or statutory regulations; since the employment relationship continues, but the main duties are (partially) suspended, generally payments have to be granted or reduced in accordance with the loss of work.

A travel allowance, for example, can be reduced proportionately if the employee no longer works full time, or can be completely discontinued in case of short-time work zero. A company car can only be withdrawn with the respective rights reserved in the employment contract.

If there are no statutory regulations for the calculation of benefits, such as in § 11 para. 1 Sent. 3 BUrlG for holiday pay or in § 2 para. 1 EFZG for public holidays, and if nothing has been expressly agreed by contract, then according to case law, a decision must be made in accordance with the purpose pursued by the respective special payment.

There is no general legal principle that special payments are to be reduced as a result of loss of work. Accordingly, if special benefits are to be paid for work performed within a certain period of time (holiday or Christmas bonus), a reduction in entitlement corresponding to the reduction in working hours is permissible. In addition, the entitlement to capital formation benefits may be permissibly waived during the short-time work period on the basis of collective bargaining provisions, depending on the structure of the agreement. The same may also apply to annual special payments under collective bargaining agreements.

In connection with the introduction of short-time work, the calculation of special benefits, such as holiday pay, capital formation benefits, annual special payments should be expressly regulated in order to avoid later disputes.

As far as the company pension scheme is concerned, it is generally not affected by short-time work; the employment relationship continues to exist from a legal point of view, only the working hours are reduced and the loss of remuneration is partly compensated by the Employment Agency. This means that the periods of short-time work must be fully taken into account when determining the statutory vesting periods. This also applies in the event of a temporary complete cessation of work. Only company pension schemes which are dependent on remuneration may be affected. Furthermore, periods of short-time work can be taken into account to reduce entitlements if a corresponding clause is included in the pension scheme. In the case of company pension schemes financed by the employees, short-time work allowance cannot be converted; however, the insurance can be continued with own contributions.

How is short-time work introduced in the company?

Employers cannot introduce short-time work on their own authority. Rather, it requires a collective bargaining agreement, a works agreement, a respective clause in the employment contract or a supplementary agreement to the contract. Therefore, if a works council exists, it must agree to short-time work; in companies without a works council and without regulations on short-time work in a collective bargaining agreement, all employees affected must agree to short-time work unless this has been agreed in the employment contracts by means of a corresponding clause.

If the employer and the works council cannot reach agreement on whether and how short-time work should be introduced, both the employer and the works council can appeal to the arbitration board. The decision of the arbitration board replaces the agreement between the employer and the works council (§ 87 para. 2 Works Constitution Act).

In this context, it should be noted that the Works Constitution Act does not provide for a circulation procedure and thus resolutions outside of personal meetings. Certain employee representation rights (e.g. Baden Württemberg) also provide for the possibility of circulation procedures. Without a personal meeting a "work council resolution" therefore is subject to formal errors, which lead to the fact that no valid resolution exists. If the works council is no longer able to make a valid decision because either the works council members themselves or a significant proportion of them are no longer able to meet in person, the company must develop a safety mechanism to ensure that the establishment is able to act. In all matters which are subject to compulsory co-determination according to § 87 BetrVG this requires in any case the approval of the work council and with subjects requiring direct and compelling company or content rules, actually a form-effective, i.e. written form, works agreement would be required.

However, without a meeting in person significant problems may arise which, in our view, may be regulated by a regulatory agreement for crisis situations by defining the exceptions to the previous procedure and documenting the temporary procedure, as well as the mutual waiver of formal errors by both parties. It remains to be seen whether this agreement really is legally valid. But such an agreement might at least be a higher hurdle for the parties to change their minds later. Resolutions that are not subject to a time limit could even repeated in normal operations.

Can employees be dismissed during registered short-time work?

No special rules apply to serving notice of termination for personal or behavioural reasons during ongoing short-time work.

However, a termination of employment for operational reasons during short-time work is socially unacceptable if it is based on the same reasons that led to the short-time work. In this case, there is usually no "urgent" operational requirement for a termination for operational reasons. In addition, a termination for operational reasons requires a permanent loss of workload. However, this is not the case with short-time work, because this requires expressly that the loss of work is only temporary.

However, short-time work does not exclude terminations for operational reasons if there is permanently no opportunity to employ the employees concerned. Even if short-time work was initially chosen as the right way out of the temporary crisis, it can always lead to incorrect assessments of the individual situation in the company.

If a dismissal actually takes place, short-time work allowances can no longer be paid.

What happens during a strike during short-time work?

Short-time work allowance is only granted if the work is based on economic reasons. The entitlement to short-time work allowance is suspended for employees in companies directly affected by strikes, because in this case the loss of work is not due to economic reasons.

For employees who are indirectly affected by an industrial dispute, the payment of short-time work allowance is possible if they do not fall within the technical scope of the disputed collective bargaining agreement. However, the claim is suspended if the employee is indirectly affected and the industrial dispute is conducted on his behalf. The law assumes this if the employee is employed in an establishment which

  • falls within the territorial and technical scope of the contested collective bargaining agreement, or
  • cannot be assigned to the territorial but to the technical scope of a collective bargaining agreement and a main claim of the same type and scope has been made in the territorial scope of the disputed collective bargaining agreement and the result of the industrial action is in all probability essentially adopted in the territorial scope of the non-contentious collective agreement

Employers in whose business an industrial dispute is taking place must notify the Employment Agency immediately when the industrial dispute breaks out and ends.

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