FAQs on short-time work
To mitigate the impacts of the COVID-19 pandemic on employees, the Cabinet has decided to extend the regulations facilitating access to short-time work allowance. Incentives are also to be put in place to encourage people to use short-time work to invest in further training. Here is an overview of everything you need to know about short-time work allowance.
The regulations to facilitate access to short-time work allowance and to raise the allowance, currently limited to the end of 2020 are to be extended until the end of 2021. On Wednesday, the Cabinet launched a package of measures to this end. "Short-time work is our model for success. It is the way we ensure the livelihoods of millions of employees and their families. And we will continue along this path," explained Federal Labour Minister Hubertus Heil. He stressed that the greater incentives to use short-time work to invest in further training mean that "short-time work is not only a way of bridging a deep economic dip, but also a path towards the future".
The Cabinet adopted the draft of the Act to Secure Employment (Beschäftigungssicherungsgesetz) and two ordinances that guarantee that the regulations currently in place will remain valid without interruption until the end of 2021. The German government thus intends to give companies and employees alike greater certainty on the basis of which they can plan for the future.
The Federal Employment Agency pays the short-time work allowance to compensate in part for the loss of wages caused by a lack of work for a temporary period. This eases the pressure on companies and enables them to keep on their workforce. Short-time work often makes it possible to avoid job losses.
What measures relating to short-time work allowance are to be extended?
- A company may announce short-time work if a minimum of 10 per cent of its workforce are affected by a reduction of over 10 per cent in their work. Under normal circumstances the limit is one third of the workforce.
- There will still be no requirement for companies to establish negative working hour balances before short-time work allowances can be paid. Before the pandemic, the rule was that companies with agreements to deal with fluctuations in workload were required to use these to avoid short-time working.
- Contract workers are also eligible for short-time work allowance.
Easing the burden
- The regulation that social insurance contributions will be reimbursed in full during short-time work is to be extended until 30 June 2021. From 1 July 2021 to 31 December 2021, 50 per cent of social insurance contributions will be reimbursed, provided short-time work began on or before 30 June 2021.
Longer period of eligibility
- The eligibility period for short-time work allowance for companies that began short-time work on or before 31 December 2020 is to be extended to up to 24 months, but at the latest until 31 December 2021.
Short-time work allowance raised
- Employees whose remuneration has been cut by at least half, can continue to benefit from higher short-time work. As of the fourth month of short-time work allowance, the allowance will be raised to 70 per cent (77 per cent for employees with at least one child) and as of the seventh month to 80 per cent (87 per cent for employees with at least one child). The months in which short-time work allowance has been paid will count as of 1 March 2020.
Supplementary income permissible
- Income earned from secondary employment during short-time work will not be fully deducted from the short-time work allowance for a limited period up to 31 December 2020.
- The currently valid limited-term regulations governing supplementary income will thus be extended until 31 December 2021, in that income from minor employment will not be deduced from the short-time work allowance.
Further professional training
Time when employees are without work should be used for further professional training. In this case, the regular reimbursement of 50 per cent of social insurance contributions will not for the meantime be linked to the requirement that the time spent training be equivalent to at least 50 per cent of the working time lost.
What is the procedure for applying for short-time work allowance?
The employer must declare short-time work and apply for short-time work allowance. Employees need not do anything.
How much is the short-time work allowance?
The amount depends on the remuneration that you normally receive after tax and after the deduction of social insurance contributions (net remuneration). Of this sum, 60 per cent of the lost net remuneration is paid as short-time work allowance. If at least one child lives with you as part of your household, the short-time work allowance is equivalent to 67 per cent of the net income lost through short-time work.
In the course of the COVID-19 pandemic, the German government has raised short-time work allowance. This regulation is to be extended until 31 December 2021 for all employees who became entitled to the allowance on or before 31 March 2021. The short-time work allowance will rise:
- As of the fourth month of receiving the allowance to 70 per cent of the net remuneration lost through short-time work (or to 77 per cent if at least one child lives in the household).
- As of the seventh month of receiving the allowance to 80 per cent of the net remuneration lost through short-time work (or 87 per cent if at least one child lives in the household).
The months need not be consecutive. In other words, an interruption to short-time work (even an interruption of three months) does not mean that you start from zero again after the interruption. Should you receive seasonal short-time work allowance, this also counts. But, if in any one month you receive only sick pay totalling the same amount as short-time work allowance, this month will not be counted.
How long is the period for which short-time work allowance can be paid?
The eligibility period for short-time work allowance for companies that began short-time work on or before 31 December 2020 is to be extended to up to 24 months, but at the latest until 31 December 2021.
The eligibility period, however, may be interrupted. If, for instance, your employer receives a large order for a limited period, you may be able to work full time again for a limited period. If, after this period, you once again receive short-time work allowance, the eligibility period will be extended by the period during which you were able to work full time.
If, however, the period of short-time work is interrupted for a period of more than three months, a new period of eligibility will be deemed to have begun. If your employer is subsequently forced to reduce your regular working time again, you are again entitled to a maximum of 24 months of short-time work allowance.
What impact does a supplementary income or secondary employment have on the total short-time work allowance?
If the secondary employment was held before the start of short-time work it will have no impact on the total short-time work allowance. The supplementary income will not be deducted from the short-time work allowance.
For secondary employment begun up to the end of 2020, the supplementary income earned will not be deduced from the allowance, provided the sum of the supplementary income and any actual remaining salary, any top-up payments and the short-time work allowance together do not exceed the regular remuneration.
The currently valid limited-term regulations governing supplementary income will thus be extended until 31 December 2021, in that income from minor employment will not be deduced from the short-time work allowance.
Are individuals with minor employment eligible to receive short-time work allowance?
Individuals with minor employment are not eligible to receive short-time work allowance because they are not required to pay contributions to the statutory unemployment insurance scheme.
Is it possible to undertake a training or upgrading course during short-time? Are individuals who work in Germany but actually live across the border in a neighbouring country eligible to receive short-time work allowance? You will find additional information on short-time work on the website of the Federal Ministry of Labour and Social Affairs and on the website of the Federal Employment Agency.