What is short-time work compensation? Short-time work compensation is paid by the Federal Employment Agency as partial compensation for wages lost due to a temporary loss of work. This relieves the employer of the cost of employing the workers.
In this way, companies can continue to employ their employees even if they are unable to complete their work. The short-time allowance therefore helps to avoid redundancies.
What basic conditions must be met in order to be eligible for short-time working benefits?
Short-time work compensation can generally be granted if an agreement has been reached between the employer and employee representatives or between the employer and the employees concerned on a reduction in working hours in the company under labour law, and if this is accompanied by a considerable loss of working hours and loss of remuneration. The following conditions must be met:
- The loss of working hours is due to economic reasons or to an unavoidable event (for example, flood, official order).
- The loss of working hours is unavoidable and the company has done everything possible to reduce or eliminate it (e.g. use of working time credits within certain limits).
- The loss of working hours is temporary. This means that, within the period of entitlement, the transition to regular working time can generally be expected again.
- The loss of working hours was reported to the Federal Employment Agency.
- After the beginning of the loss of working hours, the employee continues an employment subject to compulsory insurance and is not dismissed.
- The loss of working hours is considerable. This means that at least one third of the employees employed in the company are affected by a loss of earnings of more than ten percent of their monthly gross salary.
In times of crisis, are there reliefs in the regulations for short-time work compensation?
Yes, the German government has issued a decree to ease the rules on short-time working. They are valid for a limited period until 31.12.2020. The conditions for access to short-time work are eased and employers are relieved of the payment of social security contributions.
A company can already register short-time work if at least ten percent of the employees in the company are affected by a loss of working hours. This threshold is currently one third of the workforce.
- There is no need to build up negative working time balances prior to payment of the short-time working 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 working.
- Temporary workers can also receive short-time working compensation.
- The Federal Employment Agency will fully reimburse the social security contributions that employers have to pay for their short-time employees alone.
- For recipients of seasonal short-time work benefits, social insurance contributions are not reimbursed from the winter employment levy, but also from contribution funds.
How do I prove that there are economic reasons for reporting short-time work?
In the form for notifying the local employment agency of the loss of working hours, the reasons for the loss of working hours are explained in detail. The form contains a declaration by the employer that the information has been provided to the best of his knowledge. If there is a works council, it must agree to the information provided by the employer or make a separate statement.
To whom does the entitlement to short-time working allowance apply?
All employees who have not been dismissed and who have lost more than 10 percent of their salary as a result of short-time work and who continue to be employed on an insurance basis are entitled to short-time work compensation. If the so-called materiality threshold is reached (at least 1/3 of the workforce has a loss of working hours of more than 10 percent), even non-terminated employees who are subject to compulsory insurance and whose loss of working hours is 10 percent or less can receive short-time compensation. For a limited period until 31.12.2020, the materiality threshold has been lowered from one third to ten percent of the workforce.
How quickly can short-time work be introduced?
Short-time work can be introduced at very short notice in the event of loss of orders by making appropriate agreements to reduce working hours in the company and notifying the local employment agency. The employer calculates the short-time working allowance and pays it out to the employees. An application for reimbursement is then submitted to the local employment agency, which, after checking the application documents, immediately reimburses the employer for the short-time allowance paid. Open questions can be clarified quickly and unbureaucratically with the local employment agency.
Do the employees in a company have to reduce their working hours by the same percentage each time?
The working time does not have to be reduced equally for all employees. What is important is that for all employees affected, the reduction of working time with reduced pay, i.e. short-time work, is effectively agreed on the basis of collective agreements, company agreements or individual contractual arrangements. The conditions for the payment of short-time work compensation are fulfilled, among other things, if at least one third or, for a limited period until 31 December 2020, ten percent of the employees employed in the company are affected by a loss of remuneration of more than ten percent of their monthly gross salary in each case.
Does an employer have to report short-time work for the entire company or can only departments be affected?
Short-time work does not have to be introduced and reported for the entire company. Short-time work can also be limited to individual departments.
What extent can the loss of working hours be for employees in short-time work?
Whether the loss of working hours, days or even weeks depends on the order situation and the agreements in the company. With "short-time work zero", the loss of working hours is 100 percent, i.e. work is stopped completely for a temporary period.
What do I have to do to apply for short-time work compensation?
Notification and application for short-time work compensation is a two-stage process:
- The loss of working hours is reported in writing by the employer or the works council to the responsible employment agency. The responsible agency is the Agentur für Arbeit in whose district the company is located. The Employment Agency decides without delay whether the conditions for payment of short-time working allowance are met. The employer calculates the short-time allowance and pays it out to the employees.
- The employer then submits a written request for reimbursement of the reduced hours compensation he or she has paid to the employment agency in whose district the payroll office responsible for the employer is located. The application must be submitted within a cut-off period of three months. The period begins at the end of the calendar month (entitlement period) in which the days for which short-time working allowance is claimed lie.
Companies requiring advice on how to apply should contact their local employment agency directly or the Employer Service of the Federal Employment Agency at 0800 4 5555 20. The necessary forms and a table for calculating short-time working allowance are available on the BA website (www.arbeitsagentur.de).
Is the procedure for granting and paying short-time work compensation too bureaucratic?
The feedback from employers affected by short-time work on the procedure, the processing of benefit applications and on the employees in the benefit offices in the Operational Service of the Federal Employment Agency (OS Team Short-time allowance, insolvency benefit, part-time retirement benefit) is consistently positive. As a rule, the benefit is paid to the employers within 15 working days of the application being made. In practice, the two-stage procedure for the payment and reimbursement of short-time work benefits has proven its worth. A fast and unbureaucratic procedure is in the interest of all parties involved. The employees of the responsible employment agency are available to answer any queries. The form for notification and reimbursement application can be found on the website of the Federal Employment Agency (www.arbeitsagentur.de).
What role does the works council play in the introduction of short-time work?
A prerequisite for the introduction of short-time work in a company is that the works council agrees. In companies without a works council and without collectively agreed regulations on short-time work, all affected employees must agree to short-time work.
What actually happens if the employer and works council cannot agree on the introduction of short-time work?
Under Section 87 (1) no. 3 of the Works Constitution Act, the works council has a right of co-determination in the introduction of short-time work. In concrete terms, this means that if the employer and the works council cannot agree on whether and how short-time work should be introduced, both the employer and the works council can appeal to the conciliation body. The ruling of the conciliation body replaces the agreement between the employer and the works council (§ 87 (2) Works Constitution Act).
Must employees have taken their remaining vacation before they start receiving short-time work compensation?
If there are still transferable vacation entitlements from the previous year, these must always be used to avoid payment of short-time compensation. The situation is somewhat different if employees' priority holiday wishes prevent them from using the remaining holiday for other purposes.
How much is short-time working compensation paid?
The short-time working allowance is calculated on the basis of the net loss of remuneration. As a rule, short-time workers receive 60% of the lost flat-rate net remuneration. If there is at least one child living in the household, the short-time working allowance is 67% of the lost flat-rate net remuneration.
However, the amount of short-time work benefit is capped on the contribution assessment basis.
From a gross monthly salary of € 6,890.00, the individual short-time allowance does not increase
A table for calculating the short-time working allowance can be found on the website of the Federal Employment Agency (www.arbeitsagentur.de).
How is short-time allowance calculated?
In many companies, short-time working compensation is calculated using software. If such software is not available, the table created by the Federal Employment Agency can be used to calculate the short-time allowance.
For how long is short-time work compensation paid?
The statutory period for which short-time work compensation is paid is 12 months. It can be extended to up to 24 months by legal ordinance of the Federal Ministry of Labour and Social Affairs.
Can non-profit enterprises, such as associations, schools, day-care centres or even cultural workers, such as theatres, also receive short-time allowance?
In connection with the Corona pandemic, non-profit enterprises such as associations, as well as day-care centres and people working in the cultural sector such as theatres, can also receive short-time work benefits. If their institution has to be closed down by an official measure, an unavoidable event pursuant to § 96.1 sentence 1 no. 1 SGB III exists. If a considerable loss of working hours occurs in the company with loss of remuneration for the employees, the short-time working allowance may be granted if the other requirements are met.
How do agreements already concluded to safeguard jobs affect the amount of short-time working compensation?
Agreements concluded by the employer with the works council or - if there is no works council - with the employees to secure jobs (so-called employment protection agreements for temporary changes in working hours) do not have a negative effect on the amount of the short-time allowance. The short-time allowance paid is based on the salary that was paid before the agreement to safeguard employment.
How does additional pay / a second job affect the amount of reduced hours compensation?
If the secondary employment was already carried out before the start of reduced hours, there are no effects, i.e. there is no imputation against reduced hours compensation. If employees take up a second job while receiving reduced hours compensation, the resulting remuneration is offset against the reduced hours compensation, since the actual remuneration is increased.
On what basis is reduced hours compensation calculated if the employee earns above the income threshold?
The calculation of the short-time allowance is based on the difference between the actual remuneration (actual gross remuneration in the month of short-time work) and the planned remuneration (gross remuneration subject to contributions that the employee would have earned in the month of entitlement without the loss of work). The planned remuneration is therefore basically the regular regular current remuneration within the meaning of social insurance up to the income threshold. As with unemployment benefit, the loss of earnings is thus covered up to the level of earnings up to which contributions are paid. If the actual remuneration earned is above the income threshold even during reduced hours, reduced hours compensation cannot be paid.
Can non-pay-scale employees also be entitled to reduced hours compensation, or can an employment contract with a non-pay-scale employee have a negative effect on the granting of reduced hours compensation?
An employment contract with a non-pay-scale employee does not preclude the payment of reduced hours compensation as long as the employee is employed subject to social insurance contributions. Please refer to the previous question regarding the effects of remuneration above the income threshold for the assessment of contributions.
Are top-up amounts that are regulated by collective agreements taken into account when calculating short-time work compensation?
Top-up amounts paid by the employer or contributions to short-time work compensation are not taken into account when calculating short-time work compensation. They do not reduce the short-time allowance if there is still a loss of remuneration.
Do short-time work and the receipt of short-time work benefits have an influence on integration grants that employers receive for an employee?
Integration subsidies are calculated according to the "eligible remuneration". This is made up of the regularly paid remuneration and a flat-rate share of the employer's total social security contribution. For periods in which the employer does not pay any remuneration, it is regulated that the integration subsidy must be reduced accordingly or cannot be paid. In principle, these periods have no effect on the duration of the subsidy. Further information is available from the responsible employment agency.
Are students taken into account when determining the number of employees employed in a company or do only employees subject to social insurance contributions count?
All employees who work reduced hours in the company on at least one day in the month are to be taken into account. This also includes employees who are not subject to social insurance contributions. This includes, for example:
- marginally employed persons,
- sick workers,
- workers on leave of absence,
- Female workers during maternity leave.
Not to be counted, however, are:
- apprentices (explicit legal regulation), - employees whose employment relationship is suspended, for example due to parental leave.
Is short-time work also possible for trainees taken on under fixed-term contracts?
Yes. Short-time working allowance can also be paid to trainees who, after the end of their vocational training relationship, take up employment (fixed-term or permanent) subject to compulsory insurance with the same or another employer.
What does an employer do with marginally employed persons if there is no work available? Do they have to be dismissed before short-time work can be reported?
Marginally employed workers do not have to be dismissed before short-time work can be introduced. However, marginally employed workers cannot receive short-time work compensation.
Who pays social insurance contributions during short-time work?
For the remuneration earned during short-time work, the employer and employee will continue to pay contributions jointly. Social security contributions are reduced to 80 percent for the working time lost due to short-time work. These are borne by the employer alone.
Does short-time work reduce the social security coverage for employees?
No. Employees in short-time work have to cope with a loss of income, but remain employed subject to social security contributions. Their social security coverage in health, pension, nursing care, accident and unemployment insurance will be maintained.
How does short-time work affect pension entitlement?
Employees continue to be covered by pension insurance while they are receiving short-time work benefits. As usual, employers and employees pay the contributions due on the reduced remuneration together. In order to avoid disadvantages in the later pension level, additional contributions are made on the basis of 80 percent of the loss of remuneration (difference between the target and actual remuneration), which are borne by the employer alone. Questions about the effects of short-time work on later pension benefits are answered by employees of the information and advice centres of the German Pension Insurance or by calling the service telephone on 0800 1000 480 480 70.
Isn't it cheaper for the employer to dismiss employees?
The advantage of short-time work is that if the order situation improves, working hours can be increased immediately or switched to regular working hours. The employees are immediately available again and do not have to be searched for, hired and trained first. The downtimes are often less than with dismissals. In the event of a dismissal, employees are also entitled to full pay until the end of the notice period - regardless of whether they can still be employed full-time or not. Short-time work reduces costs for the company immediately.
Can employees be dismissed during the registered period of short-time work?
In accordance with the principle of proportionality (termination as a last resort), the introduction of short-time work as a milder means of making a dismissal for operational reasons in the event of a temporary loss of working hours unacceptable. However, short-time work does not exclude dismissals for operational reasons if the employment opportunity of the employees concerned is permanently lost. If a notice of termination is actually given, short-time work compensation can no longer be paid.
Does short-time work compensation affect the entitlement to and the amount of unemployment benefit?
In many cases, short-time work helps to avoid dismissals for operational reasons. Should it nevertheless occur, employees are not disadvantaged by short-time work. Periods during which short-time work benefits are received do not have a negative effect on entitlement to unemployment benefits. The receipt of short-time work benefits does not mean that employment that is fundamentally subject to compulsory insurance to promote employment becomes exempt from insurance. This is not the case even if employees no longer perform work during short-time work. Like "normal" periods of employment, periods of short-time work benefit contribute to the fulfilment of the qualifying period for unemployment benefit and are also taken into account when determining the duration of entitlement. If employees become unemployed after receiving short-time work benefits, unemployment benefits are calculated on the basis of the remuneration that would have been earned without the loss of work. This basically ensures that employees do not suffer any disadvantages in terms of benefits if they become unemployed after receiving short-time working benefits.
Can further training be supported during short-time work?
Employees can be subsidised by assuming the costs of further training in full or in part in accordance with the Third Book of the Social Code (SGB III) if
- knowledge and skills are imparted that go beyond exclusively job-related further training,
- at least four years have elapsed since obtaining the professional qualification,
- the employee has not taken part in any continuing vocational training funded under the SGB III in the four years preceding the application,
- the measure is carried out outside the holding and lasts more than 160 hours,
- the measure and the body responsible for the measure are approved for funding, and
- employees are affected by structural change or are seeking further training in bottleneck occupations. Deviations from this rule are possible for companies with fewer than 250 employees.
How does the promotion of further training by the Employment Agency work in practice?
In order to apply for the assumption of the costs for qualification measures, both the employer and the employee can approach the Agentur für Arbeit. There, the entitlement to the subsidy is examined and it is determined whether a subsidy is possible according to SGB III. In the case of subsidies, an education voucher is usually handed over to the employee. Under the conditions laid down in the education voucher, the employees can redeem the education voucher with an institution of their choice that is approved for further education funding. A guide or tips on how to find a suitable training offer is contained in the leaflet "Förderung der beruflichen Weiterbildung" (Promotion of continuing vocational training), which is available from the Federal Employment Agency. The Federal Employment Agency's "KURSNET" training and continuing training database on the Internet and the training providers themselves also offer comprehensive information on approved training measures.
What opportunities for further training exist before short-time work becomes an issue or if short-time work is not required in the company?
In 2019, the Qualification Opportunities Act made it possible to promote continuing training for employees regardless of their training, age and company size, thus opening up the possibilities even further. The expansion of continuing vocational training funding focuses on all employees who perform occupational activities that can be replaced by technologies, are otherwise affected by structural change or who are seeking continuing vocational training in a bottleneck occupation. The promotion of further training comprises on the one hand the assumption of further training costs (e.g. training course costs) for the individual employee (employee promotion) and on the other hand the granting of wage subsidies to employers for work absences due to further training (employer's benefit). The assumption of the costs of further training and the granting of wage subsidies generally requires co-financing by the employer. The type and scope of the subsidy depends largely on the size of the company.
Is it possible to continue further training that was started before short-time working?
In principle, this is possible if it involves continuing education and training while working (e.g. in the evening or at the weekend). If, before the start of short-time work, the employer has begun a qualification that takes place in whole or in part during working hours and has taken time off for this, it should be noted that short-time work compensation is paid for economically induced downtime. In these cases, however, the time off is for further training, so that wage entitlement continues to exist. If necessary, further training costs subsidized by the Employment Agency will continue to be covered if the wage continues to be paid.
Can the further training begun during short-time work be continued if the short-time work ends in whole or in part?
Participation in further training must not prevent a return to normal working hours. In principle, it must therefore be possible to adjust the duration of further training to the total or partial discontinuation of short-time work and to end it when the employee returns to normal working hours. If the employer agrees and continues to release the employee or the employee from work, the further training can be continued beyond the end of short-time work if necessary. Details on continued financing within the framework of the support provided under the Qualification Opportunities Act can be obtained from the responsible employment agency.
Who decides on possible qualification measures - the employer or the employees?
The content, type and duration of further training are agreed between the employer and the employee.
What exactly do I have to do to ensure that my further training is supported by the Employment Agency?
Both the employer and the employee can approach the Employment Agency to request that the costs of qualification measures be covered. There, the entitlement to the subsidy is examined and, if the result is positive, a training voucher is usually handed over to the employee or employee. Under the conditions laid down in the education voucher, the employees can redeem the education voucher with an institution of their choice that is approved for further education support. A guide or tips on how to find a suitable training offer is contained in the leaflet "Förderung der beruflichen Weiterbildung" (Promotion of continuing vocational training), which is available from the Federal Employment Agency. The Federal Employment Agency's "KURSNET" training and continuing training database on the Internet and the training providers themselves also offer comprehensive information on approved training measures. Parallel to this, employers can apply to the Federal Employment Agency for a subsidy on wages if they release employees for a qualification measure and continue to pay their wages during this time. If the decision is positive, the employment agency pays the wage subsidy directly to the employer.