Short-time work - News from the legislator

(Last update 8 May )

Amendment of the period of entitlement to short-time work compensation to 21 months (16 April 2020)

With the Ordinance on the Period of Entitlement to Short-Time Work Compensation [Kurzarbeitergeldbezugsdauerverordnung – KugBeV] announced on 16 April 2020, the previously applicable period of entitlement of 12 months has now been extended to 21 months. The basis for this amendment is the authorization to issue statutory ordinances contained in § 109 (1) No. 2 German Social Code Book III [Sozialgesetzbuch III - SGB III], which enables short-time work to be extended to up to 24 months.

Caution is required, however: The Ordinance is not a carte blanche to extend current short-time work notices. Pursuant to § 1 KugBeV, this Ordinance only applies to employees whose claim to short-time work compensation arose before 31 December 2019.

The aim was to enable companies that were already on short-time work prior to the corona pandemic to continue short-time work. The period of entitlement had expired in many companies and they would have had to have a three-month break before being able to order short-time work again. In most cases, this break in short-time work would have had existential consequences for the companies concerned.

In order to protect affected companies, the Ordinance will come into force retroactively as of 31 January 2020. Like most corona pandemic measures of the legislator, it is only valid until 31 December 2020.

Increase in short-time work compensation (22 April 2020)

The Covid-19 pandemic is hitting the economy hard. To date (22 April 2020), around 725,000 companies have applied for short-time work. For employees, short-time work, especially zero short-time work, means significant financial losses. The short-time work compensation amounts to 60% or 67% of net income (§ 105 SGB III). Although employers can make additional top-up contributions to the short-time work compensation, many employers are currently unable to offer this additional financial outlay.

In recent weeks, there have been increasing demands from politicians and above all from the trade unions for an increase in the short-time work compensation, to as much as full compensation of the previous net income, in order to minimize the net losses for employees.

On 22 April 2020, the governmental coalition agreed to change the short-time work compensation. Graduated according to the length of time in which the compensation is paid, the rate is to be increased to up to 80%, and for parents to up to 87% - until the end of 2020 at the longest. The graduation is as follows:

• As of the fourth month of compensation payment, the rate is increased to 70% or 77%.
• As of the seventh month of compensation payment, the rate is increased to 80% or 87%.

In accordance with the formulation aid provided by the Federal Ministry of Labor and Social Affairs [Bundesministerium für Arbeit und Soziales – BMAS] to the coalition parties for a draft law on social measures to combat the corona pandemic (Social Protection Package II), only months with short-time work from March 2020 onwards are to be taken into account in the calculation of the compensation payment months.

Moreover, the increase in short-time work compensation will only apply if the loss of working hours is more than 50%.

The changes to the short-time work compensation are to be included in the law as § 421c (2) SGB III, new version, and represent a deviation from § 105 SGB III.

Practical implications:

For those companies that have agreed to pay top-up contributions – whether by employment contract, shop agreement or collective bargaining agreement - the decisive factor is now whether the top-up amount will be automatically credited against this or whether the top-up amount previously granted still has to be paid up to a maximum of the full net wage compensation.

Since commitments to make top-up contributions are usually tied to the granting of a certain level of net income (e.g. 80% of the net income), there is much to suggest that the increase in short-time work compensation will lead to the automatic crediting of this top-up amount against it. In other words, the top-up amount paid by the company will be reduced by the increase in the short-time work compensation.

 Changes in the parental benefit (22 April 2020)

In order to prevent a disadvantage to expectant parents who have lost earnings or are no longer able to meet the requirements for receiving parental benefit due to the corona pandemic, the Bundestag adopted on 22 April 2020 a special regulation on parental leave during the corona pandemic by way of a new Act for Parental Benefit Measures occasioned by the Covid 19 Pandemic [Gesetz für Maßnahmen im Elterngeld aus Anlass der Covid-19-Pandemie] (Bundestag printed paper 19/18698).

The main changes to the parental benefit are as follows:

• To date, the introduction of short-time work has had a massive impact on parental benefit. In order to calculate parental benefit, the average income over the 12 months preceding the month of the child’s birth (so-called assessment period) are to be taken into account, §§ 2, 2b German Act on Parental Benefit and Parental Leave [Bundeselterngeld- und Elternzeitgesetz – BEEG]. For employees, income basically includes all salary components subject to income tax. It therefore fundamentally comprises all salary components of an ordinary employment relationship. However, short-time work compensation is not income in this sense. For this reason, it is not taken into account in the calculation of the parental benefit. If a short-time work phase falls within the assessment period, this leads to cuts in the receipt of parental benefits.

According to the new regulation adopted for the period from 1 March to 31 December 2020, the income owed to the entitled person in the assessment period in substitution of his work remuneration - in particular short-time work compensation or class 1 unemployment benefit (Arbeitslosengeld I - ALG 1) which has been lost after the birth of the child due to the Covid-19 pandemic is disregarded in the calculation of the amount of the parental benefit. In this respect, the monthly parental benefit is at most as high as the amount of parental benefit that would be owed to the parent if the entitled person were to have had or had no loss of income due to the pandemic.

• A parent employed in a key sector may apply to postpone the receipt of parental benefit for the period from 1 March 2020 to 31 December 2020. He must then claims the benefits for the postponed months of life by 30 June 2021 at the latest. All occupations that are indispensable, in particular for public life, security and order, the health and nursing care system, education and childcare sector, transport and passenger transport, the supply of energy, water, communications, food, goods and services of daily life are to be regarded as key-sector occupations.

• Under § 4 (3) BEEG, it is possible to extend parental leave if both parents simultaneously work part-time for 25 to 30 hours a week for four consecutive months. This partnership bonus will continue to exist if parents cannot work due to the Covid-19 pandemic.

Practical implications:

In practice, many companies have sought socially acceptable solutions for short-time work and have concluded shop agreements. Pregnant women or expectant fathers who claim parental benefit and for whom the receipt of short-time work compensation will fall within the assessment period for parental benefit pursuant to § 2 BEEG have been exempted from the provisions of the shop agreement on short-time work in order to avoid disadvantages for them, in particular a reduction of their expected parental benefit.

With the legal amendments, there is no longer any reason to exempt these persons from short-time work because of the threat of disadvantages to their receipt of parental benefits. Employers and works councils should adjust the regulations in this respect by means of a corresponding amendment agreement on short-time work. Unlike in the past, a reason to treat affected persons differently from other employees no longer exists.

As the employment agency deems it permissible to agree on retroactive short-time work for accounting periods that have not yet been completed, it could also be effected retroactively as of 1 April 2020. However, problems could arise here in the event of notice periods for introducing short-time work. In such case, it will only be possible to introduce short-time work for these groups of people for the future.

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