Update: Short-time work compensation during the corona pandemic

On 25 August 2020, the governmental coalition agreed to extend the payment of short-time work compensation. This planned extension and other current changes are part of the consequence management policy in the corona pandemic. After completion of the legislative procedure, these changes will come into force on 1 January 2021.

Extension of the period of entitlement and the amount of the short-time work compensation

The economic consequences of the Covid-19 pandemic for companies in Germany remain considerable. The agreement reached therefore provides that the payment of short-time work compensation will not be limited to 12 months, but will be extended to up to 24 months, albeit until 31 December 2021 at the latest. This means that companies do not have to take a break from short-time work - which in many cases would probably threaten their existence - despite the current lack of employment.

Furthermore, the staggered increase in short-time work compensation from the fourth and seventh month onwards to 70% and 80% respectively, and for parents to 77% and 87% respectively, is also being extended until 31 December 2021. This extension applies to all employees whose claim to short-time work compensation has accrued by 31 March 2021.

Extension of facilitated access

According to the regulations on easier access to short-time work compensation, at least 10% of the employees employed in the business or business department currently each have to be affected by a loss of earnings of more than 10% of their monthly gross remuneration – as opposed to the original 1/3 of the employees. In addition, the build-up of negative working-time balances is currently not a prerequisite for receiving short-time work compensation. These simplified conditions for accessing short-time work compensation are also going to be extended until 31 December 2021 for all employees who have started short-time work by 31 March 2021.

Reimbursement of social security contributions

In order to provide employers with further relief during the current situation, it was also decided that the social security contributions to be borne by the employer would be fully reimbursed until 30 June 2021. In the last two quarters of 2021, half of the social security contributions to be borne by the employer will be reimbursed for all employees who have started short-time work by 30 June 2021. However, full reimbursement is also possible if qualifications are made during short-time work. The prerequisite for this is that there is a need for further training, that the measure is longer than 120 hours in duration and that both the provider and the measure are approved.

Further changes

The regulations on short-time work compensation also apply to temporary workers. Temporary employment agencies can also contact the German Employment Agency [Agentur für Arbeit] and request its assistance to mitigate the consequences.

Additional income earned from marginal employment commenced during short-time work is not taken into account.

Finally, under the 2020 Annual Tax Act [Jahressteuergesetz 2020], the tax relief for employers’ contributions towards short-time work compensation is also being extended until 31 December 2021.

Conclusion

Employers affected by the corona pandemic can breathe a slight sigh of relief with the new extensions and will be able to secure jobs for the time being.

The Federal Government's draft law with the above-mentioned new regulations has been available since 16 September 2020. The planned German Act to Safeguard Jobs in the Wake of the Covid-19 Pandemic [Gesetz zur Beschäftigungssicherung, BeschSiG] is to be passed this year - together with the two ordinances, the Ordinance Amending the Short-Time Work Compensation Ordinance [Verordnung zur Änderung der Kurzarbeitergeldverordnung] and the Ordinance on the Payment Period for Short-Time Work Compensation [Verordnung über die Bezugsdauer für das Kurzarbeitergeld], and is to enter into force on 1 January 2021.

Further information about the BeschSiG:  https://www.bmas.de/DE/Service/Gesetze/beschaeftigungssicherungsgesetz.html.

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