What is short-time work?
Short-time work means the temporary reduction of regular working hours in a business because of a substantial loss of work. The aim is to avoid dismissals and keep the workforce in the business. For the hours that are lost, employees receive partial pay in the form of short-time work allowance (Kurzarbeitergeld), which is paid by the Federal Employment Agency (Bundesagentur für Arbeit). Whether the short-time work takes the form of a reduction in weekly working days or in daily working hours can be decided individually.
How do I get this state financial injection for my business?
Last month around 7.3 million employees were on short-time work. That is five times as many as at the peak of the financial crisis in 2009. There is probably no sector of the economy that is not feeling the
effects of the pandemic and that is spared short-time work. But although the term short-time work often has a negative ring to it, and means a poor order situation
and loss of income as well, there is one thing that should not be forgotten: during the Covid-19 pandemic, short-time work secures employment relationships, prevents insolvencies and thus becomes probably the most important instrument of 2020. But how does the procedure on the way to the state financial injection actually work? This complete guide sums up the route to short-time work allowance for you
What are the requirements for short-time work allowance?
To be able to introduce short-time work, certain requirements have to be met:
- Substantial loss of work: this can arise for economic reasons or because of an unavoidable event..
- Minimum share of affected employees: at least one third of the workforce must be affected by a loss of pay of more than 10%.
- Operational requirements: at least one employee must be employed subject to social security contributions.
- Personal requirements: the employee must not be under notice or have ended the employment relationship by a termination agreement.
You can find further information on the requirements on the website of the Federal Employment Agency.
Also of interest for you: short-time work – clean timesheets avoid trouble with the employment office.
A practical example of the requirements for short-time work:
Let us assume that a mid-sized mechanical engineering company has a loss of work of 40% of its working hours because orders have dropped. To introduce short-time work, the employer has to prove that more than one third of the workforce is affected by a loss of work of at least 10%. After the application, the Federal Employment Agency finds that the requirements are met and approves short-time work allowance. This helps the company to cut staff without having to issue dismissals.
This is how the federal government is responding:
Because of the pandemic, the federal government has brought in special rules for applying for short-time work allowance, which are expected to apply until the end of 2020. Under them there is an entitlement if at least 10%, previously 33%, of the workforce are affected by a loss of pay of more than 10% of gross pay each (including low earners, who are not entitled to short-time work allowance themselves). During the crisis, temporary agency workers are entitled to short-time work allowance as well as employees subject to social security contributions. The social security contributions borne by the employer alone are now covered by the state in full or in part, depending on the case.
Important!
Since July 2023 the federal government has lifted all the special rules that were issued because of the coronavirus pandemic. That includes the rules on short-time work. Since then the old rule applies again: at least one third of the employees in a business have to be affected by the loss of work in order to go on short-time work.
Applying – step by step
The process for applying for short-time work allowance involves the following steps.
- Notifying the loss of work: the company files a notification of the loss of work with the responsible employment agency (form KUG 101)..
- Review by the employment agency: the authority checks the requirements and decides on the approval.
- Monthly settlement: once approved, the employer submits the benefit application (form KUG 107) every month in order to receive the reimbursement of the short-time work allowance.
You can find detailed information and the necessary forms on the website of the Federal Employment Agency.
Here you can find the Federal Employment Agency’s table for calculating short-time work allowance
Short-time work and your tax return: what you should know
Even though short-time work allowance is in principle tax-free, it is subject to what is known as the progression proviso (Progressionsvorbehalt). That means: it raises the tax rate on your other income – which can lead to back payments in your tax return. Anyone who received short-time work allowance in the year in question is generally obliged to file an income tax return. So it is worth keeping your records carefully and getting tax advice where necessary.
Vacation and short-time work: what applies?
Short-time work does not necessarily affect your vacation entitlement. Your vacation entitlement stays the same on short-time work too, except in the case of complete short-time work (zero hours). In that case the vacation entitlement is reduced proportionally. During this time there is no obligation to work and accordingly no entitlement to paid vacation either. That only applies, however, if nothing else is set out in the employment contract or the collective agreement.
In the case of short-time work, vacation entitlement has to be handled individually in any case.
That also applies, by the way, if employees fall ill during short-time work. Anyone who falls ill receives up to six weeks of continued pay on the basis of the short-time work allowance.
Is a second job allowed during short-time work?
Anyone who already had a second job before moving to short-time work can continue it without any problems and without it affecting the short-time work allowance. Anyone who wants to start a second job during short-time work, however, should bear in mind that this increases the pay actually earned. In that case the short-time work allowance will tend to be reduced.
What happens to overtime during short-time work?
Before short-time work is introduced, overtime generally has to be used up. If overtime is still documented and has not been used up at the time of the application, that can lead to the application being rejected.
Termination during short-time work – is that possible?
Employees on short-time work do not have any extra protection against dismissal. Short-time workers can therefore be given both ordinary and extraordinary notice – for reasons relating to the person and to conduct as well as for operational reasons.
You can read more about protection against dismissal here.
Clean proof of hours is essential!
Once the notification has been approved, things get into the real detail. Forms 107 and 108 require properly kept timesheets, preferably right at hand, in digital form. These will help you or your tax advisor enormously. Because the target and actual pay – that is, the regular salaries before short-time work and the new salaries during it, plus the sick pay hours – have to be entered into settlement list 108 precisely. Depending on the number of employees in the business, that means a large amount of time and carries a high risk of errors. Precisely recorded working time records are therefore the be-all and end-all for filling in form 108 quickly and without mistakes.
Have proof of hours created automatically with the clockin app
clockin gives you the best possible support in filling in the settlement list and saves you trouble with the employment office. The digital system for time tracking, documentation and employee management is immediately understandable and easy to use. Every absence of your employees is recorded by clockin and documents such as a medical certificate can be stored as well. On top of that, your employees’ timesheets can conveniently be exported as an Excel list and sent to your accounting team or your tax advisor.
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