Update: Q&A on coronavirus and short-time work

Our labour law expert Bettina-Axenia Bugus will answer important questions about short-time work in the context of the Corona crisis.

Question: What is short-time work?

Answer: Short-time work is a temporary reduction in the number of working hours that are normally worked in a company. It is intended to enable companies to overcome financially difficult times and to avoid dismissals for operational reasons. In cases where short-time work is introduced, the workforce in a company will be working fewer hours or not at all.

Question: What requirements must be met by employers under Social Code SGB III to introduce short-time work in their companies?

Answer: On March 13, 2020, the Federal Government passed the “Act on the Crisis-Related Improvement of the Regulations for Short-Time Work Allowance,” a package of measures designed to facilitate companies’ access to short-time work allowance when suffering from supply bottlenecks or being shut down by the authorities in the event of “exceptional circumstances.”

The facilitations apply retroactively from March 1, 2020, allowing affected companies to submit applications in compliance with the new legal situation effective immediately. The following conditions were introduced to simplify the receipt of short-time work allowance:

• 10 percent of a company’s workforce must be affected by the loss of working hours
• Social security contributions are being reimbursed by the Federal Employment Agency
• Short-time work allowance may now also be applied for relating to temporary workers
• Companies using agreements on working time fluctuations will not have to establish negative working time accounts

In addition, the existing requirements of SGB III continue to apply:

According to Sections 95, 96 SGB III, the requirements for the granting of short-time work allowance are met where

• there is a significant loss of work due to economic reasons or an unavoidable event
• the loss of work is temporary
• the loss of work cannot be avoided
• the employer has notified the Federal Employment Agency in writing of the loss of work. The notification must be accompanied by the opinion of the company’s works council where one is installed.

According to Section 96(3) sentence 2 SGB III, an unavoidable event is also given where a loss of work is caused by official measures or officially recognized measures for which the employers are not responsible.

Additionally, the operational requirements must be met. According to Section 97 SGB III, this is the case if at least one person is employed in the company.

Question: Is it possible for employers to unilaterally order short-time work for their companies?

Answer: No, employers are not entitled to introduce short-time work unilaterally. The introduction of short-time work constitutes a deviation from the statutory provisions and the employment contract applicable to the employment relationship. This requires a legal basis between the parties to the employment contract. Where a works council is installed in the company, this provision may be introduced by means of a works agreement. If there is no works council, provisions in the employment agreement are required to introduce short-time work.

Question: Who receives short-time work allowance and how much is granted?

Answer: Short-time work allowance is granted to all employees who, after the start of the loss of working hours, are in an employment relationship subject to compulsory insurance which has not been terminated or canceled by a contract. In addition to full-time and part-time employees, this also includes employees in a fixed-term employment relationship or those who are entitled to continued remuneration under the Continued Remuneration Act for incapacity for work.

The amount of the short-time work allowance is based on the flat-rate net loss of pay during the entitlement period (calendar month). This is the difference between regular pay and actual pay. The allowance is granted in two different benefit rates: For employees with at least one child, or employees whose spouse has at least one child, it is 67% of the net pay difference. For all other employees, it is 60% of the net pay difference.

The short-time work allowance is paid by the Federal Employment Agency to those companies that applied for it for their operations. They then transfer it to their workers with the remaining pay.

Question: Where and how do employers have to report short-time work?

Answer: According to Section 99(1) SGB III, the loss of work is to be reported to the Federal Employment Agency in whose district the employer’s business is located. The notification must be made in writing or in electronic form.

Question: How long will short-time work allowance be paid?

Answer: According to Section 104 SGB III, short-time work allowance will be paid for a maximum of 12 months. The period of entitlement may be extended to up to 24 months by legal ordinance if exceptional circumstances arise that affect the entire labor market. In the current situation, it is to be expected that the Federal Ministry of Labor and Social Affairs will make use of this power to issue an appropriate decree.

Status: March 19, 2020