Germany: Short-Time Work Allowance – New Framework Conditions

• The simplified crisis regulations governing short-time working in Germany introduced in connection with the COVID-19 pandemic expired at the end of June 2023.
• As of July 1, 2023, the regular statutory provisions once again apply for access to short-time working.
• This Insight answers common questions regarding the new (old) requirements for receiving the short-time allowance.

Six million employees in Germany were on short-time work ("Kurzarbeit") in spring 2020. 45.5 billion euros were spent by the German government on short-time work benefits between 2020 and 2022. These figures speak for themselves: short-time work allowance ("KUG") is a tried-and-tested instrument for keeping employees in the company during difficult economic times. In May, however, Hubertus Heil, Federal Minister of Labor and Social Affairs, announced that easier access to short-time work allowance would not be extended.

Framework conditions for short-time allowances from July 1, 2023

The simplified crisis regulations introduced in connection with the COVID-19 pandemic expired at the end of June 2023. As of July 1, 2023, the regular statutory provisions once again apply for access to short-time working. The most important questions and answers regarding the new (old) requirements for receiving short-time allowance:

In which cases can short-time work allowance be considered at all?

The general requirements for receiving short-time allowance remain unchanged and are set out in Section 95 et seq. of the Third Book of the German Social Code (SGB III). The core requirement is a significant loss of work with loss of pay. This means:

• There must be an "unavoidable event" (e.g., measures initiated by the authorities, extraordinary weather conditions, accident) or economic causes (e.g., lack of orders, cancellation, missing material).
• This does not include increased energy prices. Rising operating costs do not constitute an unavoidable event within the meaning of the short-time allowance, as this is a normal, general market risk.
• The work stoppage must be temporary and unavoidable. Unavoidable means that the absence must not be based on reasons that are customary in the industry, usual in the company or seasonal. The transfer of employees to another area/department must be examined (temporary transfer if necessary). Economically reasonable countermeasures must have been taken beforehand (e.g., work in stock, clean-up or repair work).

What is the minimum number of employees who must be affected by the work stoppage?

Short-time work allowances can now be paid only if at least 30 percent of employees are affected by a loss of pay instead of 10 percent as in recent years.

Can short-time work be introduced for the entire company only?

No, short-time work can also be introduced for individual areas, departments, or different groups of employees (provided there is an objective justification for the distinctions).

If the introduction of short-time work does not extend to the entire company, the employer decides within the scope of its right to issue instructions to employees to whom the employer will assign work and to those who will be directed to refrain from work.

For how long can short-time work allowance be drawn?

The maximum period of entitlement to short-time work allowance is 12 months.

Can the period of entitlement to short-time work allowance be interrupted?

Yes, the maximum period of 12 months can be interrupted. Employers can thus temporarily employ employees full time again, for example to process a new order. If short-time work subsequently needs to be ordered again, short-time allowance can be drawn again if the requirements are met (again).

However, if short-time work is interrupted for three months or longer, the Federal Employment Agency must be notified.

Is the prior buildup of negative time credit required?

Yes, if there is a regulation in the company that allows the accumulation of negative hours within the framework of a working time account.

Is prior reduction of overtime / positive time credit required?

Yes, the prior reduction of overtime / positive time credit is generally required.

Something else may apply in the case of long-term accounts, e.g., if the time credit has existed unchanged for more than one year or the working-time credit exceeds the amount of 10 percent of the annual working time.

Does leave from the current calendar year have to be deducted before applying for short-time allowance?

Vacation from the current calendar year must generally only be taken before the application is submitted if no vacation planning exists. If, on the other hand, vacation planning already exists (e.g., through a vacation plan), this is not required.

Are temporary workers eligible for benefits?

No, temporary workers are not eligible for benefits.

How much is the short-time allowance?

Employees receive 60% of their flat-rate net wages. Employees with at least one child receive 67%.

Can the employer unilaterally introduce short-time work?

No, short-time work can only be introduced on the basis of employment law. This can be a legal norm (§ 19 KSchG), a collective agreement, a works agreement or a provision in the employment contract.

Is there an obligation to prioritize the introduction of short-time work over terminations of employment for redundancy?

There is no legal obligation to first introduce short-time working allowances before issuing redundancies for operational reasons. According to the case law of the Federal Labor Court, there is no labor court review of whether the termination for operational reasons could have been avoided by ordering short-time work.

It is always advisable to introduce short-time work if the company is undergoing temporary versus permanent difficulties. In this context, employers can also use the introduced short-time work for the further training of their employees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.