Answer to important questions about short-time work and short-time working allowance regulation.
1. What is the legal position?
According to the "Act on the temporary crisis-related improvement of the regulations for short-time work compensation" ("Gesetz zur vorüberristeten krisenbedingten Verbesserung der Regelungen für das Kurzarbeitgeld") (see preliminary version of BT publication 19/17893), a company can order short-time work due to the worldwide cases of illness caused by the corona virus and thus reduce working hours. In the event of loss of remuneration, affected employees can receive reduced working hours compensation (KUG). This benefit must be applied for by the employer. The Federal Government - also in the person of Federal Minister of Labour Hubertus Heil and on its website - has announced that the changes in the law will apply retroactively from March 1, 2020.
2. What is short-time work?
Short-time work is the temporary reduction of working hours with a corresponding reduction in the remuneration of the employees concerned. If all work is stopped as part of short-time working, this is referred to as "zero short-time work".
3. What is short-time working allowance (KUG)?
KUG is a benefit under the statutoryunemployment insurance. The employer must reduce the regular working hours and must notify the competent employment agency of this. This can be done in particular for economic reasons, because the economic situation of the company is poor. The KUG is intended to compensate the loss of earnings for the reduction in working hours and to avoid mass redundancies.
4. Must short-time work be extended to the entire company?
Short-time work can be limited to specific areas/departments - and can also be implemented to varying degrees in relation to different groups of employees (taking into account the requirements for objective justification of distinctions).
5. What is new in the "law to facilitate short-time work"?
In order to be prepared for times of crisis - triggered, for example, by the corona pandemic - an ordinance authorization for the Federal Government, limited until 2021, has been included in the law, which makes it possible to facilitate access to the KUG.
The Act contains the following ordinance authorization in § 109 para. 5 SGB III n.F:
"The Federal Government shall be authorised, in the event of exceptional circumstances on the labour market, to take measures by statutory order which do not require the approval of the Bundesrat,
- notwithstanding section 96(1), first sentence, point 4, to reduce the proportion of employees employed in the establishment who must be affected by the loss of remuneration to up to 10 percent
- notwithstanding § 96, Subsection 4, Sentence 2, No. 3, to waive the use of negative working time balances in whole or in part to avoid short-time work,
- to introduce full or partial reimbursement of employers' social security contributions for employees receiving short-time work benefits.
The Regulation should be limited in time. The authorisation shall expire on December 31, 2021."
In addition, the Act contains the following regulation authorization in § 11a AÜG (new version):
"The Federal Government is authorised, in the event of exceptional conditions on the labour market, to determine by statutory order without the consent of the Bundesrat that the temporary worker's right to remuneration under Section 11(4), second sentence, if short-time working is agreed, is cancelled for the period for which the temporary worker is paid short-time compensation under Book Three of the Social Code. The regulation is to be limited in time. The authorization shall expire at the end of December 31, 2021."
The regulation is limited in time until December 31, 2021.
6. What conditions must be fulfilled to be granted payment of KUG?
According to § 95 S. 1 SGB III, employees are entitled to KUG if
- there is a considerable loss of working hours with loss of pay (see § 96 SGB III),
- the operational requirements are fulfilled (see § 97 SGB III),
- the personal requirements are met (see § 98 SGB III),
- the loss of working hours has been reported to the Federal Employment Agency (see § 99 SGB III) and
- an application (§ 323.2 SGB III) has been filed within a preclusive period of § 325.3 SGB III.
7. What is a considerable loss of working hours?
According to § 96, Subsection 1, SGB III, the loss of working hours is considerable if it is
due to economic reasons or an unavoidable event,
Loss of working hours is based on economic reasons if it is caused by a change in the company structures caused by general economic developments (§ 96, Subsection 2, SGB III).
An unavoidable event is an objectively ascertainable occurrence which cannot be averted even by the utmost care required by the circumstances of the case for the establishment affected by the loss of working hours. This includes a loss of working hours resulting from an official shut down order. In the legal literature it is widely assumed that an epidemic can also trigger claims to KUG in isolation (cf. Schweiger, NZS 2017, 135, 138 m.w.N.).
A work stoppage is temporary if the company affected by short-time working can return to full-time work in the foreseeable future.
Loss of working hours cannot be avoided if all reasonable precautions have been taken in a company to prevent the occurrence of the loss of working hours. Suitable and economically reasonable measures include internal relocations, clean-up and repair work, and production in stock.
Current information: It is questionable and has to be clarified in individual cases with the Federal Employment Agency whether short-time work can be avoided when working in the home office. In addition, the legislator has included in the power to issue regulations that in future the use of negative working time balances can be waived in whole or in part in accordance with § 96 Para. 4 S. 2 No. 3 SGB III.
and in the respective calendar month (entitlement period) at least 1/3 of the employees employed in the enterprise are affected by a loss of earnings of more than 10 percent of their monthly gross salary in each case
Current reference: For this purpose, the Federal Government can now issue a corresponding ordinance after the "Law to Facilitate Short-time Work" has come into force in accordance with § 109 Para. 5 SGB III n.F., according to which it is sufficient for 10 percent of the employees to be affected.
8. What conditions must the establishment meet to receive KUG?
Since the KUG is a benefit of the unemployment insurance scheme, the granting of the benefit requires that the company located in Germany employs at least one employee.
9. What personal requirements must be met?
The personal eligibility requirements for the entitlement to KUG are fulfilled in accordance with § 98 Para. 1 SGB III, if the employee
- continues an employment relationship that is subject to statutory social security system after the beginning of the loss of working hours,
- takes up an employment relationship that is subject to the statutory social security system for compelling reasons or following the termination of a vocational training relationship, and
- the employment relationship is not terminated or dissolved by a termination agreement. This also includes the employee's own terminations.
10. How is the application process carried out?
First, the loss of working hours must be reported in writing or electronically to the competent employment agency; according to § 327, Subsection 3, SGB III, it must be directed to the employment agency in whose district the payroll accounting office responsible for the employer is located. The notification must be accompanied by any comments of the works council. The conditions of entitlement must be explained and made credible.
In the case of companies operating nationwide or nationwide, a "key customer advisor" can be made available on request by the Federal Employment Agency to coordinate short-time working issues between the employment agencies involved and the company's affected operations.
The employer must then submit the application for KUG in writing to the employment agency in whose district the payroll accounting office responsible for the company is located. The application must be submitted within a cut-off period of three months, which begins at the end of the month in which the days for which benefits are claimed lie.
11. How much is paid out as KUG?
The amount of the KUG depends on the amount of the financial loss after the payment of taxes for the employee. In principle, around 60 percent of the lost net remuneration is paid by the Federal Employment Agency. If there is at least one child living in the household, the KUG amounts to about 67 percent of the lost net salary.
To determine the amount of the KUG, it is necessary to determine the difference (the net pay difference) between the flat-rate net pay from the target pay (without short-time work; up to the social security ceiling for unemployment insurance) and the flat-rate net pay from the actual pay (during short-time work).
12. For how long is the KUG granted?
In accordance with Section 104 (1) SGB III, the subscription period is a maximum of twelve months. The Federal Ministry of Labour and Social Affairs (BMAS) may, in the event of exceptional circumstances on the labour market as a whole, stipulate an extension of up to 24 months by decree.
Current information: On the basis of the now adopted ordinance authorization, the Federal Government can introduce a full or partial reimbursement of the social security contributions to be borne solely by the employers for employees who receive KUG.
13. May the company unilaterally impose short-time work?
No. Since the employer is basically obliged to employ and pay the employee to the agreed extent, the introduction of short-time work requires a special basis under labour law.
This may be based on the employment contract or on a collective bargaining agreement. If this is not the case, short-time work must be agreed with the individual employees individually. The employer's right of direction alone is not sufficient as a legal basis (see BAG dated December 16, 2008 - 9 AZR 164/08).
The case law places special demands on the (mandatory) contents of a works council agreement on short-time work:
In the interests of transparency for the employees concerned, the works agreement must at least contain provisions on the start and duration of short-time working, on the location and distribution of working time and on the selection of the employees concerned. The employees should be able to see from the agreement on short-time work how "hard" they will be personally affected by short-time work. It should be borne in mind that short-time working does not have to be introduced "uniformly" in a company.
"Optional" elements of a works agreement are often (usually at the insistence of the works council) provisions on top-up payments by the employer, on the exclusion of dismissals for operational reasons during the short-time working phase and, if necessary, also on hardship provisions.
14. How should the works council be involved?
If a works council exists in the company, the introduction of short-time work is subject to mandatory co-determination pursuant to § 87, Subsection 1, No. 3, BetrVG. Works agreements (BV) on short-time work result in a temporary reduction of the contractually agreed amount of working hours. In companies with a works council, therefore, short-time work cannot be ordered without the participation of the works council even if there is a legal basis in the individual contract.
15. How is the KUG calculated if the employee earns above the social security ceiling?
As with unemployment benefit, the KUG covers the loss of earnings up to the level at which contributions are paid. If, even during short-time work, the actual remuneration earned is above the income threshold, no KUG is paid. Examples of calculations are in the appendix.
16. Are employees entitled to a top-up payment from their employer?
No, in principle, such a claim does not arise from the statutory provisions. However, such a claim may arise from an applicable collective agreement.
In many cases, however, the conclusion of an individual supplementary agreement on the introduction of short-time work or the conclusion of a works agreement will only be successful if the employer makes a top-up contribution of usually 70 percent or 80 percent of the lost net remuneration.
It should be noted that this top-up amount is generally taxable. According to § 1 para. 1 no. 8 SvEV, however, there is only an obligation to pay social security contributions if the top-up amount together with the KUG exceeds 80 percent of the lost pay. If a higher top-up amount is paid, only the excess amount is liable to contributions.
17. May the employer unilaterally order holiday leave before applying for KUG?
In principle, the employer is required to work towards the realization of any remaining vacation entitlements before applying for KUG. However, in the event of impending short-time work, the employer may not, in principle, unilaterally order leave if the employees' wishes for leave conflict with this. In particular, short-time work does not constitute a business concern within the meaning of Section 7, Paragraph 1 of the German Federal Law on Company Law (BUrlG), which can be countered by the employees' individual vacation requests.
However, employees could avoid the loss of earnings through short-time work by taking leave. In any case, it is therefore possible to convince employees of the benefits of taking leave.
18. What effects does short-time work have on social security?
Employees who work short-time do not suffer any disadvantages in social security coverage as a result. For the duration of receiving KUG, the insurance obligation of the statutory health, nursing care and pension insurance is maintained. In the case of unemployment insurance, the continued existence of a statutory social security relationship is not linked to the receipt of the KUG, but to the existence of a loss of working hours.
19. What happens in the event of incapacity for work during short-time working?
If KUG is granted by the Federal Employment Agency, Section 98 SGB III stipulates that the personal requirements for entitlement to KUG are also met for employees who become incapable of work while receiving KUG, as long as there is an entitlement to continued payment of remuneration in the event of illness or would exist without the loss of work. The employee who is incapable of work is therefore placed in the same position as if he were not incapable of work and acquires a corresponding claim against the Federal Employment Agency for payment of KUG.
20. What do we recommend?
First of all, the power to issue orders under individual or collective law must be clarified. If a works council exists or the applicable collective bargaining agreement or employment contract provides for the ordering of short-time work, the order is simplified. Otherwise, an amicable arrangement must be made with the employees. We recommend that you negotiate a short supplementary agreement with the employee.
Especially in the context of the implementation of the present changes in the law, the ordering of short-time work and a corresponding KUG approval will be considered. This is particularly the case if an official measure temporarily prevents the continuation of operations.
The application should be made in close cooperation with the competent employment agency. According to the Federal Government, the newly passed law should be applied retroactively from March 1, 2020 and the "improved" conditions of short-time work should take effect.
SHORT-TIME WORKING ALLOWANCE REGULATION
1. What is the short-time working allowance regulation?
In order to facilitate access to the short-time working allowance for companies with corona virus (COVID-19) related absences from work, the German government created the basis for the "Regulation on the facilitation of short-time working (Short-time working allowance regulation - KugV)" with the "Act on the temporary crisis-related improvement of the regulations for short-time working allowance" of March 13, 2020. The regulation of March 25, 2020 was announced in the Federal Law Gazette on March 27, 2020 (Federal Law Gazette 2020 I 595) and entered into force retroactively as of March 1, 2020. It is initially valid until December 31, 2020.
The regulation contains three facilitations for access to short-time working allowance: The requirements for the granting of short-time working allowance are reduced, social security contributions on the short-time working allowance are fully reimbursed to the employer by the Employment Agency and short-time working is also opened up to temporary workers.
2. Which requirements will be lowered for the granting of short-time work allowance?
The threshold value of workers affected by work loss in the business operation is lowered. In deviation from the previous statutory regulation (§ 96.1 sentence 1 no. 4 SGB III), not at least one third of the employees must no longer be affected by a loss of earnings of more than ten per cent of their monthly gross salary in each case, but only at least ten per cent of the employees in the business operation or in the business operation department.
On the other hand, contrary to the previous statutory regulation (§ 96, Subsection 4, Sentence 2, No. 3, SGB III), the use of fluctuations in working time permitted in the company means that negative working time balances no longer have to be built up before short-time compensation can be paid. Only the reduction of positive working time balances - with a few statutory exceptions - continues to be a prerequisite for receiving short-time work compensation.
3. Are social security contributions automatically reimbursed by the Federal Employment Agency?
No. The social security contributions (employee and employer contributions) to be borne solely by the employer for the short-time working allowance are reimbursed by the Federal Employment Agency only upon application and in a lump-sum form. A social security lump sum (cf. § 153.1 sentence 2 no. 1 of the Third Book of the Code of Social Law) amounting to 21 per cent of the assessment remuneration, less the amount for employment promotion, is taken as a basis. There are no further material requirements for the reimbursement of social security contributions under the KugV.
4. To what extent do the regulations on short-time work also apply to temporary employees?
The KugV now also offers temporary employment agencies the possibility to agree short-time work with their temporary employees. Corresponding loss of work can be reported to the Agentur für Arbeit and short-time allowance for the temporary workers can be applied for. In this respect, the general legal requirements for short-time work apply. According to the KugV, there are no deviations specifically for temporary employees.
Originally published 05-20-2020
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.