Short-Time Work in the Corona Crisis - An Overview of the Most Important Changes in Benefits

The SARS-CoV2 has turned the world upside down overnight. The economy has collapsed. Even during the 2009 financial crisis, politicians were already using short-time work and bridging loans to combat the consequences. In order to provide even greater relief to companies, the German government has revised the requirements for short-time work compensation. This article outlines what employers need to know now - and what simplifications the future legal situation will bring.

Under high pressure, politicians have launched the “Act to enhance the regulations governing short-time work allowance for a limited period as a result of the crisis" (Gesetz zur befristeten krisenbedingten Verbesserung der Regelungen für das Kurzarbeitergeld, BT-Drucks. 19/17893). It is designed to effectively meet the economic challenges posed by the spread of the Coronavirus (SARS-CoV2). The new legal regulations can be found in section 109 (5) of Book III of the Social Code (SGB III) and section 11a of the German Temporary Employment Act (AÜG). These regulations enable the Federal Government to deviate from the currently existing legal regulations for the duration of the crisis by means of statutory ordinance(s) and to create easier access to short-time work benefits.

Requirements

Short-time working allowance (KUG) can be received if there is a considerable loss of working hours with loss of remuneration, the operational and personal requirements are fulfilled and the loss of working hours has been duly notified to the Federal Employment Agency.

Previously, at least one third of the employees of a company had to be affected by loss of working hours. In future, it will be sufficient for a minimum of 10% of employees to be affected by a loss of pay exceeding 10%.

In addition, within the framework of flexible working time models, it should be possible to avoid building up negative working time balances. At present, the "working time fluctuations permitted in the company" must be used primarily to avoid loss of working hours. Scope for making working hours more flexible can be found in the employment contract, a company agreement or a collective bargaining agreement. As long as there is the possibility of working time accounts "going into the red", this hinders the purchase of KUG. This obstacle no longer exists as a result of the new regulation; however, working time credits, i.e. "plus hours", must continue to be reduced as a matter of priority.

KUG can be claimed by any company that has engaged at least one employee. However, the individual prerequisite is an employment relationship subject to compulsory insurance. For example, trainees, employees in a terminated employment relationship or recipients of sickness benefit are not eligible to receive KUG.

Introduction of short-time work

The employer must have a legal basis for the possibility of introducing short-time work - or create one as soon as possible. After all, the one-sided introduction of short-time work by means of exercising the right of management is not permissible (Federal Labor Court (BAG), dated October 10, 2006 - 1 AZR 811/05, marginal no. 12). Accordingly, short-time work can only be ordered on the basis of a collective agreement, a works agreement or an individual agreement between employer and employee. Within the scope of collective agreements in many sectors, there are currently signals from the trade unions for a speedy and unbureaucratic implementation. The fact that this succeeds is likely to be crucial for many employers.

The same applies to co-determination at company level: employers and works councils must reach agreement quickly on a temporary reduction or extension of normal working hours.

Notification of short-time work

In order to receive KUG, the employer or the works council must notify the competent employment agency in writing of the loss of work. This is because KUG is paid at the earliest from the calendar month in which the notification of the loss of working hours is received by the Federal Employment Agency. The responsible employment agency is the agency in whose district the company is located. The scope of the loss of working hours and the company or part of the company affected must be reported as part of the notification. In addition, the prerequisites for KUG's employment must be substantiated. Therefore, employers should submit all essential documents. These are:

• legal basis for short-time work,
• short-time work schedule,
• payroll accounting lists, ,
• further information, such as the order situation or possibilities for granting leave.

Application procedure

Following the notification, the KUG must be applied for in writing. The application must be submitted within a preclusive period of three months. The period begins at the end of the calendar month for which the KUG is requested. Usually, KUG is applied for retroactively. Therefore, the employer has to calculate the KUG independently and pay it to his staff in advance. If the application is approved, the KUG will be refunded by the employment agency.

Social security contributions

The social security contributions that the employer has to bear so far and that are attributable to the notional pay are to be reimbursed in full or in part according to the regulation yet to be adopted.

KUG in future also for temporary workers

An important innovation is that, by inserting the new section 11a AÜG, temporary workers can also receive KUG in the future.

The new regulations at a glance

The following is a summary of the provisions of the draft bill of March 23, 2020 for a "Short-time Work Regulation” (KugV), which has already been adopted by the Federal Cabinet:

• reduction of the minimum threshold of employees affected by short-time work to 10% of a company or a department of a company;
• removal of the obligation to give priority to negative working time balances;
• in future, temporary workers can also be employed in short-time work and receive short-time allowance;
• reimbursement by the employment agency of social security contributions previously borne solely by the employer.

With the new regulations, the Federal Government is making full use of the regulatory power it has been granted under the “Act to enhance the regulations governing short-time work allowance for a limited period as a result of the crisis”. The new regulations come into force retroactively as of March 1, 2020 and are initially limited until December 31, 2020.

Outlook

The short-time working allowance is now considered crucial to Germany's rapid recovery from the past financial crisis. According to serious estimates, it is said to have saved the jobs of a six-figure number of employees at the time. However, it is already to be expected that the number of applications will considerably exceed the figures at that time, because unlike then, every sector without exception will be affected. In view of this, it is simply a question of resources to process the flood of applications to the employment agencies as quickly as possible. Even now, there are already signs of considerable overloads in practice. Another decisive factor is likely to be the length of time German companies will be exposed to the immense restrictions of economic life. The longer this state of affairs continues the worse off the convalescence of ailing companies will be. In this context, the KUG will at best be able to bridge the gap and will not be a universal remedy. Urgently needed are additional measures to secure liquidity, which, if possible, take companies directly out of their obligation to pay benefits and thus take effect more quickly than the reimbursement of the KUG.