If in the exercise of its duty of care to other employees, an employer places an employee on leave “only” because of a suspected infection, even though an infection has not been proven and the employee is willing and able to work, the employer must continue to pay that employee consistent with his or her contract during the period of his or her leave from work.
If an employee actually becomes infected with the coronavirus, the employer must continue to pay the employee for a maximum of six weeks due to illness. The employer remains obligated to remit payments for pension insurance, health insurance, long-term care insurance, and unemployment insurance. From the seventh week, the employee can claim sick pay from the competent health insurance fund.
If for reasons of infection control an employee has been forbidden from working or placed under quarantine by the competent public health authority, regardless of whether he or she has symptoms of COVID-19, this also constitutes inability to work. As a consequence, pursuant to section 56 (5) of the German Act on the Prevention and Control of Communicable Diseases (Infektionsschutzgesetz, IfSG), the employee has a claim against the employer to continued payment of wages or salary for the first six weeks. However, upon application, the competent authority will reimburse the employer for the amounts paid out. From the seventh week, the employee can apply to receive compensation directly from the competent authority in the same amount as sick pay.
If a company experiences a work slowdown, it must compensate for this and avoid redundancy dismissals. In order to achieve this goal, it may temporarily order short-time working, i.e. reduced working hours. However, this also correspondingly reduces the amount of pay to which employees are entitled. Although this consequence benefits the employer, it disadvantages employees. To (partially) compensate for this detriment, the state employment agency will pay what is known as a short-time allowance.
On 15 March 2020, a law came into force that provided the federal government with certain options for changing the current rules for short-time allowances by legal decree. According to the Ministerial Draft Bill of 23 March 2020, the Decree on Short-time Allowances (Kurzarbeitergeldverordnung, KugV) will have the following key content:
- If a company suffers a shortfall of orders due to the economic situation, the business may give notice of short-time working if at least 10% of employees experience a loss of pay of more than 10%. The previous threshold was 30% of the workforce.
- Negative working time account balances can be disregarded prior to the payment of short-time allowances. The law previously required businesses with agreements regarding fluctuations in working hours to use working time account balances to avoid short-time working and accumulate negative balances.
- Short-time allowances are also available for temporary contract workers.
- Social insurance contributions for lost working hours will be refunded in full by the Federal Employment Agency. In “normal” situations, the employer is required to pay all of its social insurance contributions in full for the period of short-time working.
The new rules apply retroactively from 1 March 2020 and will remain in effect until at least 31 December 2020, although they may be extended by one year.
You’ll find a simple chart that we’ve prepared describing the customary procedure for introducing short-time working HERE.
The eligibility requirements for short-time allowances are based on sections 95 et seq. of Book III of the German Social Code (SGB III) and on the KugV, which is awaiting enactment. At this juncture, we would like to provide you with a rough overview.
The legal basis for introducing short-time working (= unilateral modification of the main performance obligations under the employment contract) are collective bargaining agreements, works agreements, and (individual) contractual arrangements.
Employees are eligible for a short-time allowance if
- there has been a substantial work slowdown with loss of pay,
- the operational requirements are met,
- the personal requirements are met, and
- the work slowdown has been reported to the state employment agency.
A work slowdown is substantial if it is based on economic reasons or an unavoidable event (e.g. the coronavirus), if it is temporary, if it cannot be prevented (economically reasonable counter-measures are fruitless, e.g. impossibility of implementation, utilisation of positive balances in working time accounts), and if in the relevant calendar month (claim period), at least 10% of employees working at the company experience a loss of more than 10% (up to 100%) of their gross monthly pay.
The operational requirements are met if the company (or company department) has at least one employee.
The personal requirements are met if, after the start of the work slowdown, the employee continues in a position for which insurance is mandatory or takes up such a position for compelling reasons or following the conclusion of a vocational training relationship and if the employment relationship has not been terminated or dissolved through a severance agreement.
Examples of employees who are eligible for short-time allowances include trainees who take up a position for which insurance is mandatory following the end of their training, managing directors, and employees not covered by collective bargaining agreements, provided that they work in a position for which social insurance is mandatory.
Marginally employed persons are not eligible for a short-time allowance.
In the case of an unavoidable event, the company must immediately submit notice of short-time working, either in writing or in electronic form, to the state employment agency at the company’s registered office and credibly demonstrate the substantial work slowdown.
Short-time allowances can be drawn for at most 12 months.
Working time records must be kept showing working times, lost working times, and absence times. The settlement statement for the respective calendar month must be submitted within three months (the period begins to run at the end of the calendar month for which the application is made), failing which the claim is barred.
The competent employment agency is the one at the registered office of the payroll accounting department. An audit will be conducted after the work slowdown ends. Short-time allowances are then paid out to the employer or, where an advance distribution was made, the difference is netted.
The short-time allowance amounts to 60% of lost net wages. If an employee lives in a household with at least one child, the short-time allowance amounts to 67% of lost net wages. Social insurance contributions for lost working hours will be refunded to the employer in full by the Federal Employment Agency.
Example: A childless woman earns EUR 2,000 per month, net. Because of short-time working, her working hours are reduced by 30%. For the month in question, she therefore receives only 70% of her pay from her employer, i.e. EUR 1,400, net. She will then receive a short-time allowance of 60% of the difference between her original net wages and her paid-out wages (here, EUR 600), i.e. an additional EUR 360. Therefore, her total pay for the month will amount to EUR 1,760, net.
Where unforeseen added work arises during the period 1 March to 31 October 2020, the earnings cap for so-called “mini-jobs” (EUR 5,400 per year) may be exceeded up to five times. The amount by which the cap is exceeded is immaterial. “Unforeseen” means, for example, absences due to illness, quarantine measures, or higher work volume as a result of the coronavirus pandemic.
Example: If a marginally employed cleaning person is required to work more between March and October because the need for cleaning has increased substantially, he or she may be paid in excess of the monthly EUR 450 cap up to five times. It is important to base compliance with the five-time limit always on a 12-month period.
From 1 November 2020, the original arrangement will once again apply, meaning that the cap may be exceed only three times over a 12-month period.
For temporary employees, the time limit has been extended from three months to five months, i.e. from 70 working days to 115 working days. This applies only in the period 1 March to 31 October 2020.
The requirements for temporary work have not been changed, including that the person may not be professionally active.
If temporary work began prior to 1 March, the pre-employment times must be taken into account.