Coronavirus: FAQ Employment Law Part 3

A. 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 percent 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.

B. Social Protection Package

1. What is the Social Protection Package?

In a legislative feat, a further legislative package was passed by the German Parliament and the Federal Council within a week and announced in the Federal Law Gazette: The "Law for easier access to social security and for the deployment and protection of social service providers on the basis of the Coronavirus SARS-CoV-2 (Social Protection Package)" of March 27, 2020 (Federal Law Gazette 2020 I 575). It essentially entered into force on March 28, 2020. The aim of the law is to mitigate the noticeable effects of the coronavirus on economy and employment. We present the most important legal innovations for working life. 

2. Which options of generating an additional income are there during short-time work?

While many employees have to work short-time, personnel bottlenecks arise in other, mainly system-relevant industries. The Social Protection Package creates an incentive to take up work on a voluntary basis temporarily. Between April 1, 2020 and October 31, 2020 , employees can top up their short-time allowance by taking up a second job without counting towards the short-time allowance, provided that the sum of the income (short-time allowance, any earnings from the main job plus additional income) do not exceed the monthly target income from the original main job. Important restriction: The privileged treatment of additional earnings only applies to system-relevant occupations and industries. The benchmark for determining system relevance is the Regulation for the Determination of Critical Infrastructures under the Federal Office for Information Security (BSI-KritisV). It concerns industries and professions which are indispensable for public life, security and the provision of services to people. These include in particular health care, energy and water suppliers, transport sector and passenger transport, but also agriculture and the food industry and the supply of food to people.

3. Which options of generating an additional income are there for pensioners?

Pensioners should also be motivated to take up (temporarily) an employment, especially in system-relevant industries, but not limited to these. Limited to the calendar year 2020, the annual additional income limit for pensioners due to old age before reaching the standard retirement age will be raised from EUR 6,300 to EUR 44,590. If the pensioner's earnings remain at this limit, the additional earnings will not be credited to the old-age pension.

4. Which facilitations are available for marginally employed persons?

From March 1, 2020 to October 31, 2020, the time limits for marginal part-time employees in the form of short-term employment will be raised to a maximum of five (previously three) months or 115 days (previously 70 days) within a calendar year. This is intended to counteract problems associated with seasonal work, especially in agriculture. However, the regulation applies to all sectors.

5. Which changes have been made to the Working Time Act?

The Social Protection Package (§ 14 (4) ArbZG, new version) authorises the Federal Ministry of Labour and Social Affairs to allow national exceptions to the applicable statutory or collective agreement regulations on working time for certain activities in exceptional emergencies such as the current COVID-19 pandemic by means of a statutory ordinance. This authorisation is valid from March 28, 2020 to December 31, 2020.

The new regulation in the Working Time Act only applies to activities, necessary to the background of an exceptional emergency. This include activities

• necessary to maintain public safety and order. This concerns the functioning of courts and authorities, the functioning and operational capability of police, border guards, emergency and rescue services and the fire brigade;
• necessary to maintain the health care system and the nursing care. This concerns all persons, organisations, institutions, regulations and processes whose task it is to promote and maintain health and to ensure it by preventing and treating diseases and injuries;
• necessary to maintain the public service tasks. The public service tasks include the provision of the goods and services deemed necessary for a human existence. This includes critical infrastructure, agricultural and livestock keeping goods and services, institutions for the treatment and care of animals, and the maintenance of data networks and computer systems;
• necessary to supply the population with existential goods. Existential goods are, in particular, fast moving consumer goods (e.g. food including agricultural products, hygiene articles or medicines) or products that are necessary to combat or mitigate the immediate effects of the emergency situation.

C. Deferral of social insurance contributions

Can employers defer social insurance contributions?

In a circular from the GKV Spitzenverband dated March 25, 2020, it was announced that employers have the possibility, under certain conditions and for a limited period in March and April 2020, to have social insurance contributions deferred on request in a simplified form.

Pursuant to Section 23 Social Security Act IV (SGB IV), social security contributions are due no later than the third-last bank working day of a month. If payment are not made on time, late payments surcharge are due in accordance with Section 24 SGB IX.

Under strict and usually unfulfillable conditions, an employer can apply for a deferral of social insurance contributions.

With the circular letter of March 25, 2020, the GKV Spitzenverband now simplifies the possibility of a deferral limited to the months of March and April 2020.

The facilitated deferral is then possible under the following conditions:

• The immediate collection of contributions without the deferral must entail considerable hardship for the employer.
• The considerable hardship must be demonstrated in an appropriate manner by the employer. A credible statement by the employer that he has suffered considerable financial damage as a result of the pandemic, for example in the form of substantial deployment losses, is generally sufficient.
• Priority will be given to short-time working allowances and subsidies/loans based on the current aid packages of the German government.
• If, for example, the reimbursement of short-time work compensation has already been applied for, the deferral in these cases is only granted until the short-time work compensation is granted.

The request for deferral may also be made for contributions already due for the month of March 2020.

The legislator has so far decided that there is no possibility of deferral for the payment of wage tax. The BMF letter of March 19, 2020 (IV A 3 - S 0336/19/10007 :002) does not concern the employee's tax.

D. New compensation claim for parents with loss of earnings

Many parents have had to cut back on overtime or take unpaid leave because of the closure of childcare facilities and schools. Now there is a new state compensation claim.

1. What is the legal basis for the compensation claim?

The legal basis is Section 56 (1a) of the Infection Protection Act (IfSG), which was newly introduced by the "Act to protect the population in the event of an epidemic situation of national importance" of March 27, 2020 (Federal Law Gazette 2020 I 587). The right to compensation is limited in time to the period from March 30, 2020 to December 31, 2020, i.e. any loss of earnings before March 30, 2020 is not covered by the right to compensation.

2. Who can assert the claim for compensation?

The following are entitled to benefits

• working parents and foster parents
• of children who have not yet reached the age of 12 or are disabled and therefore need help.

3. What are the conditions of eligibility?

The claim for compensation is subject to the following conditions

• the authority has issued a closure or a ban on entry in accordance with the Infection Protection Act (IfSG) for the childcare facility or schools and
• no other reasonable care option for the child can be guaranteed during the period of closure or prohibition of entry, and
• the working parent suffers a loss of earnings as a result.

No compensation may be paid if and to the extent that

• the school or childcare facility would be closed anyway for the school holidays; or
• the working parent can already be released from work on the basis of other statutory, collective bargaining, company or individual legal bases with continued payment of remuneration.

This is the case, for example, if there are still time credits in working time accounts. These must be reduced as a matter of priority.

4. When is there an "other reasonable care option"?

According to the explanatory memorandum to the law, there should be another reasonable possibility of care, for example, if

• the working parent is entitled to emergency childcare in the childcare facility or school, for example because both parents or one parent works in systemically relevant professions; or
• the other parent can be called upon for childcare; or
• other family members / relatives or friends who are prepared to do so can take care of the child or - in the case of siblings - several children. This expressly does not include persons who belong to a risk group, such as grandparents; or
• insofar as the working parent is on short-time work. During this time he shall look after the child himself; or
• as far as the possibility of flexible working (e.g. home office) exists and the use is reasonable.

5. What is the amount of compensation?

Compensation shall be paid at the rate of 67 percent of the loss of earnings incurred by the working parent for a maximum of six weeks. A maximum of EUR 2,016 is granted for a full month.

6. Which procedure should be followed?

It is the employer's duty to pre-finance the compensation payment of the State and to pay it on behalf of the competent authority. The due date of the compensation payment is determined by the due date of the salary earned from the previous activity. The employer's pre-financing should therefore be subject to the condition that the competent authority issues a positive decision on the grant.

The entitled persons have to explain the conditions of entitlement to the employer, in particular that there is no other reasonable option of care. The employer shall apply to the competent authority under national law for reimbursement of the compensation paid (loss of earnings and social security contributions) and attach the relevant evidence to the application. The authority will request any missing documents. The authority decides on the approval/rejection in a written decision.

The application for reimbursement shall be submitted to the competent authority within three months of the date on which the worker with custody ceased to work. On application, the employer shall receive an advance payment of the anticipated amount of the reimbursement.

Additional, daily updated information on the corona crisis is also available on our focus page.