Grand coalition decides to increase short-time allowance

During the night of 23 April 2020, the party and parliamentary party leaders of the CDU, CSU and SPD agreed to increase the short-time allowance – depending on the length of short-time work – to up to 80 percent of the loss of earnings for childless employees and up to 87 percent of the loss of earnings for employees with children.

Scaled increase in short-time allowance according to length of short-time work

The grand coalition government has decided that the previous short-time allowance rates (60 percent of lost wages for employees without children and 67 percent for employees with children) shall apply for the first three months during which employees receive short-time allowance.

From the 4th month of receiving short-time allowance, 70 percent of the loss of wages for employees without children and 77 percent of the loss of wages for employees with children shall be paid if the employees’ working hours are reduced by at least 50 percent.

From the 7th month of receiving short-time allowance, the rate of short-time allowance is then to increase again by 10 percent to 80 percent and 87 percent respectively, at a maximum until 31 December 2020.

So far, it is not yet possible to foresee when we can expect legal implementation as the relevant changes to the law will still need to go through the legislative process. While in the beginning of the crisis new laws were implemented very quickly, the pace of German Parliament seems to now have slowed down. A number of envisaged changes, that were announced by the Government (eg the ability to hold virtual works council meetings), are still not in force.

Since the first increase will only become effective from the 4th month of short-time work anyway, most companies will probably still have enough lead time to modify clauses on short-time work and payroll accounting.

However, companies that have concluded agreements with their employees on the introduction of short-time work, a works agreement on short-time work with the works council, or a collective agreement with the trade union on short-time work that provides for employer top-up payments to the short-time allowance should examine the respective clauses now in order to be able to act quickly once the new law comes into force.

Opening up additional income opportunities for all professionsIn addition, the party and parliamentary party leaders of the CDU, CSU and SPD have decided that the existing additional income possibilities with an additional income limit up to the full amount of the previous monthly income for employees on short-time work shall be opened up for all professions from 1 May 2020 until 31 December 2020. Previously, this additional income option under Section 421c of the third book of the German Social Security Code (SGB III) only applied to employment in system-relevant sectors and occupations.

By Verena Braeckeler-Kogel, MAES (Basel) and Maren Sievert