I’m an employer in Germany who can’t pay my employees due to COVID-19

Everyone keeps talking about “Kurzarbeitergeld” in the media. What is it? Can I use it to pay my employees in these difficult times? Red Tape Translation has never been so busy playing detective as we are right now. We’re talking to officials, waiting for hours for information on hotlines and publishing everything we know in our blog. We’re now covering compensation for partial unemployment.

If there are unavoidable circumstances that cause you to have to reduce your employees’ working hours or stop them from coming to work altogether, there’s always Kurzarbeitergeld (Kug). Let’s call it “compensation for reduced hours / compensation for partial unemployment. It’s a part of the unemployment insurance that every employee has deducted from their paycheck. If employee hours are reduced, they can apply to have the net difference paid by the Agentur für Arbeit and they’ll be able to keep their job too. It can last for up to 12 months.

How much do my employees receive?

They’ll get 60% of their net salary for the difference between their normal working hours and their working hours due to the circumstances. If they have at least one child, they’ll get 67% of their net salary.

Prerequisites

1. There has to be a significant loss of work with corresponding loss of income. This doesn’t just mean financial loss. Nor does it cover things considered normal risk (e.g. opening a new branch). There has to be an unavoidable event. It also has to be a temporary event. You have to have exhausted options for employing the person in another role, having them take mandatory holiday entitlements, offering flexible working hours, etc. Normally, at least 1/3 of your employees must lose at least 10% of their gross salaries to be eligible. During the times of corona,  the rules have changed: now only 10% of employees have to have been affected.
2. Operational requirements: You have to have at least one employee for whom you pay social contributions. If you only have minijobbers, it won’t work.
3. Personal requirements:  Your employees have to fulfill requirements so that they themselves are eligible.
4. You have to let the Bundesagentur für Arbeit know in writing by the last working day of the month in which you are applying. You can download a template online, you can submit forms online using E-Services, or have forms sent to you.

How to Apply

As the employer, you have to make the application within three months. You have to submit your application to the Agentur für Arbeit in the district in which your payroll accounting department is located.

1. Announce to the employees affected your intention to apply for Kurzarbeitergeld. Make sure you observe any notice periods as per their work contracts. If you have a Betriebsrat, you’ll need to involve them.
2. Get written consent declarations from the employees affected.
3. Notify the Agentur für Arbeit in the district of your payroll. If you alone are payroll, that’s the district in which your business is registered. They’ll check your application to make sure the prerequisites are met and – we hope – issue approval.
4. Pay out the hours your employees have already worked and add the Kurzarbeitergeld portion to their pay. We recommend you use a tax advisor to make these calculations for you – it’s complex.
5. Apply for the Agentur für Arbeit to refund you the Kurzarbeitergeld portion and the social contributions too (new: these will be reimbursed during Corona times) at the end of each month. This application has to be submitted within three months of the month worked.
6. Once your business is back on its feet, the Agentur für Arbeit will check the numbers and make sure your payments were correct. They might adjust them.

What happens when operations are back on track?

You can interrupt Kug if things go well for a few months, e.g.  if you suddenly get a massive but short-term contract. If you do, the unused months will be postponed. If you interrupt Kug for more than 3 months and then wish to resume it, you have to start again with a new application.

You can use our Life Admin service to make conference calls in German, go through application forms, coordinate with your employees, your Agentur für Arbeit or your payroll department to get this stuff done. We’ve reduced the price from 49/hr to 35 EUR per hour during the COVID-19 outbreak.

Stay safe, stay healthy, stay sane, wash your hands and dream of summer!

Kathleen Parker