Kurzarbeit: What workers in Germany need to know
If you’re working in Germany, chances are you’ve heard the word “Kurzarbeit” thrown around a fair amount recently. But what exactly is this government financial support scheme? Who’s eligible, how much can you get, and how do you apply for it? Here’s everything you need to know.
What is Kurzarbeit (short-term allowance)?
German government is betting on a tried and tested scheme to help it weather the economic fallout of the coronavirus pandemic. The Kurzarbeit benefit is a kind of unemployment benefit, paid out by the Federal Employment Agency (BA) that was used by many during the 2008 / 2009 financial crisis.
It is a short-term allowance that compensates lost earnings for workers who have temporarily been put on reduced working hours as a result of economic reasons or circumstances beyond the employer’s control. By partially taking over the cost of employing workers, the scheme enables companies to avoid job losses.
Who can apply for Kurzarbeit?
Any company that has at least one employee and has suffered a “significant loss of work” due to the coronavirus crisis may apply for the benefit. Lawmakers have also recently loosened the definition of what constitutes “significant”.
Previously, at least one-third of a company’s workforce had to be affected for it to qualify, but from March 1 until the end of the year it is sufficient for just 10 percent of the workforce to have their working hours temporarily cut by more than 10 percent. Applications for Kurzarbeit cannot be made for employees who have been made redundant - only those who have been put on reduced hours, but are still employed, are eligible.
Companies who have been affected need to apply to their local Employment Agency (BA). As an employee, you do not need to do anything. Once the short-term allowance has been calculated, your employer will pay this to you, along with any salary you are due; the BA then reimburses the employer for the Kurzarbeit allowance; they also cover the employer’s social security contributions for employees working reduced hours.
How much is the Kurzarbeit allowance?
The benefit you receive is based on the amount of net pay lost. Overall, this means you will earn less. For example, if your working hours have been cut in half, you receive only half of your salary. Kurzarbeit steps in to fill the gap, but it usually only replaces 60 percent of lost wages (67 percent for parents).
However, Germany's ruling coalition recently agreed to temporarily increase Kurzarbeit payments, at least until the end of the year, for those who have lost at least 50 percent of their normal working hours for several months or more. According to the new regulation, after four months Kurzarbeit recipients will receive 70 percent of their lost wages (77 percent for parents), and after seven months 80 percent (87 percent).
Holiday, Christmas or performance bonuses of any kind are not taken into consideration, only “income” up to the contribution ceiling that applies to pensions and unemployment insurance: currently 6.900 euros per month in the western federal states and 6.450 euros in the eastern federal states. So, if you earn more than that as a “Kurzarbeiter”, it will not translate into higher benefits. You can use this table from the BA (in German) to check how much you are entitled to.
How does it affect part-time workers?
According to the BA, each company can decide for itself whether a 50 percent reduction in working hours also means that part-time workers’ hours are reduced by 50 percent - or if their hours stay the same.
What about Mini and Midijobbers, agency workers and trainees?
Only employees who are subject to compulsory insurance are eligible for Kurzarbeit benefits. This means that Minijobbers are excluded, but that Midijobbers are eligible. Temporary agency workers have recently been added to the group of Kurzarbeit beneficiaries by new coronavirus crisis regulations. Trainees are also entitled to six weeks’ remuneration for shorter hours.
How do additional earnings / side jobs affect your benefits?
Previously, any additional income from part-time side jobs would have been calculated against the Kurzarbeit benefit you were due, unless the additional occupation was in a “systemically-relevant area” (e.g. healthcare or food distribution). As of May 1, 2020, however, any additional income will not have an impact on your Kurzarbeit payments.
What if you cannot live on your Kurzarbeit payments?
The government has also loosened up the requirements for applying for Unemployment Benefit II (Hartz IV), the basic subsistence benefit, so that means testing is no longer required and benefits can be issued without an in-person appointment at a Jobcenter. You may also be eligible for other benefits, including child benefits and housing benefits.
For how long can a company receive the allowance?
Currently, a company is entitled to receive the allowance for up to 12 months. The duration can be extended to up to 21 months - ending on December 31, 2020, at the latest - for companies who gained entitlement before or on December 31, 2019.
More information on Kurzarbeit
You can find more detailed information about Kurzarbeit, in English, in this document issued by the Federal Ministry of Labour and Social Affairs.