News - Germany

Germany - March 2010

Germany: Extension of short-time compensation scheme in 2010

Due to the financial crisis, many German of companies have used this scheme as a means to avoid redundancies

Under the scheme, pro-rated employment benefits are paid by the government, as compensation for loss of income, to workers whose hours have been reduced. Compensation is not paid to the company itself but the company only has to pay the employees for the shorter hours of work.  In 2009, the original minimum statutory period of 6 months for receipt of benefits under the short-time compensation scheme was extended to a period of 24 months to support employers and employees.  The use of the scheme has been further extended to cover 2010.

Where companies apply to use the short-time compensation scheme in 2010, they may be entitled to payments for a maximum period of 18 months. (Where companies applied for short-time compensation in 2009, the maximum period of 24 months still applies, subject to the comments set out re qualifying criteria below).

Qualifying criteria

Irrespective of when a company applied to use the scheme, the most simple of the qualifying conditions for an employer to meet in order to be entitled to benefit from short-time work compensation is where only one employee has had his working hours reduced by at least 10%. However, this qualifying condition will only apply until 31st December, 2010.  Therefore companies should be aware that, where they have applied for the scheme on the basis of meeting this particular qualifying criterion, even if their application was made in 2009, they will not necessarily qualify for assistance under the scheme for the full period of 24 months, or 18 months in the case of applications in 2010.

At the moment, it is not known whether this admission criterion will be extended beyond this date.  If is not extended, employers will then have to fulfil the more complex criteria of s. 170 par. 1 no. 4 SBG III (Social Code), namely that at least one third of the employees of a company or a department would have to have their working hours reduced by at least 10 %.

Other considerations for employers

In the case of termination of employment, short-time compensation will no longer be available from the day of giving notice (this being the day on which the notice is handed to the employee) and the employer must revert to paying the employee’s original regular full salary. The rationale for this rule is broadly that, in the case of notice or a termination agreement, the aim of the short-time compensation scheme (which is to keep the individual in employment) is no longer achieved.  (This same reasoning applies in the case of an employee’s resignation in accordance with BSG SozR 3-4300 § 172 Nr. 1).

Commentary

Employers should give thought wherever possible, to giving employees notice on the latest date possible, particularly as a requirement to give a full calendar month’s notice is common in Germany.  For example, where a notice period of one full calendar month is agreed and notice is given on the 1 March 2010, the employment relationship would end on 30 April 2010.  Where notice is given on 31 March 2010, the employment relationship would, similarly, end on 30 April 2010.  However, the critical difference in these two examples is that rather than ceasing on 1 March 2010, in the second example short-time compensation is available until 31 March (that is, an additional 30 days).

The same principle applies to termination agreements and the giving of notice by employees to the employer.  Therefore, wherever possible, termination agreements should be entered into by both parties on the last day of employment.  Employees who are subject to the short-time compensation scheme should be informed that they should notify their employer of any potential resignation in advance for planning purposes but, as far as practicable, should not formally hand in their notice until the last day possible under the notice period.

Employers should also be aware, as noted above, that they may not necessarily be entitled to benefit from the scheme for the full period if the simple qualifying criterion where only one employee has had his working hours reduced by at least 10% is not extended beyond 31 December, 2010.

Resources

s. 170 par. 1 no 4 SGB III

BSG SozR 3-4300 § 172 Nr. 1

For further information or to discuss any of the issues raised, please contact Stefanie Andrelang (Turn on Javascript!) on +49 89 24 22 30 0.

This article was produced by, and re-produced with kind permission of, our correspondent firm in Germany, Keller Menz Rechtsanwälte.  www.keller-menz.de

Keller Menz