Ever more legislation is being introduced to cushion the economic and social effects of the COVID–19 pandemic. In addition to the Social Protection Package II (Sozialschutz-Paket II), there are now other new regulations relevant to labor law. We provide you with an overview here:
1. Improved conditions for short-time work allowance (furlough)
Under the previous legal situation, the amount of short-time working allowance was 60% (employees with no children) and 67% (for employees with at least one child) of the net difference between the flat-rate target remuneration and actual remuneration, irrespective of the number months for which it is claimed.
a) Increase in short-time working allowance
The legislator has now increased these percentages; this is implemented incrementally and is limited until December 31, 2020. The prerequisite is that the difference between target and actual remuneration in each month of claiming must be at least 50%:
- From the fourth month of claiming, employees without children receive 70% and employees with at least one child receive 77% of the net salary difference;
- From the seventh month of claiming, employees without children receive 80% and employees with at least one child receive 87% of the net salary difference.
The reference month for calculating the individual duration of a short-time work allowance claim is March 2020, which means that the increased benefit rate can be claimed for the first time in June 2020. According to the directive issued by the Federal Employment Agency on May 28, 2020, the reference months must be considered at the level of individual employees. This means that, with regard to the level of the benefit rate, the employer must check each employee individually to see which month of claiming they currently are in going back to March 2020. It is also important to note that the months of claiming do not need to be continuous, as long as they fall between March 2020 and December 2020. The Federal Employment Agency has also clarified that the number of claiming months also includes those months in which the net pay difference was less than 50%. It is therefore sufficient for the employee to have suffered at least 50% loss of wages in the fourth or subsequent months of claiming since March 2020 to receive the higher benefit rate.
All relevant directives from the Federal Employment Agency can be found here.
The Federal Employment Agency also provides illustrative examples:
- An employee was claiming STWA from March 2020 to May 2020 with 20% loss of wages and in June 2020, i.e. in the fourth month of claiming, with at least 50% loss of wages. In June 2020, i.e. in the fourth month of claiming, they are entitled to the increased benefit rate of 70% or 77%, depending on whether or not they have children.
- The employee continues to claim STWA from July 2020 to August 2020 with 20% loss of wages and in June 2020 and in September 2020 with at least 50% loss of wages. They are only entitled to a benefit rate of 70% (no children) or 77% (with child) in September 2020, i.e. in the sixth month of claiming.
b) Employers must act
Employers must take the temporary increase into account when calculating the short-time working allowance. In addition, employers should review any agreements on topping up short-time work allowance. Under social security law, employer contributions to short-time working allowance should only be included in wages that are subject to contributions if they do not exceed 80% of the difference between the target and actual pay together with the short-time working allowance (Section 1(1)(8) of the Ordinance on Social Security Compensation). If a higher subsidy is paid, only the excess part is liable for contributions.
c) Tax-exempt employer subsidies for short-time working allowance.
Following the Bundesrat's approval of the »Coronavirus Tax Relief Act« on June 5, 2020, employer contributions to short-time work allowance are now tax-exempt, provided that they do not exceed 80% of the difference between the target and actual remuneration together with the short-time work allowance. This special regulation applies to wage payment periods beginning after February 29, 2020 and ending before January 1, 2021. However, the tax-exempt employer's subsidies are included in the progression proviso.
2. Non-credited additional income opportunities for all professions
Under the previous legal situation, remuneration from other employment taken up while claiming short-time working allowance generally had to be offset against the short-time working allowance. For secondary employment taken up during short-time working, the full crediting of remuneration to short-time working allowance has been suspended for a limited period from April 1, 2020 to December 31, 2020. During this period, earnings from secondary employment in essential (»systemrelevant«) occupations and industries that were taken up during short-time work are not credited against the short-time work allowance up to the full amount of the previous monthly income. This regulation applies to all professions and sectors from May 1, 2020. Marginal employment (»Minijobs«) are also not credited.
3. Extension and increase of childcare allowances
We recently reported in detail about possible allowance claims for childcare. Since then, the Bundestag has decided to extend the duration of such allowance claims from six to ten weeks for every working person, and even up to 20 weeks for single parents. The Bundestag ratified this on June 5, 2020. The legislator has made it clear that allowance claims can also be considered for employed persons who look after or care for people with disabilities in need of assistance because their care facilities are closed due to coronavirus. These provisions enter into force retroactively from 30 March 2020.
4. A glimpse into the future of short-time work allowance
What will happen with short-time working allowance next year? Many special provisions expire on December 31, 2020. The coalition committee's current Key Issue Paper on the »fiscal stimulus« package does not stipulate any specific measures in this regard, but highlights short-time work allowance's role as a tried-and-tested instrument in the crisis. In September, the heads of the coalition government want to »present a reliable provision for claiming short-time work allowance in the light of the pandemic situation from January 1, 2021.«
We await this with interest and will keep you informed.