Short-Term Work Benefits – What You Need to Know!

What Is Short-Term Work (Kurzarbeit)?

Short-term work is a legislative tool that allows companies to reduce employee hours without having to lay anyone off. The Federal Employment Agency (Agentur für Arbeit) compensates employees for their reduced hours and payment by providing them with short-term work benefits (Kurzarbeitergeld), a type of unemployment wage replacement (Lohnersatzleistung) that is financed through contributions to unemployment insurance.

How Much Will I Receive in Short-Term Work Benefits (Kurzarbeitergeld)?

  • Employees receive 60% of their lost net wages in short-term work benefits
  • Employees with at least one child receive 67% of their lost net wages
  • Short-term work benefits were temporarily increased due to the current Covid-19 pandemic (see below)

Did you know? All employees who receive short-term work benefits must file a tax return!

What Different Types of Short-Term Work Benefits Are There?

There are two additional types of short-term work benefits:

  • Seasonal short-term work benefits (Das saisonale Kurzarbeitergeld): Seasonal short-term work benefits are paid in the construction industry when there is a lack of available work or when jobs are prevented by severe weather.
  • Transfer short-term work benefits (Das Transfer-Kurzarbeitergeld): Transfer short-term work benefits are paid to improve job placement prospects for employees during corporate restructuring or reorganisation. Employees affected by downsizing can then transfer from job to job without receiving unemployment benefits.

How Are Short-Term Work Benefits Calculated?

Short-term work benefits are calculated based on your net salary (= gross salary minus income tax and social security contributions). The duration of the short-term work and whether you have at least one child determines the percentage of your salary that you receive in benefits (see above).

Who Pays Social Security Contributions during Short-Term Work?

Social security contributions for wages earned during short-term work are split between and employer and employee. The employer alone takes over the contributions for the hours not worked due to short-term work and these contributions are reduced to 80% of the gross salary difference (i.e. the difference between what you are earning and what you would have earned).

The new short-term work regulation implemented due to the Corona pandemic also allows employers to request the Federal Employment Agency (Agentur für Arbeit) for a full reimbursement of the social security contributions accumulated during short-term work.

How Has Corona Changed Short-Term Work Benefits?

Employees now receive a higher percentage of their normal net wage from their fourth month receiving short-term work benefits.

  • From the fourth month: The short-term work benefits amount to 70% of their lost net salary Employees with at least one child receive 77%
  • From the seventh month: The short-term work benefits amount to 80% of their lost net salary Employees with at least one child receive 87%

Temporary workers can also receive short-time work benefits due to the Corona pandemic.

By the way: Short-term work benefits are not available in unlimited amounts. The calculation is based on the upper limit of the contribution assessment ceiling (Beitragsbemessungsgrenze).

Can I Still Earn Money While Receiving Short-Term Work Benefits?

You are permitted to earn additional income on top of short-term work benefits under these conditions:

  • You already had a second job before receiving short-term work benefits
  • You have a mini job (450 euros per month)

If you start another job while earning short-term work benefits, your additional income will be deducted from the benefits.

Short-Term Work Benefits: A New Regulation during the Corona Pandemic

The new regulation allows you to earn extra income on top of your short-term work benefits in certain situations. The following rules apply:

  • If your second job is systematically relevant, your income will not be deducted from the benefits received in April 2020.
  • Employees working in all occupations are permitted to earn additional income on top of their short-term work benefits from May 1, 2020 to December 31, 2020.

Your additional income won’t be deducted from your benefits if the total of the additional income, remaining compensation from your main job, and short-time work benefits do not exceed the amount you would have earned from your typical salary.

What are the Consequences of Short-Term Work Benefits?

Short-time work benefits are a continued payment of wages; therefore, the Employment Agency (Agentur für Arbeit) has the right to offer you a comparable and reasonable job instead of awarding benefits. If this is the case, the earnings from the alternative job count towards the total you earn in benefits. The Employment Agency’s “right” to offer you an alternative job is a purely theoretical and very unlikely outcome, as many companies typically apply for short-term work simultaneously – leaving no alternative employment available.

Those who receive more than 410 euros per year in short-term work benefits are required to file a tax return in the following year.

Did you receive short-term work benefits? File your tax return today!