Glossary for Short-Term Work & Taxes
In our glossary, you will find a simple explanation for all relevant terms and vocabulary pertaining to taxes and short-term work. If you think a term is missing, please let us know and we will add it.
Corona
Corona is an infectious disease transmitted by the SARS-CoV-2 virus. The first cases were registered in China before it spread to a worldwide pandemic. It is considered to be transmitted by droplets and aerosols.
Income Tax Act (Einkommensteuergesetz)
The Income Tax Act governs the income tax of natural and legal residents of Germany. According to this law, those legally residing in Germany are subject to unlimited tax liability.
Mandatory Tax Assessment (Pflichtveranlagung/Steuerveranlagungspflicht)
Mandatory tax assessment means that one is required to provide information so that their taxes can be assessed, this information is usually obtained in the form of a tax return. Many taxpayers are obliged to submit a tax return, particularly those who received wage replacement benefits (Lohnersatzleistungen) during the assessment period (including short-term work benefits).
Mass Layoffs (Massenentlassungen)
Mass layoffs occur when a company lays off a certain number of employees are within a 30-day period. The employer must notify the appropriate Employment Agency (Agentur für Arbeit) in advance and if there is a work committee (Betriebsrat) at the company, they must be involved in the mass layoff process.
Progressionsvorbehalt
Progressionsvorbehalt is a term that describes the possibility of a raised tax rate (Steuersatz) and tax payments after receiving tax-free income due to tax progression. Under German tax law, tax-exempt income is considered when calculating your tax rate. This can lead to additional tax payments as your tax rate determines the tax due on your normal income. Some tax-free income can include:
- Wage replacement benefits (Lohnersatzleistungen)
- Parental benefits (Elterngeld)
- Short-term work benefits (Kurzarbeitergeld)
- Foreign income (ausländische Einkünfte) that was already taxed in another country
Seasonal Short-Term Work Benefits (Saison-Kurzarbeitergeld)
In the event of reduced working hours in the construction industry due to harsh weather or a lack of jobs, employees can receive seasonal short-term work benefits. Different sectors of the industry can apply for short-term work at various times, but the option expires for all sectors in March of each year. The benefits are financed by the winter employment levy (Winterbeschäftigungsumlage).
Short-Term Work (Kurzarbeit)
Short-term work is a temporary reduction of regular working hours due to a significant lack of available tasks in a company. This could impact either some or all hired employees. During short-term work, the affected employees either work less or sometimes not at all.
Short-Term Work Benefits (Kurzarbeitergeld)
Short-term work benefits are unemployment insurance (Arbeitslosenversicherung) wage replacement benefits (Lohnersatzleistungen) for employees affected by short-term work. Employees without children receive 60% of their net wages per month while employees with at least one child receive 67%. Because of the Covid-19 pandemic, short-term work benefits were temporarily increased: Employees whose companies applied for short-term work by March 2021 receive 70% of their net salary from the fourth month receiving short-term work benefits and 80% from the seventh (employees with children receive 7% more).
Short-Term Work Benefits Calculator (Kurzarbeitergeldrechner)
The short-term work benefits calculator calculates the effects of short-term work benefits on your income tax. Although short-term work benefits themselves are not taxed, they increase your tax rate due to the so-called Progressionsvorbehalt, thus increasing the tax due on your remaining income.
Short-Term Work Benefits Regulation (Kurzarbeitergeldverordnung)
The short-term work benefits regulation (KugV) of March 2020 regulates how the implementation of short-term work has been simplified due to the Corona pandemic. Some simplifications include lowering the requirements to receive short-term work benefits, reimbursing social security contributions, and allowing temporary workers to claim short-term work benefits.
Supplementary Income Limits (Hinzuverdienstgrenzen)
Those who receive wage replacement benefits (Lohnersatzleistungen) such as short-term work benefits (Kurzarbeitergeld) can earn additional income by working a second job. Supplementary income limits regulate how much can be earned in additional income before it is deducted from the wage replacement benefits. Because of Corona, the regulation concerning additional earnings and short-term work was temporarily eased.
Systemically Relevant Professions (Systemrelevante Berufe)
Systematically relevant professions keep society running and are still essential during the Corona pandemic. Occupations in the following sectors are systematically relevant: Energy supply, child and youth care, water and waste treatment, health, transportation, finance, nutrition and sanitation, telecommunications, and IT.
Tax Class (Steuerklasse)
In Germany, there are six different tax classes (also known as tax brackets) that determine the tax amount that is deducted from your wages. Your tax class can be determined based on various factors, the most decisive being your marital status. Married couples can change their tax class multiple times throughout the year.
Tax Rate (Steuersatz)
Your tax rate determines the percentage of tax that is charged to your income. The higher your income, the higher the tax rate.
Transfer Short-Term Work Benefits (Transfer-Kurzarbeitergeld)
Transfer short-term work benefits are paid to help employees find new jobs when companies are being restructured or reorganised. This ensures employees that are laid off can find a new job without receiving unemployment benefits (Arbeitslosengeld). The goal is to transfer as many employees as possible. The benefits amount to 60% of lost net pay (67% for those with at least one child).
Unavoidable Loss of Work (Unvermeidbarer Arbeitsausfall)
To claim short-term work benefits (Kurzarbeitergeld), there must be an unavoidable work loss. The following conditions must be met for the work loss to be classified as unavoidable:
- Overtime and positive working time accounts must be reduced.
- It cannot be a work loss that is common in the industry, in the company, or season (exception: seasonal short-term work in the construction industry).
- It must be checked if the employee can temporarily work in another department.
- Other in-house measures must be given priority (e.g. cleanup efforts, warehouse work).