Short-time working allowance secures jobs but is not instant liquidity support for companies

Around 750,000 companies have reported plans to reduce their employees’ working hours since the beginning of March. Many of them are claiming short-time working allowance for the first time. This is leading to several questions and sometimes even uncertainty when it comes to claiming such payments, as discovered by the Federal Employment Agency (BA) in recent telephone consultations. Their questions range from the reporting process to the transfer of short-time working allowance. That is why we have provided some answers to frequently asked questions about the requirements, the process and the settlement of short-time working allowance.

05 May 2020 | Press release no.28

How are short-time working arrangements reported? And how is short-time working allowance paid out?

There are two application stages for short-time working allowance. When a company reports that it is planning to reduce its employees working hours, the Agentur für Arbeit checks whether it meets the basic requirements. If it does, it may follow through with its plans. In other words, reporting plans to reduce working hours does not automatically entitle a company to short-time working allowance. The instrument is designed to be used flexibly according to each company’s current needs, which is why short-term working allowance is always paid out retrospectively by the BA (i.e. at the end of the month in which employees have had their working hours reduced). Employers have three months to submit their documents for each month; for example, payroll lists for March must be submitted by the end of July.

The company transfers the short-time working allowance to its employees alongside their usual (but reduced) wage. It then submits payroll lists to the Agentur für Arbeit, so that the amounts paid up front can be settled by the BA.

The Agentur für Arbeit can only pay out short-time working allowance to employers after these monthly payroll lists have been submitted and checked.

Why is short-time working allowance only settled by the BA afterwards?

This is required by law. It allows employers to flexibly reduce their employees’ working hours according to their current needs. If a company starts to get more orders, for example, they will not have to reduce their working hours as much, or fewer employees will be affected. But if the situation worsens again, it can extend its short-time working arrangements and reduce working hours for more employees. This can be flexibly determined by each company – they do not have to send a new report every time they plan to reduce their employees’ working hours.

How long does it take the Agentur für Arbeit to process reports and transfer short-time working allowance?

The BA has already added ten times more workers to its task force to quickly and efficiently process the huge rise in reports and applications for short-time working allowance. Over 8,500 BA employees are now working in the responsible department. The BA can usually process payroll lists and arrange payment within 15 days. We are working faster at the moment, but only when all the necessary documents are provided. The BA is doing all it can to make sure the high number of payroll lists continue to be processed in good time.

How do employees receive short-time working allowance?

Employers pay them a wage, as usual, for the work they have actually done. When it comes to the working hours that have been cut, employers pay them a short-time working allowance alongside their monthly wage. Employees do not have to submit an application to the Agentur für Arbeit.

Who is entitled to short-time working allowance?

Short-time working allowance can only be paid out to employees who are subject to national insurance payments. Workers in minor employment (mini jobs) are not eligible for short-time working allowance, as their employers do not pay unemployment insurance contributions for them. However, such workers in minor employment are also considered when calculating a company’s eligibility to receive short-time working allowance, as at least 10% of working hours must be reduced for at least 10% of its entire workforce. Apprentices can also receive short-time working allowance in some cases – but only after a reduction in working hours amounting to 6 weeks or 30 working days. Until then, they still receive their full training wage.

How long can short-time working allowance be claimed?

Short-time working allowance can be claimed for a maximum of twelve months. However, companies have recently been able to claim short-time working allowance for up to 21 months if their claim arose last year. This extension also applies to companies whose 12-month allowance period expired between January and March 2020. Such companies must informally notify the Agentur für Arbeit of their plans to reduce working hours again before claiming the allowance.

More information is available on the short-time working allowance page.

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