On the evening of April 23, 2020, the coalition committee agreed on further measures to soften social and economic hardship resulting from the ongoing Coronavirus pandemic. Among other measures, short-time work compensation is to be increased.

Short-term work compensation is to be increased according to a time scale from 60% to up to 80% (67% to 87% for households with children).

Precondition for the increase should be that the respective employees in short-term work are affected by at least 50% loss of working hours.

From the fourth month of short-term work, the short-term work compensation is then to be further increased to 70% or rather 77% of the lost net salary and from the seventh month onwards to 80% or rather 87%. Currently, the maximum period for which short-term work compensation can be drawn is 12 months.

The new regulation will initially be limited until December 31, 2020.

Employers should take into account the increases in topping-up provisions.

The increase may lead to uncertainties in dealing with contractual or collective topping up provisions. If the employer has promised a percentage increase in short-term work compensation, it is questionable whether this should then also apply to the increased short-term work compensation. If, on the other hand, the regulations provide for an increase in the difference in pay, no application problems should arise: In this instance, the topping up provision may not apply. If agreements on short-term work are currently being negotiated with the works council or employees, this aspect should, however, be taken into account and it should be made clear that the employer’s obligation to top up to a certain percentage of the difference in pay only extends as far as the state does not compensate for this with the short-term work compensation.

Implementation

The resolutions of the coalition committee must be passed by the German Federal Parliament (Bundestag) for the most part as amendments to the law. As an increase in the short-term work compensation plans is only to take place from the fourth month onwards, there is no particular hurry for the short-term work cases currently ordered due to the Coronavirus, as companies will only be in the second month of short-term work at most and the new regulation would then only become relevant on June 1, 2020. If the time limit is implemented as planned, companies and employees could then benefit from a total of no more than four months of the maximum short-term work compensation until the end of the year.