Short-time allowance (Kurzarbeitergeld or KUG) during corona: FAQs
A difficult economic development or an unpredictable event such as corona can make short-time work necessary in a company. The resulting loss of earnings can be partially compensated with short-time work allowance.
At the end of April 2020, German Federal Employment Agency reported KUG applications submitted by companies for more than 10 million employees; even higher than during the Global Financial Crisis in 2008/2009 which reported KUG for more than 3 million employees.
Especially during the Global Financial Crisis, KUG has proven to be an important measure for the German government to manage unemployment rates and ensure that companies can quickly restart their businesses post-crisis.
How does it work in brief?
- Companies are entitled to KUG if at least 10 percent of their employees or certain departments have lost more than 10 percent of their wages.
- Any social security contributions for lost working hours will be reimbursed by 100 percent (until end of 2020).
- KUG can be used for up to 12 months (certain exceptions for longer periods apply).
- Temporary workers can also do short-time work and are entitled to KUG (until end of 2020).
- In companies in which agreements on fluctuations in working hours are used, negative working time accounts are not set up.
How long is KUG paid and how much does the employee receive?
The short-time allowance can be granted for up to twelve months. It is paid at the same level as unemployment benefit and compensates for 60% (for employees without children) or 67% (if employee has children) of the net pay lost as a result of the short-time work.
Can employers top up KUG?
Employers can top up KUG to up to 100% of the net pay but the difference between KUG net pay (60% or 67%, see previous answer) and actual net pay is principally subject to income taxes and social security.
(a) net pay is increased to 70% (for employees without children) or 77% (if employee has children) from month four of KUG, and/or
(b) net pay is increased to 80% (for employees without children) or 87% (if employee has children) from month seven of KUG,
it is income tax free but subject to progressivity proviso (Progressionsvorbehalt).
How is KUG being executed?
- Work, downtime and absenteeism must be recorded in the time sheet.
- Billing for the respective calendar month must be within 3 months (beginning of the deadline at the end of the requested calendar month).
- The Employment Agency is responsible at the location of the payroll office.
- KUG is subject to final assessment after the period of short-time work is over since it is paid out on a conditional basis.
Do employers need to pay reduced salaries and wages in advance?
Yes, KUG is a reimbursement and is paid to the employer by the Federal Employment Agency retrospectively.
Is there a requirement to document hours for KUG?
Yes, it is compulsory to keep working time sheets that show daily actual working hours. Information provided in the application for KUG is an estimate which will be assessed later on an actual basis. During short-time work, time sheets of employees falling under KUG must be kept.
There are no templates for this. It is to be recorded in hours, when the employee actually worked, when he was on vacation, working overtime, other absenteeism and when there was short-time work. These and the pay slips are used to check entitlement after the end of short-time work.
Can temporary workers receive KUG?
Can dismissed employees receive KUG?
No, dismissed employees are not entitled to KUG the moment they receive the notice of dismissal.
What happens if employees fall sick with COVID-19?
If an employee falls ill due to coronavirus infection, and is therefore unable to work, he or she is entitled to continued payment of wages in the event of sickness for a period of six weeks (Section 3 of the Continued Payment of Wages Act (Entgeltfortzahlungsgesetz)). After this period, people insured under the statutory health insurance scheme are entitled to receive sickness benefit (Krankengeld).
How can my company apply for KUG?
Companies which want to apply for the short-time allowance must first notify the local Employment Agency (Agentur für Arbeit) about the short-time work. The notification of absence from work must be received in the month in which short-time work begins. A justification for the considerable loss of work is required. The application form for short-time work benefits (in German language) can be downloaded here. Companies can also apply for short-time work benefits online (registration required, see link for further information in German).
Please contact us for more information.
Source: German Federal Employment Agency, WiWo
Disclaimer: We assume no liability for the accuracy of the information. The information listed here does not constitute recommendations for action.