Short-Time Work—A Tool to Help Master the Economic Crisis?

In times of economic crisis short-time work can be a useful tool to reduce personnel costs without making qualified employees redundant. As part of its economic stimulus package, the German government has decided to extend the existing possibilities to obtain financial support from the labour office. In February 2009, more than 700,000 applications for short-time work were filed including some from the large German multinationals.

However, not only large companies can benefit from short-time work. Small and medium-sized businesses can benefit too. Unlike in other European countries, short-time work is not limited to blue-collar workers.

The two most significant changes decided by the German government are: an extension of the maximum time period for receiving financial support from the labour office and the possibility of being reimbursed for social security contributions.

The labour office will now pay compensation for up to 18 months (formerly 12 months) if short-time was imposed before the end of 2009. The compensation amounts to 60 percent (67 percent for employees with at least one child) of the difference between the former net salary and the net salary during the short-time work period. The net salaries will be calculated on the grounds of a schedule published by the labour office which, de facto, results in a reduction in payments.

The employer used to be liable for the greater part of the social security contributions due for the net salary difference. In the long run, short-time work therefore often proved to be an expensive way to avoid redundancies. To reduce the employer's financial burden, the government decided that the employer will be partly reimbursed for 50 percent of the social security contributions paid for the net salary difference in 2009 and 2010. For employees who participate in further professional education to improve their qualification during short-time work, 100 percent of social security contributions will be reimbursed.