Coping with the crisis
For many companies the present economic crisis leads to substantial decrease in turnover.
Parts of the workforce no longer are working to capacity, while the labor costs remain high.
These companies therefore face the dilemma that they might loose highly qualified and experienced employees in case of a reduction in staff, who then might not be available again when the economic situation recovers.
The German legislator now meets these concerns.
Last Friday (February 20, 2009) the 2nd Economic Stimulus Package passed the Federal Assembly and – inter alia – eased and expanded the regulations regarding public support for reduced hours of operation (“Kurzarbeitergeld”).
The following new rules now apply backdated to February 1, 2009 and partly limited until December 31, 2010:
• It is no longer required that at least one third of the staff is affected by reduced hours of operation. Alternatively, it is sufficient that reduction in salary mounts up to more than 10% of the monthly salary, even if only one employee should be affected.
• The duration of support has been extended up to 18 months.
• 2009 and 2010 the labor agency will refund to the employer 50% of the social contributions related to the reduced operation.
• Advanced vocational training will be promoted and – in the event that an employee affected by reduced operation participates in the training during this period - even up to 100% of the social contributions will be borne by the labor agency.
Public support for reduced hours of operation can be applied for by any company, no matter its size.
Please note that prior to this application the company has to exhaust all possibilities to avoid the reduction of working time (e.g. granting of vacation etc.).
Implementation of reduction of working time is subject to co-determination by the work council.
Provided that no work council exists, the company could either agree with the affected employees on an amendment of the employment contract with reduced working time and reduced salary or could even enforce it by unilateral dismissal with the option of altered conditions of employment (“Änderungskündigung”).
The reduction of working time then leads to the corresponding reduction of salary.
In the event that normal weekly working time is e.g. reduced from 40 hours to 20 hours the company will only pay half of the salary and the labor agency pays 60% - in case the employee has children 67% - of the lost net salary.
This support is not subject to income-tax. The company has to apply for the support and then has to balance it with the employee.
In particular the public support for advanced vocational training appears to be an additional attractive element of this state subsidy.
The Federal Secretary of State for Employment explicitly encourages the companies to make use of it in order to avoid redundancies and to cope with the crisis.
We are of course at your disposal for further consultation.
Johannes Beyer, Attorney at Law
beyer@einem.de; www.einem.de
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