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Please stay! How companies can support employee retention despite short-time work

Please stay! How companies can support employee retention despite short-time work

The coronavirus crisis, and with it short-time work, are already entering their seventh month in some companies. Even if many affected employees have so far shown understanding for the financial restrictions associated with short-time work, patience and solidarity among many are gradually coming to their limits. Due to the lack of prospects and loss of income, the leaving of sought-after skilled workers and top performers in particular is to be expected, if not already observed. However, for employers there are certainly ways and means to counteract fluctuation and keep employees on the job. Still, most of these are not for free. The following blog post outlines possible options for strengthening employee retention despite short-time work.

Statutory increase of short-time allowance

The most favourable ‑ since for the employer free of charge ‑ option of employee retention is the use of the new legal regulation for a gradual increase of the short-time allowance (KUG) until 31

December 2020: The benefit rate refunded by the German employment agency rises from the fourth month of receipt to 70 and/or 77 per cent and from the seventh month of received short-time allowance to 80 and/or 87 per cent. It is a condition that the employee's loss of remuneration must amount to at least 50 per cent, although not necessarily permanently: It is sufficient if this is the case in the fourth or seventh month. After completion of the third or sixth month of receipt, it is therefore checked monthly whether the loss of remuneration amounts to at least 50 percent. The individual months of receipt are decisive when considering the duration of payment, and a receipt of short-time allowance does not have to be uninterrupted. In case of interruptions, the months when short-time allowance was received may be added up, as long as they fall in the period from March to December 2020.

This offers employers the opportunity to control the degree of short-time work in such a way that the loss of remuneration is at least 50 percent, so that the employees meet the requirements for the increase. The prerequisite for this is of course the existence of a corresponding lack of work, and that the co-determination rights of an existing works council are observed.

Voluntary increase of the short-time allowance by the employer

In addition to an increase by the state, employers may also top up the short-time allowance at their own expense. Such top-up payments are exempt from social security and tax up to 80 percent of the net pay difference and are not set off from the short-time allowance. Employer top-ups are particularly interesting for companies that do not benefit from the statutory increase because the level of working time is too high, or because short-time work has not been in effect long enough. A top-up payment does not have to be made on a permanent basis, but can also be granted for individual months. Moreover, the payment has no effect on the thresholds required for the receipt of short-time allowance (at least 10 percent loss of remuneration for at least 10 percent of employees).

In addition to the principle of equal treatment under labour law, the works council's right of co-determination pursuant to Section

87 (1) no. 10 of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) must be observed when introducing and amending voluntary top-up payments. However, it is limited to the principles of distribution; the decision on whether top-up payments are made at all, to what extent the employer wants to make financial means available for this purpose, for what purpose and to which group of persons it wants to provide the service, remains with the employer.

Coronavirus bonus

The special coronavirus-related regulations further allow employers to grant their employees aid and support in the form of a Coronavirus Bonus up to an amount of EUR

1,500 ‑ without tax and social security contributions ‑ to mitigate additional burdens resulting from the coronavirus crisis. The bonus is not limited to certain industries and activities. The tax-free payment is also possible in addition to short-time allowances. Furthermore, the coronavirus bonus is not set off against the short-time allowance.

Like the top-up payment, the coronavirus bonus has no effect on the thresholds required for short-time working. The granting of a coronavirus bonus will therefore likely to be of particular interest to companies whose lack of work is only close to 10 percent, and who nevertheless want to provide a quick and clear positive incentive to their employees.

Again, the principle of equal treatment must also be observed for the coronavirus bonus, so any differentiation between employees would have to be justified. In addition, the works council's right of co-determination applies to the granting of voluntary one-off payments such as the coronavirus bonus in the same way as to the granting of any top-up payments.

But be careful when reallocating or bringing forward vacation or Christmas bonuses

Not rarely employers who want to motivate and financially relieve their employees at short notice, might have the idea to bring the normal pay date forward of a vacation bonus or a Christmas bonus which would be paid anyway. This is financially less drastic for the employer than the payment of an additional increase or a coronavirus bonus.

To bring the pay date forward of one-off payments is however a double-edged sword: Although they can remain unconsidered when calculating the amount of short-time allowance, thus do not reduce the allowance, they do affect the operational threshold values (more than 10 per cent loss of remuneration with at least 10 per cent of the employees) which must be considered for a granting of a short-time allowance. In a worst-case scenario, although well-intentioned, bringing the pay date of the one-off payment forward can, in the month of payment, lead to the loss of claim for short-time allowance for the entire operational unit for which the loss of remuneration was applied for with the employment agency.

Should employers consider such steps, it is advisable to obtain legal advice for each individual case in order to avoid such unintended, fatal consequences.

Dr Corinne Klapper Jasmin Onderscheka

Note: This contribution has been published in a similar form in a newsletter of the German Chamber of Industry and Commerce (IHK) Schwaben dated 2 July 2020

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Dr Corinne Klapper

Lawyer, Licensed Specialist for Labour Law

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