HR-Glossar
Kurzarbeitergeld (short-time work allowance)
When German short-time work allowance applies, how notification and payroll work and what the final audit will ask for.
1. What is Kurzarbeitergeld (short-time work allowance)?
Kurzarbeitergeld is a benefit of the unemployment insurance scheme which replaces part of the loss of pay where a business temporarily works less than agreed. The aim is to carry employment relationships through a crisis rather than dismiss people and hire again later.
The procedure has one feature that explains much of the effort: the employer calculates and pays the benefit itself in the first instance and is then reimbursed by the Federal Employment Agency. For payroll, short-time work allowance is therefore not an external benefit that arrives from somewhere but a payroll process of its own, with its own records. A group used to state schemes paid directly to employees should plan for both the cash flow and the process.
The condition under Sections 95 and 96 SGB III is a substantial loss of working time with a loss of pay, resting on economic grounds or an unavoidable event, temporary and not avoidable. Added to this are operational and personal conditions and a prior notification of the loss of working time to the Federal Employment Agency (Section 99 SGB III).
Benefit rates, the period of entitlement and the reimbursement of social security contributions have repeatedly been changed – some of them for limited periods. They must be checked against the current position before any use; this entry deliberately does not state them.
2. Origin and development
The instrument is considerably older than its best-known application. It comes from post-war labour market policy and was meant to cushion cyclical downturns without breaking up trained workforces.
It drew wide attention in the major economic crises and most recently during the pandemic, when access conditions and benefits were temporarily widened considerably. That experience explains a widespread misunderstanding: many remember the special rules of those years as the normal case. They are not.
Alongside the cyclical form there are special forms, foremost the seasonal short-time work allowance for weather-related losses in construction.
3. Core principles and how it works
A substantial, temporary loss of working time
The loss must rest on economic grounds or an unavoidable event, be temporary and not avoidable by reasonable measures. A permanent fall in orders will not carry the instrument.
Avoidance comes first
Working time credit must be used up first and holiday from earlier entitlements brought in, so far as that is reasonable. Only then does the benefit apply.
Notification before entitlement
The loss of working time must be notified to the Federal Employment Agency. Without notification within the right period there is no benefit – and it cannot be cured retrospectively.
The employer calculates and funds it up front
Calculation, payment and the application for reimbursement sit with the employer. The benefit reaches employees through the ordinary payroll run.
A legal basis within the business
Short-time work cannot be ordered unilaterally. It needs a basis – a works agreement, a collective rule or an individual agreement.
The final audit
After entitlement ends the Federal Employment Agency audits the calculations. Amounts paid in excess must be repaid – the records must be complete by then.
4. Who is Kurzarbeitergeld (short-time work allowance) relevant for?
- Businesses with a temporary collapse in orders – the standard case of cyclical short-time work allowance. - Construction businesses in the bad weather period – the seasonal form applies to them. - Payroll – short-time work is one of the most laborious special cases there is. - Works councils – its introduction and design are subject to co-determination. - Employees – their income falls, their employment relationship remains.
5. How it differs from related terms
- Short-time work allowance and continued pay – continued pay concerns one person's absence for personal reasons; short-time work allowance an operationally caused loss. - Short-time work allowance and unemployment benefit – the employment relationship continues under short-time work. It is not partial unemployment. - Cyclical and seasonal short-time work allowance – the latter is tailored to the bad weather period and particular sectors, is financed through a levy of its own and has supplementary benefits. - Short-time work and a reduction in working time – a permanent reduction is a variation of contract, not short-time work.
6. Variants and adaptations
- Cyclical short-time work allowance – for economically caused loss of working time; the standard case. - Seasonal short-time work allowance – for weather-related losses in construction and related sectors, with supplementary benefits from the winter employment levy. - Transfer short-time work allowance – on a business change, to avoid unemployment, with its own scheme and conditions. - Zero short-time work – working time falls away entirely; in payroll terms the most laborious case, because the whole loss of pay has to be reflected.
7. Advantages and challenges
Advantages
- Employment relationships are preserved; trained people are not lost
- The business saves staff costs without having to give notice
- Employees keep their employment relationship and their social insurance cover
- After the crisis the business is immediately able to work, with no hiring or induction
- For construction, the seasonal form supports year-round employment
Challenges
- Considerable administration for notification, calculation, records and settlement
- The employer funds it up front and carries the reimbursement risk
- Employees' income falls noticeably
- The final audit can lead to claw-back where records are incomplete
- The conditions require interpretation and are examined
- Conditions change politically; planning on old rules goes wrong
8. Best practices for implementation
Settle the legal basis before the notification
Without a works agreement, a collective rule or an individual agreement, short-time work is not validly introduced in employment law – regardless of what the Employment Agency approves.
Document working time without gaps
The calculation rests on target and actual hours per person and month. Without reliable time recording the final audit is a risk.
Collect all records for the final audit
Time records, payslips, agreements and notifications belong in an ordered file from the start – not once the audit is announced.
Inform employees early and specifically
How much less pay, from when, for how long – that belongs before the first short-time month, not on the first payslip.
Check the conditions afresh before every use
Benefit rates, the period of entitlement and reimbursement rules have changed repeatedly. Anyone relying on the position at the last crisis will calculate wrongly.
9. Tips for employers and employees
For employers
- **The notification deadline decides** – a late notification cannot be made good, and without it there is no benefit
- **Check credit and old holiday first** – the priority of avoidance is followed up on audit
- **Plan for funding it up front** – reimbursement comes after payment, not before
- **Think of the final audit from the start** – it looks back over months, and gaps count against you
For employees
- **Read the agreement** – short-time work cannot be ordered unilaterally
- **Expect noticeably lower net pay** – the benefit replaces only part of the loss
- **Check your payslip** – target and actual hours are the basis; raise discrepancies promptly
- **Clarify other earnings** – additional work during short-time working may be set against the benefit
10. Conclusion
Short-time work allowance carries employment relationships through a temporary crisis – and moves the entire administrative burden into the business. The employer calculates, pays out and applies for reimbursement; the audit comes afterwards. Success therefore depends less on the approval than on the documentation: the legal basis, notification within the window, complete time records.
Two points deserve emphasis for a group. The employer funds the benefit up front – it is not a state payment that arrives at the employee. And short-time work cannot be ordered unilaterally: a decision at group level does not carry it; a works agreement, a collective rule or individual agreements do. Anyone taking the special rules of the pandemic years as the measure is working with conditions that no longer apply – they belong checked afresh before every use.
Sources
- Section 95 SGB III – Entitlement to short-time work allowance (German original; no official English version) (opens in a new tab)
- Section 96 SGB III – Substantial loss of working time (German original; no official English version) (opens in a new tab)
- Section 99 SGB III – Notification of the loss of working time (German original; no official English version) (opens in a new tab)
- Section 106 SGB III – Amount of short-time work allowance (German original; no official English version) (opens in a new tab)
- Federal Employment Agency (English pages) (opens in a new tab)
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