Short-Time Work Allowance (Kurzarbeitergeld) in 2024: Requirements and Financial Impact for Employers and Employees

Short-time work allowance (Kurzarbeitergeld, KUG) is a crucial benefit in Germany that supports businesses and employees during economic downturns. It helps secure jobs and mitigate financial burdens during temporary work reductions. Here are the key aspects and requirements for short-time work allowance in 2024.

Requirements for Short-Time Work Allowance

1. Economic Reasons or Unavoidable Events:

  • Short-time work can be applied for when there is a significant work loss due to economic reasons or unavoidable events such as natural disasters. Examples include declines in orders, supply chain disruptions, or catastrophic events like floods (SGB III, §§ 95 ff.).

2. Minimum Work Loss:

  • At least one-third of the workforce must experience a work loss of more than 10% to be eligible for KUG.

3. Temporary Work Loss:

  • The work loss must be temporary, and there must be a prospect of returning to normal working hours.

4. Notification and Application:

  • Employers must notify the Federal Employment Agency (Bundesagentur für Arbeit) about the short-time work and submit an application in a timely manner. The agency will then review the requirements and approve the KUG if conditions are met.

Financial Aspects

1. Amount of Short-Time Work Allowance:

  • Employees generally receive 60% of the net salary loss due to short-time work. If there is at least one child in the household, the allowance is 67% of the net salary loss.

2. Duration of Benefits:

  • KUG can be received for a maximum of 12 months. This period can be interrupted and restarted if the conditions are met again.

3. Additional Earnings:

  • Additional earnings from a side job taken up before the start of short-time work are not counted against the KUG. However, side jobs taken up during short-time work will be counted.

4. Reimbursement of Social Security Contributions:

  • During short-time work, 50% of social security contributions are reimbursed if certain conditions are met. This rule is valid until July 31, 2024.

Tax Components

1. Taxation of Short-Time Work Allowance:

  • While the KUG itself is tax-free, it is subject to the progression clause (Progressionsvorbehalt). This means that the KUG increases the overall taxable income, potentially pushing the recipient into a higher tax bracket and thereby increasing the tax rate on their other income.

2. Tax Declaration:

  • Recipients of KUG must declare this income in their annual tax return. The Federal Employment Agency provides the necessary documentation to be included in the tax return.

3. Impact on Overall Tax Liability:

  • The inclusion of KUG under the progression clause can lead to a higher overall tax burden for the year, as it increases the marginal tax rate applied to other income sources.

Employer Responsibilities

1. Advance Payment Obligation:

  • Employers must initially pay the KUG to employees and subsequently receive reimbursement from the Federal Employment Agency.

2. Documentation and Proofs:

  • Employers must document the work loss and measures taken to reduce it. Proper notification and application for KUG must be completed.

Conclusion

Short-time work allowance provides essential support for businesses and employees during economic challenges. Understanding the legal requirements, financial aspects, and tax implications is crucial for effectively utilizing this benefit. For further information and assistance, WW+KN, a Baker Tilly Company, is available. Our colleagues at Baker Tilly Legal offer legal advice and support on employment matters. We act as a single point of contact for our clients, managing all aspects related to payroll and employment law efficiently.

For further inquiries or personalized advice, please contact us at info@payrollgermany.de.

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