Short-time work (in German: Kurzarbeit) is a well-known instrument in Germany that allows companies to temporarily reduce the working hours of employees due to economic difficulties. The goal is to prevent dismissals during periods of lower workload. The German Federal Employment Agency (Bundesagentur für Arbeit) compensates part of the employee’s lost income through the so-called Kurzarbeitergeld (short-time work allowance).

For international companies with employees in Germany, understanding the framework of short-time work in 2025 is essential to maintain payroll compliance and manage workforce challenges.

Is Short-Time Work Still Applicable in 2025?

Yes, short-time work remains available in 2025 under the German Social Code (SGB III). Although the special COVID-19 regulations have expired, the traditional Kurzarbeit scheme is still active and can be used in cases of temporary and unavoidable work reduction.

Requirements for Implementing Short-Time Work

To be eligible for Kurzarbeit, companies must meet several legal requirements:

1. Significant Loss of Work

The loss of work must be substantial, unavoidable, and based on economic reasons or an unavoidable event (e.g., supply chain disruptions). A reduction of at least 10% of the employees in the company or department must be affected with a loss of more than 10% of their gross monthly pay.

2. Notification to the Federal Employment Agency

Employers must officially notify the competent local office of the Federal Employment Agency before short-time work begins. The notification must include detailed information on the cause and expected duration of the work reduction.

3. Agreement with Employees

Short-time work generally requires either a clause in the employment contracts, a collective bargaining agreement, or an individual agreement with the employees or works council.

4. Temporary Nature

The short-time work must be temporary. The company must show that there is a realistic prospect of returning to normal working hours.

Amount and Duration of Kurzarbeitergeld in 2025

• The employee receives Kurzarbeitergeld amounting to approximately 60% (or 67% if they have children) of the net salary lost due to the reduced working hours.
• The allowance is paid by the Federal Employment Agency, but the employer must initially calculate it and include it in the payroll.
• In 2025, the maximum period for receiving Kurzarbeitergeld is 12 months, unless extended by the German government.

Payroll Handling of Kurzarbeit

Foreign employers must ensure correct calculation and reporting of Kurzarbeitergeld. This includes:

• Correctly calculating the reduced gross salary and the applicable short-time work allowance.
• Reporting the short-time work periods in the payroll system.
• Preparing accurate payslips reflecting the reduced working hours and the allowance.

Non-compliance may lead to audits and repayment obligations.

Conclusion

For international companies with employees in Germany, short-time work (Kurzarbeit) remains a valuable tool in 2025 to manage temporary workload reductions without terminating employment. However, employers must strictly follow the legal requirements and payroll procedures to avoid legal and financial risks.

If you have any questions regarding payroll, employment law or HR compliance in Germany, please feel free to contact us.

We are WW+KN, a Baker Tilly Company.

You can reach us at info@payrollgermany.de.