Kurzarbeit: A Proven Solution for Economic Downturn

Kurzarbeit is a proven solution for economic downturns. It's a German concept that has been successfully implemented in various countries, including Germany, Austria, and Switzerland.

During the 2008 financial crisis, Germany's Kurzarbeit scheme helped reduce unemployment by 1.5 million people. This shows that Kurzarbeit can be an effective tool in times of economic hardship.

In Germany, Kurzarbeit is typically implemented when a company experiences a significant decline in orders or sales, resulting in a need to reduce working hours. This can be done through a collective agreement between the employer and employee representatives.

By implementing Kurzarbeit, companies can avoid layoffs and retain skilled employees, which is beneficial for both the company and the employees.

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Kurzarbeit is a German labor law concept that translates to "short work" in English. It's a way for companies to reduce their workforce temporarily during economic downturns.

Kurzarbeit involves employees working shorter hours, usually with reduced pay, to help their company stay afloat during tough times. This can be a more attractive option than layoffs for both employers and employees.

Kurzarbeit is often used in conjunction with government subsidies to help cover the costs of shorter working hours. This can be a win-win for everyone involved.

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To be eligible for Kurzarbeit, a company must have at least one employee and have suffered a significant loss of work due to the coronavirus crisis.

Companies that have been affected can apply to their local Employment Agency (BA) to get the benefit.

You don't need to do anything as an employee, just wait for your employer to pay you the short-term allowance and then the BA reimburses them.

The BA also covers the employer's social security contributions for employees working reduced hours.

For a company to qualify, it's now sufficient for just 10 percent of the workforce to have their working hours temporarily cut by more than 10 percent, a change that happened from March 1 until the end of the year.

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To be eligible for Kurzarbeit, your employer must have suffered a significant loss of work due to the coronavirus crisis.

Any company with at least one employee can apply, regardless of its size or industry.

Lawmakers have recently loosened the definition of what constitutes a significant loss, making it easier for more companies to qualify.

From March 1 until the end of the year, it's sufficient for just 10 percent of the workforce to have their working hours temporarily cut by more than 10 percent.

Employees who have been made redundant are not eligible for Kurzarbeit, but those who have been put on reduced hours are.

Your employer will need to apply to the local Employment Agency (BA) to receive the Kurzarbeit allowance.

As an employee, you don't need to do anything - your employer will handle the application process and pay the Kurzarbeit allowance to you.

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To apply, you'll need to submit your application within the specified timeframe, which is usually 6 weeks from the start of the program.

First, make sure you meet the eligibility criteria, which includes being a US citizen or national and having a minimum GPA of 3.0.

You'll need to provide transcripts and letters of recommendation as part of your application package.

The application fee is non-refundable, so make sure you're ready to submit your application before paying it.

You can submit your application online or by mail, but be sure to follow the instructions carefully to avoid delays.

It's a good idea to proofread your application multiple times to catch any errors or omissions.

Once you've submitted your application, you'll receive an email confirmation within 3 business days.

If you have any questions or concerns, don't hesitate to reach out to the program administrators for assistance.

The Kurzarbeit allowance is a kind of unemployment benefit that helps workers who have temporarily been put on reduced working hours due to economic reasons or circumstances beyond the employer's control. It's designed to partially take over the cost of employing workers, enabling companies to avoid job losses.

The benefit you receive is based on the amount of net pay lost, so you'll earn less overall. For example, if your working hours have been cut in half, you receive only half of your salary.

Kurzarbeit usually only replaces 60 percent of lost wages, but Germany's ruling coalition recently agreed to temporarily increase payments for those who have lost at least 50 percent of their normal working hours for several months or more. You'll receive 70 percent of your lost wages after four months and 80 percent after seven months.

A short-term allowance is a type of benefit that helps workers who have temporarily reduced working hours due to economic reasons or circumstances beyond their employer's control.

It partially compensates for lost earnings, making it easier for companies to avoid job losses.

This type of allowance is often used during economic crises, like the 2008/2009 financial crisis, where many workers benefited from it.

The Kurzarbeit allowance amount is based on the amount of net pay lost. You'll earn less, but the state will fill the gap, usually replacing 60 percent of lost wages (67 percent for parents).

Initially, the allowance replaces 60 percent of lost wages, but it's been increased temporarily for those who have lost at least 50 percent of their normal working hours for several months or more. After four months, you'll receive 70 percent of your lost wages (77 percent for parents), and after seven months, 80 percent (87 percent).

Holiday, Christmas, or performance bonuses won't affect your benefits, only income up to the contribution ceiling, which is 6,900 euros per month in western federal states and 6,450 euros in eastern federal states. If you earn more than that, it won't translate into higher benefits.

The allowance is calculated based on your lost income, not your actual hours worked, which can be a relief for employees who have seen their working hours reduced.

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Part-time workers have a bit of flexibility when it comes to Kurzarbeit benefits. Each company can decide whether part-time workers' hours are reduced by 50 percent, or if their hours stay the same.

This means that part-time workers may not necessarily see a 50 percent reduction in their working hours, even if their company is implementing Kurzarbeit. However, this decision ultimately lies with the company.

For part-time workers, it's essential to understand how Kurzarbeit benefits will be applied to their specific situation.

In Germany, Kurzarbeit is a special case when it comes to part-time work. Employees can work a reduced schedule, but must be paid at least 60% of their usual salary.

The minimum salary guarantee applies to all employees, regardless of their age. This ensures that workers, even those who are young or elderly, receive a fair wage during times of reduced work hours.

Employees with a fixed-term contract are not exempt from Kurzarbeit. If their contract is due to expire soon, the employer must still pay them at least 60% of their salary during the reduced work period.

Employees with a flexible work arrangement may be able to work from home during Kurzarbeit. This can be a convenient option for those with caregiving responsibilities or other obligations.

In some cases, employees may be required to take time off during Kurzarbeit. This can be a difficult adjustment for those who are not used to taking breaks.

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Germany's experience with Kurzarbeit has been a game-changer during the coronavirus pandemic. Essentially, workers get as much as two-thirds of their pay even if they don't work, which has helped keep companies like Lufthansa, BMW, Volkswagen, and Daimler afloat.

The number of short-term working schemes has jumped rapidly, with almost half a million companies in Germany making use of the labor market instrument to trim their payroll costs. This is a significant increase from the last crisis in 2008.

The government expects some 2.35 million people to be drawing "Kurzarbeitergeld" – a short-term allowance – which could cost the Federal Labor Office more than 10 billion euros. This is a substantial investment, but Germany has saved during the good years and has built up reserves of 26 billion euros.

Unlike in the last crisis, where predominantly industrial companies were tapping the scheme, now it's also small service companies like restaurants and consultants who make use of Kurzarbeit. This is a testament to the flexibility and adaptability of the German economy.

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Here are some key statistics on the use of Kurzarbeit during the pandemic:

The use of Kurzarbeit has been so successful that the president of the European Commission, Ursula von der Leyen, has floated the idea of introducing the scheme in other countries, backed by as much as 100 billion euros.

Germany's successes with Kurzarbeit, or short-time work, have been impressive, but can they be easily replicated elsewhere? Not so fast, as there are some institutional settings in Germany that make it easier for companies to implement Kurzarbeit.

Germany ranks among the top 10 OECD countries in protecting permanent workers against dismissal, with stringent rules about layoffs and high severance payments. This makes it more pertinent for firms to use Kurzarbeit.

In Germany, firing and re-hiring is costly, especially for companies that require specific qualifications. Turnover costs for qualified workers were around EUR 7000 in Germany during the GFC, which is almost five times higher than for low-skilled workers.

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Internal flexibility measures, such as working hour accounts and reductions in weekly hours or overtime, play a crucial role in Kurzarbeit in Germany and help cushion the effects of cyclical downturns. These measures are often covered through collective bargaining agreements or agreed between the social partners.

The current crisis has hit the economy faster and more broadly than the GFC, but the decline in business activity has been determined by confinement and social distancing rather than pre-existing differences in firm performance. This suggests that the risk of locking workers in unviable jobs through the use of Kurzarbeit might be less pronounced.

Germany entered the current crisis with very low unemployment and a high degree of labour shortages, making firms reluctant to lay off valuable workers. This has reduced the likelihood of structural changes in some industries, such as automotive manufacturing.

Expansion of Kurzarbeit to allow part-time working in a second job is positive as it facilitates reallocation towards sectors with a temporarily higher labour demand.

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