Coronavirus (COVID-19) Labour law recommendations, short-time work compensation and tax measures – UPDATE

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24. April 2020 (Datum der Veröffentlichung)

Coronavirus (COVID-19) Labour law recommendations, short-time work compensation and tax measures


The corona virus is omnipresent. The appearance of the COVID-19 virus in Germany has led to considerable economic difficulties. Customers avoid shops, guests in restaurants and hotels stay away and companies have problems in delivering new goods for production. The governing parties of the grand coalition recently agreed on a comprehensive package to absorb the economic consequences of the corona virus crisis, which, in addition to numerous investment measures, provides for lowering the hurdles for the receipt of short-time work benefits. The regulations will come into force in April 2020 and are initially limited until the end of 2020. But the employer must also consider the further rights and obligations of the parties to the employment relationship.

In the present, we would like to inform you about the basic rights and obligations of the parties to the employment relationship as well as the basic requirements for ordering short-time work and granting short-time work compensation


A. Employee’s compensation and benefit entitlements and obligations

First of all we want to deal with the employee’s remuneration claims and performance obligations.

I. Rights of the employee to refuse performance

The corona virus can cause numerous situations in which the employee is entitled to an at least temporary right to refuse performance.

If the employee himself falls ill with the corona virus, he is not obliged to perform work. Such a case is to be treated analogously to any „normal“ illness of the employee, so that the employee has a right to refuse performance for the period of the illness.

In the event that the employee is ordered to be quarantined, a distinction must be made. If the employee himself is ill, he is entitled to a right to refuse performance. If the quarantine was ordered without the employee being ill himself, the employee can be instructed to remain active in the home office if this is agreed in the employment contract and/or in a company agreement or a collective agreement.

If the employee’s children are ill, the employee is unable to perform his work within the meaning of Section 275 para. 3 BGB (German Civil Code), as the work performance is unreasonable for him, at least for a short period of time. According to the prevailing opinion, a maximum period of ten days will be permissible (cf. e.g. price in ErfK, BGB Section 616 marginal no. 10a).

As day-care centres and schools are now being closed nationwide, the question arises in this context as to whether the employee is entitled to a right to refuse performance. The employee will initially be expected to take care of alternative childcare. If this is not possible, the employee is again entitled to a right to refuse performance under Section 275, Subsection 3, BGB, whereby this period does not normally have to be remunerated. Accordingly, the principle of „no wage without work“ remains in force.

For fear of infection on the way to the place of work or at the place of work itself, the employee is not entitled to a right to refuse performance unless special circumstances arise. Here, even consequences under labour law could be conceivable.

II. Rights to payment of the salary

  1. If the employee himself is sick, he has the normal right to continued payment of wages for six weeks.
  2. If the employee is not ill himself, but if there is a suspicion of illness and he is therefore in quarantine, the employer’s obligation to pay depends on whether or not Section 616 BGB was waived in the employment contract or collective agreement. If Section 616 BGB has not been waived, there are many indications that a personal impediment to performance exists. This in turn has the consequence that the employer continues to owe continued remuneration for a relatively insignificant period of time, which is to be determined in each individual case. If Section 616 BGB is waived, this claim does not apply.

However, if quarantine is ordered, the employee is entitled to compensation pursuant to Section 56 para. 1 IfSG (German infection prevention and reduction act) in the amount of the loss of earnings. Whether and to what extent a loss of earnings occurs depends again on whether and to what extent Section 616 BGB applies or is waived. In case of a claim for compensation according to Section 56 para. 1 IfSG, the employer is obliged to make advance payments. However, the compensation must be paid out as an advance payment for the competent authority for a maximum of six weeks. The compensation paid will be reimbursed to the employer by the competent authority upon request in accordance with Section 46, para. 5, sentence 2 IfSG. The application for reimbursement of the compensation payments must be submitted within three months of the cessation of the prohibited activity in accordance with section 56(11) IfSG.

  1. If the employee’s child falls ill with the corona virus, a differentiation must always be made. If the application of Section 616 German Civil Code (BGB) is not excluded by the employment contract, the employee may stay away from work and retain his entitlement to continued remuneration. According to the prevailing opinion, a period of no more than 10 days will be permissible. If the contracting parties have waived the application of § 616 BGB, the provision of Section 45 Social Security Code (SGB V) shall apply. According to this, the employee is entitled to sickness benefit if, according to a medical certificate, the child requires supervision, care and nursing, another person in the household cannot fulfil this task and the child has not yet reached the age of 12 or is disabled and is dependent on assistance.


III. quarantine order according to the Infection Protection and Reducing Act

If the health authorities order protective measures for the sick worker, other principles apply. In the event of an official order for protective measures, the employee is entitled to compensation in accordance with Section 56 (1) IfSG. The compensation corresponds to the amount of the loss of earnings, whereby the loss of earnings is deemed to be the salary. The compensation is granted for a period of six weeks in accordance with the Continued Remuneration Act. This period may be followed by an entitlement to sickness benefit, at least if the loss of earnings does not exceed the annual income limit for compulsory health insurance.

Employers must note that they are obliged to pay benefits in advance pursuant to Section 56 (5) sentence 1 IfSG. However, the employer must pay the compensation as an advance for the competent authority for a maximum period of six weeks. Pursuant to Section 56, para. 5, sentence 2 IfSG, the compensation paid will only be reimbursed to the employer by the competent authority upon application. Pursuant to Section 56, para. 11 IfSG, the application must be made within three months of the cessation of the prohibited activity.


B. Employer’s duty of care

The employer has a general duty of care, which also obliges him to protect the health of his employees. The employer must therefore take the necessary precautions, such as providing disinfectants, advising employees to wash their hands regularly and the like. With this in mind, the employer will also have to allow employees who have significant customer contact to wear hand and mouth protection. Further problems arise with regard to home office, business trips, compulsory leave and working time credits.

I. Home-Office

The question under which conditions the employee can be transferred to a home office has not yet been clarified by the highest court. Nevertheless, the arrangement of work in a home office may be an effective means of maintaining the operational flow and at the same time minimising the risk of COVID-19 infection in the company. A distinction must be made between cases where the place of work is defined in the employment contract, where the employer has a contractual right to give instructions regarding the place of work and cases where telework is already being carried out.

If the place of work is stipulated in the contract, it would therefore normally require a contractual agreement or a notice of termination with notice. By unilateral order, the employer will then probably not be able to order work in the home office.

If, on the other hand, the employer can determine the place of work by means of instructions, the home office can theoretically also be considered for this purpose. According to a decision of the LAG Berlin-Brandenburg, the transfer to the home office should no longer be covered by the employer’s right to issue instructions (LAG Berlin-Brandenburg decision of 14.11.2018 – 17 Sa 562/18).
In the event that alternating teleworking is already performed, the employer can extend this to increased or even exclusive teleworking by way of the right to issue instructions.

II.Business trips

Business trips can only be ordered by the employer within the framework of the right of management. This means that the instruction must be in accordance with equitable discretion. At present, the employer will therefore not be able to order a business trip to a danger area such as Northern Italy or China. However, other business trips are still covered by the right of direction as long as they are within the scope of reasonable discretion.

III. Obligatory leave

The employer is not entitled to unilaterally determine the amount of employees‘ holiday.
According to Section 7, Subsection 1, Sentence 1, BUrlG (German General Vacation Act), the holiday wishes of the employee are to be taken into account when determining the duration of the holiday, unless urgent operational concerns or holiday wishes of other employees who deserve priority from a social point of view conflict with their consideration. As a result, the employer can only ask the employees to determine the time of their holiday. Wherever possible, the wishes must be taken into account. However, the employer may not determine the holiday itself without taking the employees‘ wishes into account.

IV. Working time credit

The employer may only reduce the working time credits in the working time accounts of the employees if he can dispose of the working time credit in accordance with the employment or collective agreement. If the right to dispose lies exclusively with the employee, the employer is not entitled to unilaterally order the reduction of the working time credit.


C. Short-time work

In view of the current uncertain economic situation and the recently passed law on short-time working, we would like to explain the conditions under which short-time working is ordered and short-time compensation is granted.

I. Prerequisites for the granting of short-time work compensation

Short-time work in the employment relationship means the temporary reduction of regular working hours in a company due to a considerable loss of work. Short-time work may affect all or only some of the employees of the establishment. The employees affected by short-time work work less or not at all. It is also possible to arrange partial short-time working, for example, to reduce it to 70%. In this case, the employee receives 70% of his or her remuneration. The employee then receives reduced hours compensation for the portion of his or her work that is due to reduced hours.

Reduced working hours may not be ordered unilaterally by the employer. This means that the employer must reserve the right to order short-time work in the employment contract or must subsequently obtain the consent of the employees. The consent of the employee is not required if a valid collective agreement allows the unilateral order. Short-time work can also be ordered by works agreement, provided that there is no final collective agreement regulation.

If there is neither a provision of a collective bargaining agreement nor a provision of a works agreement or an employment agreement, the employer must conclude an agreement with the employees, according to which the employee authorizes the employer to order short-time work. The employer can also decide whether to grant a subsidy in addition to the government-granted short-time work allowance to top up the short-time work allowance. Employees will often only agree to short-time work if the employer provides benefits in addition to the short-time allowance. Frequently, they will also be required to safeguard their jobs for a temporary period, for example by waiving their right to terminate their employment.

II. Condition for the granting of short-time working compensation

The following conditions must be met before short-time work compensation can be granted:

  • Significant temporary loss of working hours due to economic reasons or an unavoidable event. This condition is always met if the reason for the loss of work comes „from outside“. The conditions are likely to be met, for example, if projects are cancelled due to corona or if there is a significant loss of working hours.
  • Inevitability of the loss of work: Before you apply for short-time work compensation, you must exhaust other means, including in particular the reduction of working time accounts or the granting of vacation. Taking leave does not mean that all employees have to use their full annual leave immediately. Rather, the employees‘ vacation requests still take precedence. However, they should and must now make a binding request to employees to apply for leave for the current leave year
  • Relevance of the loss of work: Currently, Section 96.1 no. 4 SGB III provides that at least 1/3 of the employees employed in the company must be affected by a loss of work of more than 10% in each case. This threshold is now lowered to the effect that only 10% of the employees employed are affected by a loss of working hours of 10%

III. Application

The Federal Employment Agency must be notified of the loss of work. The notification must be formulated very carefully. If the prerequisites are not conclusively stated, the Federal Employment Agency will reject the short-time work. In this context, it makes sense if the employer already prepares a list of the capacity utilisation rate, which is attached to the notification as proof of under-utilisation. However, according to the Federal Government’s statements, the Federal Employment Agency should generously modest the applications for short-time work compensation. It remains to be seen whether this will actually be implemented.

The granting of the short-time work allowance as such will be made by means of a benefit application to the Federal Employment Agency. The short-time allowance is paid by the employer as the paying agent. The employer must therefore have the short-time allowance paid refunded by the Federal Employment Agency. The benefit application is required for this.

IV. Amount of the short-time allowance

The amount of the short-time working allowance is equal to the amount of the unemployment benefit. This amounts to 60% of the previous net remuneration or 67% of the previous net remuneration for employees with dependent children. For this reason, the employer often tops up the short-time work allowance to give employees an incentive to agree. It is usual that the net remuneration is increased to between 80% and 90% of the previous net remuneration.
The social security contributions that employers normally have to pay for their employees will be fully reimbursed by the Federal Employment Agency in the future. This is intended to create an incentive to make greater use of periods of short-time work for the further training of employees.

The maximum period for which short-time work compensation can be paid is 12 months. The Federal Ministry of Labour and Social Affairs is authorised to extend the period of entitlement to up to 24 months by statutory order if exceptional conditions exist on the labour market as a whole.

In the coalition committee of 23.04.2020, the coalition leaders decided to increase the short-time working allowance in stages. For those who receive it for working hours reduced by at least 50 percent, it is to rise to 70 percent respectively 77 percent for households with children from the fourth month of receipt and to 80 percent respectively 87 percent for households with children from the seventh month of receipt – at the latest until the end of 2020. In addition, existing additional income opportunities will be extended for employees on short-time working from 1 May until the end of 2020.


D. Other measures

In addition to ordering short-time working, there are other measures that can be taken to deal with the corona virus. For example, it may be advisable for the employer to consider a change in the working time models. In addition, in the case of shift work, it may make sense to shift existing shifts in such a way that the employees of the individual shifts do not encounter each other in the company. If there are substitution rules in the company, it may be advisable to ensure that mutual representatives are never present at the same time so as not to endanger the employees.


E. Tax support measures

The tax authorities should also contribute to overcome the crisis as far as possible.

  • Tax deferrals
    Deferments of tax debts should be facilitated and granted. Overall, companies should be granted the possibility of tax deferrals. The Federal Ministry of Finance has initiated consultations with the German federal states on these tax deferrals amounting to billions.
  • Enforcement and late payment surcharges
    The tax authorities want to waive enforcement measures and late payment surcharges for affected companies until the end of 2020. Enforcement measures (such as account seizures) are to be suspended until 31.12.2020. The possibilities for reducing advance payments will be significantly improved.
  • Customs Administration
    In the case of taxes levied by the customs administration (e.g. energy tax and air transport tax), the General Directorate of Customs has been instructed to meet the taxpayers‘ needs. The same applies to the Federal Central Tax Office; responsible for insurance tax and value added tax.
  • Tax returns
    No special features have been announced for late payment surcharges, so far. It can be assumed that the tax offices will be instructed to decide generously on applications for extensions of deadlines.


F. Social security support measures

Deferral of SV contributions

The possibility of deferring social security contributions is regulated in Section 76, Subsection 2, Sentence 1, No. 1, SGB IV. According to this, claims to the total social security contribution may be deferred if immediate collection would be associated with considerable hardship for the company and the claim is not jeopardised by the deferment. Considerable hardship for the company is given if the company is temporarily in serious financial difficulties due to unfavourable economic circumstances or if the company would get into such difficulties if the social security contributions due were to be collected immediately. However, a deferral may not be granted if the claim would be jeopardized. This is the case if the financial difficulties are not only temporary or if over-indebtedness obviously cannot be reduced in the foreseeable future. The health insurance fund, as the competent collection agency, decides on the deferral application according to its dutiful discretion (Section 76 Para. 3 SGB IV). Tax consultants are authorised to represent the client in accordance with Section 73 Paragraph 2 Sentence 2 No. 4 SGG and Section 28h SGB IV when commissioned by the client.


In its circular letter, the umbrella organisation of the statutory health insurance funds announces the simplified deferral of social security contributions by the collection agencies (= statutory health insurance funds). Those affected by the Corona crisis are to be supported in this way. At the request of the employer, the contributions can initially be deferred for the months March to May 2020. Deferrals are to be granted at the latest until the due date for contributions for the month of June 2020. Attention: As before, the prerequisite for easier access to deferral is that the immediate collection of contributions without the deferral would entail considerable hardship for the employer, despite the prioritised use of short-time work compensation, subsidies and/or loans.


Professional association contributions

Various trade associations are reacting to the effects of the Corona crisis by facilitating the deferral arrangements for their member companies. The applications are to be complied with simply and unbureaucratically.


Disabled persons‘ advertisements for the 2019 advertising year

Due to the current situation as a result of the corona pandemic, the Federal Employment Agency (BA) and the integration/inclusion offices accept that notifications of severely disabled persons for the 2019 notification year will continue to be submitted after 31 March 2020 and no later than 30 June 2020. This was announced by the Federal Employment Agency in a press release. The same applies to the payment of the equalisation levy. If a notification is submitted by 30 June 2020 at the latest, failure to comply with the notification obligation by 31 March 2020 for the 2019 notification year will not be prosecuted as an administrative offence


G. Questions and contact

If you want to order short-time working or have further questions about how to proceed with Corona, we will be happy to advise you.

Your contact persons Herr Dr. Marcus Michels , Herr Larsen Lüngen und Herr Gerhard Müller are available by e-mail info@stallmeyer.de or by telephone.

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