Germany: coalition parties agree on a gradual increase in the short-time working allowance

Following a meeting of the ruling coalition leaders on 22 April, an increase in the short-time working allowance, which at the start of the week 20 April looked like being an intractable point of contention between on the one hand, the trade unions and the Social Democratic Party (SPD), and on the other, the Conservative Party (CDU) plus the employers (c.f. article No.11860), was finally accepted at the end of day. So far, the short-time working allowance covers 60% (67% for employees with children) of the net income loss of employees placed on short-time working due to the reduction in the volume of hours worked. Employers can negotiate with the works councils to compensate all or part of the loss of earnings, and this has already occurred in many companies and especially in the industrial sector. However, with a current estimate of 4 million employees on short-time working, and rates of decline in activity often reaching as high as 100% in sectors already known to employ many low-wage workers (commerce, tourism, etc.), the trade unions and the SPD party have called for an increase in reimbursement rates from 60% to 80% (67% to 87% for employees with children) in order to keep many from falling below the poverty line. Hostile to a broad-based increase in the allowance, the Conservatives, with the backing of the employers, initially blocked the initiative. However on 22 April, a compromise was secured so that employees on short-time working and undergoing a reduction of a minimum of 50% of their working time will see the level of short-time working allowance rise from 60% to 70% (77% for employees with children) as of the 4th month of short-time working, and again from 70% to 80% (87% for employees with children) from the 7th month of short-time working. Furthermore, the government is immediately increasing the supplementary income ceiling allowed for partially unemployed people who work alongside their main activity in order to increase their incomes. The new ceiling will apply until 31 December 2020. In addition to the short-time working allowance, these workers will now be entitled to earn the level of net salary they had been earning each month prior to starting short-time working.