Coronavirus & Kurzarbeitergeld (reduced working hours compensation): What businesses need to know

updated on 30. March 2020 14 minutes reading time
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To cope with the economic damage during the COVID-19 pandemic, many companies will have to take action. The German government has therefore made it easier for businesses to receive Kurzarbeitergeld (reduced hours compensation). Here you will find a detailed overview of the most important changes and facts.




Coronavirus response: Simplification and enhancement of reduced working hours compensation (Kurzarbeitergeld)

There are new rules for applying for Kurzarbeitergeld in order to reduce the bureaucratic burden. These following changes already apply retroactively from 1 March 2020 and will also be paid out retroactively.

  • Loss of work (Arbeitsausfall): Entitlement to reduced hours compensation exists if at least 10% of the employees have a loss of earnings of more than 10% (threshold previously: 30%).
  • Temporary work (Leiharbeit/ Zeitarbeit): Reduced hours compensation can also be applied for temporary employees.
  • Social insurance contributions (Sozialversicherungsbeträge): Social insurance amounts paid to insurance providers for lost working hours are reimbursed at 100%.
  • Working time balances/Timesheets (Arbeitszeitsalden): The creation of negative working time balances/working time accounts/Timesheets before the payment of reduced hours compensation can be partially or completely waived. This relief applies to employment relationships that contain regulations on working time fluctuations.

It is based on the Act on the temporary crisis-related amendment of the regulations for reduced hours compensation (13.3.2020, Federal Law Gazette I 2020, p. 493 ff.). In German, this is called the Gesetz zur befristeten krisenbedingten Verbesserung der Regelungen für das Kurzarbeitergeld (13.3.2020, BGBl. I 2020, S. 493 ff.).

Source: Website of the Federal Government

Coronavirus (COVID-19) briefing: Information & updates for entrepreneurs in Germany

Reduced working hours (Kurzarbeit) FAQ

A compilation of the most frequently asked questions and answers on the subject of reduced working hours (Kurzarbeit) and reduced hours compensation (Kurzarbeitergeld).

What does reduced working hours mean (Kurzarbeit)?

Reduced working hours, or Kurzarbeit in German,  is the temporary reduction of regular working hours. Reduced working hours can affect all employees or only some of them.

Currently, many companies are either losing orders or are no longer allowed to open their business at all due to the new rules in response to the COVID-19 pandemic. Reducing working hours can be used as an economic protection measure if less work is required due to changed conditions. Kurzarbeit, reduced hours compensation, is intended to avoid redundancies. At the same time, it is not intended to become a permanent solution. Therefore, it is limited by law to twelve months. In exceptional cases, this period can be extended to 24 months.

What is reduced hours compensation (Kurzarbeitergeld)?

In order to compensate for the loss of earnings (reduced income/Kurzlohn) for employees during reduced working hours, employers can apply for reduced hours compensation (Kurzarbeitergeld, or KUG for short) as compensation. Employers must apply to the Federal Employment Agency for KUG. A prerequisite for the application is that the reduced hours must be declared before the KUG application is submitted. You will find the most important forms below.

The authority checks whether the social and labour law requirements are met and either approves or rejects the application. However, it is precisely these conditions that have now been relaxed due to the current COVID-19 epidemic.

Who pays the KUG?

The employer must first calculate the reduced hours compensation and make advance payments. Reimbursement is then requested by submitting an application. Payment is made retroactively by the employment agency to the employer.

What conditions have been set since 1 March 2020 to claim for KUG?

  • The company employs at least one employee obliged to pay social insurance contributions.
  • A temporary but high reduction of working hours of at least 10% of employees due to economic reasons or unavoidable events.
  • The reduction in working hours may not be due to reasons typical for the industry or business, or for seasonal reasons.
  • The employees concerned cannot be assigned to any other area/department (ie temporary redeployment).
  • Economically reasonable countermeasures must have been taken in advance.
  • Remaining holidays, overtime and positive working time accounts were reduced in order to avoid loss of working hours.


Which employees are included in the calculation of the loss of working hours?

In principle, the KUG is available to all employees who have a loss of earnings of more than 10% and who work reduced hours on at least one day per month. Following the adoption of the new law, this also includes temporary and contract workers. The following employees are also included:

  • Sick or incapacitated employees who are unable to work and who are not already entitled to sick leave (for 6 weeks, parallel to the entitlement to continued remuneration)
  • Temporary employees
  • Employees who are on holidays
  • Employees on maternity leave
  • Low-income earners (trainees with wages of up to €325)
  • Student employees subject to social insurance contributions


Who is not entitled to KUG?

These employee groups are not entitled to a KUG and cannot be included in the calculation of the loss of working hours:

  • Employees receiving sick pay (Krankengeld) before the introduction of reduced working time.
  • Employees already receiving support from the Employment Agency/Agentur für Arbeit (eg pay top-up).
  • Students who are not in employment subject to social security contributions.
  • Trainees/Auszubildende (currently, however, there is some flexibility when short-time work is based on a company closing down).
  • Employees on parental leave (Elternzeit).
  • Employees whose employment contract has already been terminated.
  • Marginally employed persons (Geringfügig Beschäftigte)
  • Employees who are currently on educational leave (Bildungsurlaub) or undergoing further training (Weiterbildungsmaßnahme)

One calendar month is always assumed for the consideration. The status of the individual employees can therefore change!


Peter Altmaier, Federal Minister of Economics and Energy: “Our goal is that in this situation, as far as possible, no jobs and no companies suffer permanent damage”.


High much is the KUG?

The reduced hours compensation is intended to fill the gap between the regular pay (planned payment) and the reduced pay during reduced hours (actual payment).

The following applies:

Target pay – Actual pay = Net Pay Difference
(Sollentgelt – Istentgelt = Nettoentgeltdifferenz)

The KUG is calculated in this way:

  • Regular rate: 60% of the net remuneration difference
  •  Increased rate: 67% of the net remuneration difference if a child allowance of at least the numerator 0.5 is entered on the wage tax card

Parents, therefore, receive more reduced hours compensation than those without children.

Example for reduced hours compensation when the loss of working hours is 20%

Normal working hours Kurzarbeit
Work output


100% 80%
Gross wage


€2,600.00 €2.080.00
Net wage (tax bracket 1) Nettogehalt (Steuerkl. 1) €1,751.89 €1,461.12
Net remuneration difference
Reduced hours compensation (60 %)

Kurzarbeitergeld (60 %)

Total €1,751.89 €1,635.58

Furthermore, the claim is capped for high salaries: Every euro of gross wages that exceeds the social insurance contribution assessment ceiling is not taken into account. For high earners, this means that the reduced working hours allowance is not paid proportionally to the actual income level.

Income thresholds 2020: Statutory unemployment insurance (Gesetzliche Arbeitslosenverischerung)

In Germany there are two different monthly income thresholds for the new and old federal states.

West East
€6,900 €6,450

What is Kurzarbeitergeld Null?

Assuming that the losses are so great that the working time and actual salary must be set to zero, the employee is entitled to 60% (or 67%) of the previous net salary. Conversely, this means employees affected by reduced working hours must forgo a maximum of 40% of their net wages.

Example of Kurzarbeitergeld Null

Normal working hours Reduced working hours
Work output
100% 0%
Gross wage


€5,500 0
Net wage (tax bracket 1) Nettogehalt (Steuerkl. 1) €3,234.69 0
Net remuneration difference
Kurzarbeitergeld (60 %) €1,940.81
Total €3,234.69 €1,940.81

Does the KUG need to be taxed?

No, the KUG is tax-free, but can in principle increase the individual tax rate (progression proviso).

Do the holidays, remaining holiday leave and overtime of my employees have to be reduced?

Due to the acute emergency situation, the Federal Employment Agency has decided not to reduce the number of holiday days. This applies to holiday entitlements from the calendar year 2020, and any remaining holiday from the previous year must now be reduced as before. Overtime and positive working time accounts must be reduced as before.

Are employees on KUG allowed to have a second job?

Yes, side jobs are allowed. However, income from these sideline jobs is included in the calculation of the net pay difference. This means that additional income from the sideline job reduces the amount of KUG compensation or even reduces it to zero.

How do I decide which employees have to work reduced hours?

No arbitrary selection may be made here! This decision must be based on the actual loss of work per employee. A common myth: The working time does not have to be reduced equally for all employees. If there are no collective bargaining agreements or company agreements, you as the employer must, therefore, make individual arrangements.

Who pays the social insurance contributions of employees who have reduced working hours?

The employer must continue to pay the social insurance contributions in full but can claim full reimbursement.

As an employer, am I allowed to make the decision to reduce working hours unilaterally?

No. If there is a Betriebsrat (works council), it has a mandatory right of co-determination. In companies without a works council, the employer must agree on the introduction of short-time work individually with each employee concerned.

Important: employees may object to reduced working hours without having to fear dismissal. This option does not apply if there are labour or collective agreements or other company agreements on the reduction of working hours.

How can reduced working hours be useful?

A reduction in working hours relieves you as an employer of some of the financial burden of wage and salary payments without having to lay off employees for operational reasons. Not only can you save your employees from becoming unemployed, but you also retain the know-how in your company. When economic conditions improve again, you can quickly return to normal operations without being slowed down by new hires and induction phases. Many collective bargaining agreements therefore already provide for corresponding regulations.


Important links on the subject of Kurzarbeit

Before you submit an application for Kurzarbeit, you must first notify the employment agency (Agentur für Arbeit) that you are reducing the working of your employees (by telephone or online). Only then can you submit the application for KUG.

Arbeitgeber-Service der Bundesagentur (Employer Service of the Federal Agency): 0800 – 455 55 20

Anzeige über Arbeitsausfall (Notification of loss of working hours) [PDF]

Antrag auf Kurzarbeitergeld (Application for reduced hours compensation) [PDF]

More resources

You can find further information directly on the website of the Federal Labour Office (Bundesagentur für Arbeit).



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