Kurzarbeit (Short-Time Work) – Definition, Requirements & Application

Kurzarbeit — Germany's state-subsidised short-time work scheme — is an employment security instrument that allows companies to temporarily reduce their employees' working hours without resorting to redundancies. The Federal Employment Agency (Bundesagentur für Arbeit) pays the so-called Kurzarbeitergeld (KUG), a short-time work allowance of 60 % of the lost net wage (67 % for employees with at least one child in the household). The legal basis is found in §§ 95–109 of Book III of the Social Code (Sozialgesetzbuch III, SGB III).

What Is Kurzarbeit (Short-Time Work)?

Kurzarbeit refers to the temporary reduction of working hours across a company or department due to a significant, unavoidable loss of work. Its purpose is to preserve employment relationships during economically difficult periods — whether caused by a downturn in demand, an unforeseen event, or structural changes within the business.

Kurzarbeit differs fundamentally from redundancy: while a dismissal permanently terminates the employment relationship, short-time work keeps it intact. Employees retain their jobs and their social insurance entitlements. For employers, Kurzarbeit is therefore a more cost-effective alternative to workforce reductions — especially when skilled employees will be needed again once the crisis has passed.

Legal Framework

SGB III §§ 95–109: The Law at a Glance

The statutory basis for the cyclical short-time work allowance (konjunkturelles Kurzarbeitergeld) is set out in §§ 95 to 109 of the Social Code III (SGB III). These provisions govern the eligibility conditions, the level of the allowance, and the application procedure.

Under § 95 SGB III, employees are entitled to short-time work allowance if a significant loss of work with associated loss of pay has occurred, the operational and personal eligibility requirements are met, and the loss of work has been formally notified to the Federal Employment Agency (BA).

Works Council Co-Determination (§ 87 BetrVG)

Where a company has a works council (Betriebsrat), it holds a co-determination right under § 87(1)(3) of the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) regarding the introduction of short-time work. Without a corresponding works agreement (Betriebsvereinbarung) or a negotiated settlement with the works council, short-time work cannot be validly introduced.

In companies without a works council, individual consent from each affected employee is required — either through an amendment to the employment contract or an explicit written declaration of consent.

Eligibility Requirements for Kurzarbeit

Operational Requirements

For a company to claim short-time work allowance, the following operational conditions under § 96 SGB III must be met:

• A significant loss of work exists: at least one third of the workforce must be affected by a loss of earnings exceeding 10 % of their gross monthly pay.
• The loss of work is temporary and unavoidable — meaning it cannot be prevented by reasonable organisational measures (e.g. drawing down overtime or annual leave).
• The company employs at least one person subject to compulsory social insurance contributions.

Personal Requirements for Employees

On the employee side, the following conditions apply:

• The employment relationship continues without notice of termination.
• The employee is in compulsory social insurance employment.
• Generally not eligible: marginally employed workers (Minijobber) and employees who have given or received notice of termination.

Apprentices (Auszubildende) are subject to special rules and are generally excluded from the standard short-time work allowance.

Types of Short-Time Work Allowance

Cyclical Short-Time Work Allowance (Konjunkturelles Kurzarbeitergeld)

The cyclical short-time work allowance (§§ 95–111 SGB III) is the most widely known form. It applies during economic downturns, supply chain disruptions, or extraordinary events such as a pandemic. It can be granted for up to 12 months; in exceptional circumstances, an extension by statutory order of the Federal Ministry of Labour and Social Affairs (BMAS) is possible.

Seasonal Short-Time Work Allowance (Saison-Kurzarbeitergeld)

The seasonal short-time work allowance (§§ 101–109 SGB III) applies specifically to seasonal industries such as the construction, scaffolding, and forestry sectors. Its purpose is to prevent seasonal redundancies during winter months; it is paid during the bad-weather period (1 December to 31 March).

Transfer Short-Time Work Allowance (Transfer-Kurzarbeitergeld)

The transfer short-time work allowance (§ 111 SGB III) supports employees who transfer to a transfer company (Transfergesellschaft) as part of a corporate restructuring. The aim is to provide requalification and facilitate placement in new employment. It is paid for a maximum of 12 months.

How Much Is the Short-Time Work Allowance? Calculation and Example

The short-time work allowance is calculated on the basis of the so-called Leistungsentgelt — in simplified terms, a standardised net pay figure.

Benefit rates (§ 105 SGB III):

• 60 % of the lost standardised net pay (standard rate)
• 67 % of the lost standardised net pay for employees with at least one child in the household

Calculation example:

An employee earns €3,000 gross per month. In a month with 50 % short-time work, half of their pay is lost. According to the Federal Employment Agency's pay tables (Merkblatt 8a), the standardised net pay is assumed to be €1,800. The short-time work allowance is then:

• Without child: 60 % of €900 (= 50 % loss) = €540
• With child: 67 % of €900 = €603

Employers may voluntarily top up the allowance. Supplements up to 80 % of gross pay are exempt from social insurance contributions.

Note: The precise calculation is based on the Federal Employment Agency's payroll tables. For accurate figures, use the official BA calculator available on the agency's website.

Applying for Kurzarbeit: Step by Step

Step 1: Notify the Federal Employment Agency of the Loss of Work

Before short-time work can be introduced, the significant loss of work must be formally notified in writing to the relevant local employment agency (§ 99 SGB III). The notification must be received within the month for which the allowance is first being claimed.

Important: Without a valid notification, there is no entitlement to the short-time work allowance. Since the reform, notifications can also be submitted digitally via the Federal Employment Agency's online portal.

Step 2: Submit the Benefit Application

Following the notification, the actual benefit application is submitted. It is the employer — not individual employees — who applies for the short-time work allowance on behalf of affected staff. The application must be submitted no later than three months after the end of the relevant month.

Step 3: Monthly Settlement and Reimbursement

The short-time work allowance is settled on a monthly basis. Employers advance the payment to employees and are then reimbursed by the Federal Employment Agency. Accurate settlement requires careful documentation of the actual hours lost.

Checklist for HR professionals:

• Obtain works council consent (works agreement) or individual declarations of consent from employees
• Submit the notification of loss of work to the BA within the deadline
• Document monthly settlements carefully
• Communicate transparently with employees (scope, duration, and level of the allowance)
• Involve payroll accounting early in the process

Frequently Asked Questions about Kurzarbeit

What is Kurzarbeit?

Kurzarbeit is a state-backed employment security instrument: companies can temporarily reduce working hours and receive a short-time work allowance from the Federal Employment Agency, which partially compensates employees for their lost earnings. The legal basis is §§ 95–109 SGB III.

Who is entitled to the short-time work allowance?

Employees in compulsory social insurance employment whose contract remains in force without notice of termination are entitled. Marginally employed workers (Minijobber) are generally not eligible. Special rules apply to apprentices. At the operational level, at least one third of the workforce must be affected by a loss of earnings exceeding 10 %.

How much is the short-time work allowance?

The allowance amounts to 60 % of the lost standardised net pay. Employees with at least one child in the household receive 67 %. Employers may voluntarily top up the payment.

How long can Kurzarbeit last?

The standard maximum duration is 12 months (§ 104 SGB III). The Federal Ministry of Labour and Social Affairs can extend this by statutory order in exceptional circumstances — during the COVID-19 pandemic, for example, the maximum was extended to 24 months.

What is Kurzarbeit 0?

Kurzarbeit 0 describes a complete cessation of working hours — the employee does not work at all, but continues to receive the short-time work allowance. This is permissible provided the operational and personal eligibility requirements are met and the loss of work has been duly notified.

What role does the works council play in Kurzarbeit?

Where a works council exists, it holds a co-determination right under § 87(1)(3) BetrVG. Without a works agreement or negotiated settlement, short-time work cannot be validly introduced. In companies without a works council, individual written consent from each affected employee is required.

Does annual leave entitlement apply during Kurzarbeit?

In principle, yes — the statutory annual leave entitlement continues to accrue. In the case of Kurzarbeit 0, where entire working days are completely lost, the leave entitlement may be reduced on a pro-rata basis. This area is legally complex; it is advisable to seek legal advice before planning leave during a Kurzarbeit period.

Can employees or employers give notice during Kurzarbeit?

Yes — neither employers nor employees lose their right to give notice during a Kurzarbeit period. However, an operational redundancy may jeopardise the entitlement to the short-time work allowance if the Federal Employment Agency determines that the loss of work is not temporary in nature.

Conclusion

Kurzarbeit is a proven and effective instrument for preserving employment during economically challenging times. For HR professionals, this means: act early, carefully assess the legal requirements, involve the works council, and communicate transparently with the workforce. A correct notification and thorough documentation are decisive for a smooth process.

Short-time work does not run itself — it requires preparation, clear communication, and close coordination between HR, management, payroll, and, where applicable, the works council. Those who know the steps and act with legal certainty can guide their team through difficult phases without losing valuable employees.

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Sources

• Social Code III (SGB III) §§ 95–109 – Kurzarbeitergeld. Federal Ministry of Justice, 2024. https://www.gesetze-im-internet.de/sgb_3/
• Works Constitution Act (BetrVG) § 87(1)(3) – Co-determination. Federal Ministry of Justice, 2024. https://www.gesetze-im-internet.de/betrvg/__87.html
• Short-time work allowance – Information for employers. Federal Employment Agency, 2024. https://www.arbeitsagentur.de/unternehmen/finanziell/kurzarbeitergeld-bei-entgeltausfall
• Leaflet 8a – Short-time work allowance (Merkblatt 8a). Federal Employment Agency, 2024. https://www.arbeitsagentur.de/datei/merkblatt-8a-kug_ba015385.pdf
• Short-time work – Information and background. Federal Ministry of Labour and Social Affairs (BMAS), 2024. https://www.bmas.de/DE/Arbeit/Kurzarbeitergeld/kurzarbeitergeld.html
• IAB Short Reports on short-time work in Germany. Institute for Employment Research (IAB), 2023. https://www.iab.de/de/publikationen/kurzbericht.aspx