Short-time work or leave – what takes precedence?

  • 02/10/2021
  • Reading time 5 Minutes

Due to the pandemic, many employees are still subject to short-time work arrangements. The simplified short-time work regulations which had been passed by the federal government in spring 2020 in order to mitigate the pandemic’s consequences continue to apply.

One recurring question in practice is the relationship between leave and short-time work.

It is undisputed that leave can also be taken during short-time work. In this case, the leave remuneration is to be granted in the usual amount for the duration of leave. Reductions in earnings as a result of short-time working are not to be taken into account. This is clearly regulated in the German Federal Vacation Act (Art. 11 Sec. 1 sentence 3 BUrlG). Employees can thus avoid loss of earnings due to short-time working by taking leave during short-time work periods. No short-time allowance is paid for them during this time, which therefore also reduces the burden on the social insurance funds.

A recurring subject of discussions is the question of whether employees affected by short-time work must take their leave prior to the implementation of short-time work.

Art. 96 Sec. 4 sentence 2 no. 2 SGB III (German Social Code, Chapter III) stipulates that leave must be taken primarily before short-time work. Previously, the German Federal Employment Agency (BA) had not mandatorily required this in its Technical Instructions on Short-Time Work. As a result, short-time work was introduced in many companies last year during the first lockdown, even though the employees concerned still had plenty of remaining leave or leave entitlements from the current calendar year.

In its current Technical Instructions “Regulations on the 2021 short-time work allowance procedure” of December 23, 2020, the BA now makes clear that, in order to avoid short-time work, i.e. prior to its implementation, one must generally take the remaining leave and leave from the current year.

In case of remaining leave, one must distinguish as follows:

If the remaining leave cannot be carried over to the subsequent year, it must mandatorily be taken by the end of the leave year in order to avoid short-time work; only then is short-time work permissible.

If the remaining leave can be carried over to the subsequent year, it must also generally be taken in order to avoid short-time work. This applies at least to unscheduled leave. Employers and employees must agree on the use of such leave during periods of absence from work. However, the employee’s and employer’s primary leave requests take precedence. If the employee has already planned his leave or if the employer has scheduled company vacations at a specific, already fixed time, the leave intended for such purpose does not have to be used in advance in order to avoid short-time work, but can be taken in accordance with the plans, i.e. even after short-time work has been implemented.

The same applies to leave from the current calendar year. As of January 1, 2021, unscheduled leave from the current leave year must primarily be taken in order to avoid short-time work. Previously, this did not apply; in the past, the BA was much more accommodating in connection with the mandatory use of the current year’s leave. The BA justified its liberal stance inter alia with the statement that, due to the closure of schools and daycare facilities for children, parents often needed unexpected days of leave during the pandemic and therefore a prior use of outstanding leave prior to the introduction of short-time work was not mandatorily required. In the meantime, the BA deviated from such view and now generally demands to primarily take the current year’s leave. It substantiates its stricter approach inter alia with the statement that, due to the creation of a compensation for loss of earnings in Art. 56 Sec. 1a IfSG (German Infection Protection Act) in case of closed daycare facilities and schools, a “reservation” of leave days for closing periods was no longer required. Therefore, one had to take, besides the remaining leave, also leave from the current calendar year before short-time work was implemented.

However, the BA’s new Technical Instructions leave one loophole: The use of leave from the current calendar year is only mandatory if it has not been scheduled yet. If the employee already has specific vacation plans, at least such scheduled leave days are not subject to the requirement to take the leave prior to the introduction of short-time work.

Practial Tip

In order to avoid disputes as to whether employees are required to take their current 2021 leave prior to the introduction of short-time work, employers and employees should consult and agree upon specific vacation schedules for 2021 at an early stage. This also applies to company holidays which should be scheduled at an early stage as well. If there are no specific vacation schedules, there is a risk that the BA will grant short-time work allowances only if the affected employees have not only used their remaining leave but also their leave from the current calendar year in advance.

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