COVID-19 Emergency Centre

10 facts you should know about Kurzarbeit, the short time work program by means of which you will have received full salary and which can save your job

The success of the Kurzarbeit model and the willingness of employers to use this support scheme offered to the companies that use short-time work as a result of the temporary reduction of the activity depending on the conditions that will be imposed for accessing it, says Anca Grigorescu, one of the most senior lawyers who supported the adoption of Kurzarbeit since March.

Anca Grigorescu, head of the Employment & Benefits and Taxation practice, answers at 10 questions you might have with respect to this program.

1. What is Kurzarbeit and what is its impact?

The Kurzarbeit concept means short-time work and is an economic model launched 110 years ago, in Germany. Kurzarbeit was also used during the two world wars but became widely known during the 2008 global financial crisis.

OECD estimations show that by the third quarter of 2009 more than 200,000 jobs in Germany had been saved due to Kurzarbeit[1]. Also, during 2009, during the former financial crisis, although Germany’s Gross Domestic Product fell by almost 6% in 2009, with the highest decrease of the Gross Domestic Product of the seven assessed countries, the number of employees remained stable.

On the other hand, in other strong economies such as France, Italy, the United Kingdom, Japan, the USA or Canada, the number of employees decreased, the largest contraction being in the USA, up to almost 4%, according to International Monetary Fund data[2].

Source of the table: International Monetary Fund

2. How many employees and companies do you estimate that will benefit from this program?

 Is the most difficult question to answer. The criteria for estimating this number would be based on:

» The number of companies affected by economic developments. This includes both the companies that suspended the employment contracts during the state of emergency and thereafter and those that made efforts not to suspend the employment contracts and to which the economic situation has aggravated

» The duration for which this program may be implemented

» The possibility to simultaneously or alternatively access several support programs

3. What percentage of the salary would receive the employee of a company benefits from this program?

The allowance borne by the state would be of 75% of the difference between the gross basic salary provided in the individual employment contract and the gross basic salary for hours actually worked.

For example, if someone’s working time would be reduced to 50%, the employee would receive 50% of the salary from the employer and 37.5% from the state. This means a total of 87.5% for an actual work time of 50%.

4. How much of the salary would be borne by the state and how much by the companies?

The companies would pay the hours actually worked by the employees. The state would borne 75% of the difference unpaid by the employer.

5. What expenses, but also what revenues would the state have from this program? What amounts will the employees receive?

The total amount the state will spend through the amounts disbursed by the employers versus the amounts it would receive through taxes and social contributions depends on how many companies will apply for the program, on the number of employees who will benefit from it, on the period for which the program will be implemented, on how much the working time will be reduced.

Currently, I cannot make this estimate because we do not have the necessary data. However, we can analyse some examples. If an employee’s activity would be reduced to 50%, here are some calculations based on different salary levels:

» Average gross salary (5,201 lei in April 2020) – the state spends 1,950 lei and receives 1,991 lei. The employee receives 4,551 lei as a gross salary.

» Minimum gross salary (2,230 lei) – the state spends 836.25 lei and receives 804 lei. The employee receives 1,951 lei as a gross salary.

» Gross salary of 9,000 lei – the state spends 3,375 lei and collects 3,446 lei. The employee receives 7,875 lei as a gross salary.

6. What kind of companies do you think can access this program?

Are eligible the companies that have temporarily reduced their activity and whose turnover has decreased by at least 10% compared to the same month of the previous year. Also, in the economic recovery plan launched by the Government is specified that the measure can be implemented for a minimum period of three to six months and will apply in case of reduced working time for at least 10% of a company’s employees.

I think that all types of companies with temporarily reduced activity, whether we are talking about SMEs or large companies, will be interested in accessing this program. The measure is expected by the entire business environment in Romania, whether they are companies that have made or not layoffs or companies they have suspended the employment contracts through technical unemployment.

The Government will establish the conditions under which a company can apply for this program.

7. Why did you think this program is suitable for Romania?

 Romania needs this program to cover the needs of the companies that cannot longer be addressed through existing or prior programs. For example, the support for the technical unemployment allowance is currently extremely limited in scope. The measure regarding the disbursement for three months of 41.5% of the salary is, also, limited in scope, subject to the prior application, during 15 working days of the technical unemployment of each employee for whom this support may be granted. Is also an inflexible measure as it implies the employer obligation to maintain the position until the end of 2020. However, now it particularly difficult, if not impossible in many cases, to forecast the activity for the following six month.

8. What measures do you think it could be taken in order to avoid abuses, to not apply to the program companies that do not need Kurzarbeit?

The measures I consider that can prevent the abuses are the personal statements regarding the reduction of the work performed by the employees, sanctioning with high fines even by criminal sanctions in case of illegal actions and the performances of inspection by the labour authorities. On the other hand, there will be a high risk of abuses in the context of the inspections.

9. What do you think should be the main feature of this program?

This program must be essentially flexible. For example, if at the beginning of the month the manager of a company estimates that the activity for the employees will be of only 10%, but until the end of the month reaches 100% or the employees should even perform over time in certain days, the Kurzarbeit should allow it. Otherwise, it will not become the necessary tool for the companies to recover the activity. It would be also useful the possibility to reduce the working time up to 20% or even up to 10%.

The success of this program of recovery of the business shall depend to a large extent on the level of conditions and restrictions imposed to the employers in order to access it. In case the conditions will be impossible or too difficult to fulfil, the employers may have to resort to measures which are more easily to implement which, in this case, result in dismissals.

10. When this program could become functional? 

The business environment hoped to have this program functional since early July, however one of the current scenarios takes into account September. According to the statements made so far, the Government currently drafts and will publish in the near future the Emergency Ordinance by means of which Kurzarbeit shall be implemented in Romania. Most probably the procedure to implement the program shall be drafted and published at a later stage. Saving of many jobs and even saving many companies depend on the speed of the implementation of Kurzarbeit, thus I hope the program will become functional as soon as possible.

 

About Anca Grigorescu and her involvement in promoting the Kurzarbeit model

Anca Grigorescu has over 20 years of experience as a lawyer and since 2006 she is a co-founding partner of the law firm bpv Grigorescu Ștefănică. She coordinates the Employment & Benefits and the Tax Law practices of the firm. Anca Grigorescu is recommended as a leading lawyer by some of the most prestigious international legal directories such as Chambers & Partners, Legal 500, ITR World Tax.

She is also the coordinator of the Labour Law Committee of the German-Romanian Chamber of Industry and Commerce (AHK), co-head of the Labour Law Committee of the American Chamber of Commerce in Romania (AmCham) and an active member of the employment task force in Coalition for the Development of Romania.

From these positions, Anca Grigorescu actively promoted the concept of Kurzarbeit as a tool for job protection and gradual recovery of business by Romanian companies: she identified models compatible with Romanian legislation, the advantages of Kurzarbeit and the need of this to contribute to the recovery of the Romanian economy.

“From the very beginning of the state of emergency, we identified as a necessity for the development of the Kurzarbeit concept for the Romanian economy. This is an idea inspired by the German concept, which has existed for over 100 years. We considered this measure as an essential one on the short and medium-term for maintaining as many jobs as possible and for saving Romanian companies. Our country needs this program to cover the needs of this business environment that can no longer be covered by existing”, says Anca Grigorescu.

 

[1] https://oecdobserver.org/news/archivestory.php/aid/3300/Keeping_Germany_at_work.html

[2] https://www.imf.org/en/News/Articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit

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