Germany has turned to partial unemployment. Thanks to the relaxation of the partial unemployment benefit (KUG) in response to the coronavirus crisis, more than 720,000 companies are currently resorting to partial unemployment, according to the media. And the longer the crisis lasts, the more companies are likely to do so. The advantage for companies: It reduces remuneration costs and the lack of liquidity in the event of a drop in load. The employer must pay less or no remuneration to the employees, and the employee’s net loss is compensated (to some extent) by the state. During the corona crisis, the employer does not even have to pay the social security contributions that he would normally have to pay for the gross difference to a certain extent. In other words: liquidity risk recognized, liquidity risk avoided.
1. Deferred reimbursement of partial unemployment benefits?
Or maybe not? Due to the large number of companies that have applied or will apply for partial unemployment benefits, it is to be feared that the approx. 600 agencies of the Federal Employment Agency could be so overloaded in processing applications that the partial unemployment benefit will only be paid with a considerable delay. This would be a problem for companies because they usually advance the partial unemployment benefit but currently do not achieve any turnover or do not get their bills paid. It is true that the plan for short-time work allowances provides that the employment agencies initially only check the plausibility of the request for short-time work allowance, and only carry out checks months later random details. These checks will then verify whether the employer has correctly calculated and requested the partial unemployment benefit. This is to ensure that employment agencies do not have to check too long before the short-time work allowance is paid. However, by law, they must perform this plausibility check before payment and cannot simply “review” a claim. The registration of requests and the only instruction of payments ‑ independently of any control over the content ‑ will already take considerable time.
Therefore, some fear that the partial unemployment benefit will be paid within 15 days of the request – as envisaged by the supervisory ministry – but only after a few weeks, or even a few months. That’s too long for many companies. The situation is aggravated by the fact that for the month in which partial unemployment is effective, the request for payment of the partial unemployment benefit can only be made the following month.
Unfortunately, there is still no experience to verify or refute these fears. Most of the companies that sent their employees on short-time work in response to the coronavirus did so in March this year and were therefore only able to submit the corresponding applications for short-time work benefits in early/mid-April. It therefore remains to be seen how quickly the payments will actually be made. This can vary from case to case and ultimately also depends on the respective branch of the employment office.
2. Financing of the partial unemployment benefit claim by the main bank?
For companies that do not want or cannot wait for the compensation payment of the partial unemployment benefit by the Employment Agency, the question arises whether their main bank could refinance the partial unemployment benefit already paid to employees. In principle, this should be possible if the main bank is secured accordingly. To this end, the short-time working allowance claim that the company has against the Employment Agency may be pledged or assigned as collateral to the main bank. This is legally possible and, in our opinion, does not require the express consent of the employee concerned. Due to the payment of the short-time work allowance, the employer has his own garnishable claim against the employment agency under Section 670 of the German Civil Code (BGB). However, the consent of the employees must be obtained if the main bank requests it (see Brand/Kühl SGB III 2018 ch. 108 margin no. 7, 21). Due to the special provisions of insolvency law applicable until September 30, 2020, the repayment claim pledged or assigned as security to the main bank would be insolvent.
In view of the uncertainties that arise as to the correct calculation of the claim for reimbursement from the Employment Agency, a retention may be made. The amount of such a deduction will depend on the complexity of the claims to be requested (eg in the case of variable remuneration elements). In this way, however, it should be possible to have a substantial part of the claim for reimbursement of the short-time work allowance financed by the main bank.