60 percent of normal net pay: With the current short-time work allowance , many workers are barely making ends meet.
IG Metall and works councils have therefore succeeded in getting employers in numerous companies within IG Metall’s organizational area to top up short-time work benefits —to 80, 90, or more percent of normal net pay.
The problem: Until now, these supplements were fully taxable. This was a loss for workers on short-time work and for responsible employers—and put them at a disadvantage compared to, for example, tax-free bonus payments.
Tax-Exempt Subsidies
IG Metall has advocated for correcting this imbalance. That has now happened. The Bundestag and Bundesrat have approved the“Coronavirus Tax Relief Act.”Under this law, the federal government is making employer supplements to short-time work benefits and seasonal short-time work benefits tax-free—up to 80 percent of the difference between the target pay and the actual pay.
For many employees on short-time work, the law means cash in hand (for gross wage targets). In other cases, the new regulation provides relief to employers who supplement short-time work benefits (for net wage targets). The tax exemption applies retroactively from March 1, 2020, and is limited until December 31, 2020.
“This law brings more fairness to tax law,” says Jörg Hofmann, President of IG Metall. “Supplements to short-time work benefits go directly to employees. That’s one more reason to demand such supplements from employers in all industries and regions.”
Four Steps Toward Better Short-Time Work Benefits
The new tax regulation is already the fourth step toward simplifying and improving short-time work that we have fought for in Berlin. Since the start of the COVID-19 crisis, the federal government has significantly strengthened the short-time work program by:
- has significantly lowered the barriers to receiving short-time work benefits
- has extended the duration for which short-time work benefits can be received
- has increased short-time work benefits
- has approved tax relief measures.
IG Metall has actively advocated for all four of these steps. For employees, these measures mean significantly greater security. Companies that would not have been eligible for short-time work before the COVID-19 crisis can now take advantage of it. This helps preserve jobs and prevent unemployment. The short-time work measures thus support the entire labor market and, consequently, the economy.
By extending the program and increasing short-time work benefits, employees who have been affected by short-time work for a particularly long time—and who therefore need support the most urgently—are receiving assistance. This is the right and important thing to do, even though IG Metall believes an increase in short-time work benefits would be appropriate after a shorter period.
