Germany: The effects of short time work on annual leave entitlement

May the employer grant leave during the period of short time work?

Short time work allows for the state subsidized reduction of working hours for a limited period of time.

One of the prerequisites for receiving short time work allowances is that the loss of work is unavoidable. If an employee request annual leave for periods of short time work, annual leave shall thus generally be granted. Only, if leave requests of other employees have priority (e.g. due to  their children observing school holidays), an application for leave can be rejected. If leave is not granted, the employer may not receive short time work allowances for these periods.

From an employment law perspective, leave can be granted as usual for those days on which employees are working.

If the employee is completely released from their duty of work (so-called short time work zero), leave cannot be granted. An exception applies in cases where a works agreement expressly stipulates that employees are exempted from short time work for periods in which annual leave is granted. Otherwise, the employee may claim respective annual leave upon termination of the short time work arrangement. In companies with a works council, it is thus advisable that the relationship between leave and short time work is determined in a works agreement.

Whether companies without a works council may grant annual leave during short time work zero is untested law. In these cases, short time work can be introduced (i) unilaterally if the employment contract provides for a respective right, or (ii) by way of mutual agreement with the employee. If short time work is introduced unilaterally, the instruction to short time work should provide that employees are exempted from short time work for the period of their leave. Such clarification could be repeated upon granting annual leave. If short time work is introduced by mutual agreement, it should provide that granted leave takes precedence over short time work.

Does short time work have an effect on the amount of leave entitlement?

The statutory leave entitlement is calculated by number of working days per week. Short time work therefore does not affect the leave entitlement if the number of working days per week remains unchanged.

In a case of short time work zero, the ECJ has decided that the annual leave entitlement is reduced pro ratedly for the short time work “zero” period. This means, for example, that  the annual leave entitlement would be reduced by one quarter if an employee has been on short time work zero for three months of the year. Accordingly, if the employee’s weekly working days are reduced on the basis of short time work (e.g. from a five-day week to a three-day week), the leave entitlement will be reduced proportionately.

While it has not been decided yet whether the leave entitlement is reduced automatically or whether an agreement between employer and employee is required, there are good reasons in favor of an automatic reduction of the leave entitlement. If the employee’s number of working days has changed for the period of short time work, the employer may therefore recalculate the leave entitlement accordingly. This applies to both the statutory and the additional contractual leave entitlement.

What if the employer has granted too much leave?

If the employer has already granted more leave days than the employee is entitled to after the reduction due to short time work, the employer can neither reclaim the overpaid leave pay nor offset it against the leave entitlement in the following year. Therefore, the employer is well advised to keep an eye on the number of leave days for employees on short-time work.

How is the leave pay calculated in case of short time work?

Short time work has no effect on the amount of leave pay. If employees are granted leave during reduced working hours, they remain entitled to the full amount of leave pay. In other words, leave pay is granted as if the employee was not working reduced hours. Consequently, if the employee is granted leave after termination of the short time work arrangement, the period of reduced working hours due to short time work is not taken into account when calculating leave pay.

For more information on these articles or any other issues involving labour and employment matters in Germany, please contact Dr. Tobias Pusch (Partner) of Pusch Wahlig Workplace Law at pusch@pwwl.de or visit www.pwwl.de.