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Client Alert 31 Mar. 2020
Click here to download a PDF copy of this alert.
The COVID-19 crisis has a significant impact on the economy. Particularly small businesses, the self-employed, freelancers and farmers are affected and need urgent assistance, but also large businesses get impacted. The Federal Government has reacted quickly and created a comprehensive emergency aid package. In addition to emergency aid in the form of financial support for companies and the self-employed, the conditions for short-time working allowances have been simplified.
I. Financial Aid Package
On 27 March 2020, the German legislator passed a comprehensive package of laws on financial support for small and large businesses, self-employed and freelancers. The aid package consists, among other things, of the Act on the Establishment of an Economic Stability Fund (Wirtschaftsstabilisierungsfondsgesetz “WStFG”). WStFG grants emergency aid of up to 50 billion euros. To this end, an Economic Stability Fund was set up and the federal budget was amended accordingly. The respective federal states are responsible for the payment of emergency aid. The financial aid package statutes:
In addition, the Federal Government is establishing an economic stabilisation fund, which is aimed in particular at large companies and can provide large-volume aid. It supplements the liquidity assistance already decided on via the special programmes of the KfW. The fund contains:
II. Short-Time Compensation
In order to provide additional financial relief to companies in the COVID-19 crisis, German legislators have simplified the conditions for receiving short-time work compensation. Companies that suffer a considerable loss of work and thus loss of earnings due to financial difficulties can apply for short-time work compensation under the Social Code III (Sozialgesetzbuch “SGB III”). Short-time work means that the employer no longer has sufficient work capacity available for all employees due to a financial imbalance. This would result in dismissals for operational reasons in order to keep the company afloat. The short-time working allowance is intended to counteract this problem. According to the SGB III the company can register so-called short-time working with the Federal Employment Agency, which means that the employees working hours are reduced and they receive a reduced wage. This reduced wage is paid by the employment agency. By reimbursing the short-time work allowance, employers receive temporary economic relief by reducing personnel costs.
On 13 March 2020 the conditions for receiving the short-time working allowance were eased by the Act on the Temporary Improvement of the Regulations for Short-Time Work Compensation due to the Crisis. Specifically, the Act on the Temporary Improvement of the Regulations for Short-Time Work Benefits due to the Crisis provided for subsequent changes until 31 December 2021:
Attorney advertising. The material contained in this Client Alert is only a general review of the subjects covered and does not constitute legal advice. No legal or business decision should be based on its contents.
Corporate
Banking and Finance
Finance
Investment Management
Commercial Disputes - Litigation
Commercial Disputes - Arbitration
Mergers and Acquisitions
Real Estate
Commercial and Residential Real Estate
Sabine Schmidt
Counsel
Dr. Karsten Rahm
Partner
Justina Speth
Associate
Frankfurt
+49 69 247 576 0
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