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At the beginning of 2021, extensive changes in German employment law came into effect, including some of particular significance to employers. In addition, on January 19, 2021, the German Federal Government implemented restrictions on public life in order to contain the coronavirus pandemic that affect employers.

Amendment of § 56 of the German Infection Protection Act (IfSG)

Loss of Earnings Due to Childcare Duties

The new provision of § 56 IfSG provides for extended compensation for the loss of earnings for parents who have to care for their children at home due to extended school or company vacations or the suspension of in-person school for reasons of infection prevention.

The requirements for claiming compensation under § 56 (1a) IfSG are as follows:

  • schools or facilities for the care of children have been closed for reasons of infection prevention, the responsible authority has announced or extended school or company vacations for reasons of infection prevention, or the compulsory attendance at a school has been lifted;
  • the employee cares for a child under the age of 12 or an individual who is dependent due to a disability;
  • supervision, care, or nursing is now provided by a working parent because other reasonable care cannot be provided (this must be evidenced); or
  • the employee has suffered a loss of earnings as a result.

There is no entitlement to compensation payment for a closure that would have taken place anyway due to regular school or company holidays.

Under this provision, the amount of compensation is 67 percent of the net loss of earnings incurred, but it is limited to a maximum amount of EUR 2,016 per month. This compensation is granted for a maximum of 10 weeks per parent providing care (and thus affected by the loss of earnings). For single parents, there is the possibility of compensation for a period of up to 20 weeks related to the duration of the measure (e.g., school closures). Generally, the compensation is calculated and paid by the employer. The employer claims the compensation from the competent authority.

Extension of Entitlement to Children’s Sick Pay Until December 31, 2021

In addition to the aforementioned expansion of compensation for parents’ losses of earnings under § 56 IfSG, the entitlement to children’s sick pay has also been expanded retroactively as of January 5, 2021.

First, the entitlement period was extended for a limited time. In 2021, under the newly inserted § 45 (2a) German Social Code, Book V (SGB V), each parent is entitled to up to 20 working days (instead of 10) per child and up to 40 working days (instead of 20) for single parents. However, this entitlement is granted for a total of no more than 45 working days (even if the number of children exceeds 3), and for single parents for no more than 90 working days.

Second, the legislature included additional eligibility criteria in the new regulation. Accordingly, in 2021 the entitlement to children’s sick pay also exists if

  • facilities for the care of children, schools, or facilities for persons with disabilities are temporarily closed by the competent authority to prevent the spread of infections or communicable diseases on the basis of the IfSG;
  • additional school or company holidays are ordered or extended;
  • the compulsory attendance in schools is lifted;
  • childcare facilities or services are restricted; or
  • the child does not attend the facility due to an official recommendation.

Entitlement to children’s sick pay due to the necessity of caring for a child exists even if the parent already works in the home office or could perform work duties in the home office. Parents are not required to care for their children in addition to performing their home office work. An entitlement lapses only if care is ensured by another person living in the household.

If an employee receives children’s sick pay, the employer must release that employee from work duties without pay. As proof, the employer may request a certificate from the school or other childcare facility. The employee receives the children’s sick pay directly from his or her health insurance.

New Occupational Health and Safety Regulation: Obligation to Require Employees to Work From Home

On January 19, 2021, in an effort to contain the coronavirus pandemic, the federal and state governments agreed to finalize a new SARS-CoV-2 occupational health and safety regulation, effective January 27, 2021.

The new occupational health and safety regulation—whose effective period has been limited until March 15, 2021—stipulates that in the case of office work or comparable activities, employers must offer employees the opportunity to carry out these activities in their homes in the absence of compelling operational reasons that would prevent that. Accordingly, under the new regulation, employers are now obligated to enable their employees to work at home to a large extent. This measure, which some employers may view as drastic, is intended to counteract the increased risk of infection through work contacts, as well as prevent employees from having to use public transport when commuting to or from their workplaces.

The wording in the regulation is broad; in particular, it is unclear what reasons would qualify as compelling operational reasons. Not all office work can be performed from home. For example, activities such as processing physical mail must take place on-site. It remains to be clarified how an employer should proceed if an activity could be performed outside the office, but the technical requirements are lacking.

Tax Relief for Employees Working From Home

For the calendar years 2020 and 2021, each day an employee worked exclusively at home can be claimed against tax at a “home office” flat rate of EUR 5 per day. This flat rate applies for a maximum of 120 days each calendar year. The maximum annual home office allowance that may be taken into account on the annual tax return is EUR 600.

The flat rate is permitted even if there is not a dedicated room set up for work in the home or if the stricter requirements for deducting home office expenses are not met. This is of particular benefit to employees who are currently working at home due to the COVID-19 crisis.

Of course, the commuter allowance for the commute to and from the workplace cannot be claimed for the days on which work was performed exclusively in the home office. This is because working in a home office does not require commuting to the workplace. Importantly, the home office tax reduction is included in income-related expenses, for which a flat rate of a maximum of EUR 1,000 has already been set. For this reason, tax relief is in fact granted only if the income-related expenses actually claimed on the tax return, including the home office flat rate, exceed EUR 1,000.

Extension of the Changes With Regard to Short-Time Work

The changes to short-time work allowance adopted in April 2020 included easier access to short-time work allowance and an increase in the amounts paid. The federal government has now extended these regulations due to the ongoing restrictions of the coronavirus pandemic.

  • The access threshold, under which only 10 percent of the company’s employees (or a company department) must be affected by loss of pay (as opposed to the 30 percent of employees affected that would otherwise be required), now applies to all companies that began short-time work by March 31, 2021, and will be extended until December 31, 2021.
  • The increase in the short-time allowance amount to 70 percent of the gross monthly wage (or 77 percent for affected employees with children) from the fourth month of entitlement and to 80 percent of the gross monthly wage (or 87 percent for affected employees with children) from the seventh month of entitlement has also been extended until December 31, 2021. It applies to all employees whose entitlement to short-time allowance arose before March 31, 2021.
  • The period of entitlement to short-time allowance for employees of companies that started short-time work by December 31, 2020, has been extended from 12 months to up to 24 months, but it will not extend beyond December 31, 2021.
  • The amended regulations for supplementary earnings have also been extended. For example, remuneration from an employment relationship in which income is less than EUR 450 a month (geringfügige Beschäftigung/Minijob), which is started while an employee is on short-time work, will remain tax-exempt until December 31, 2021.
  • Social security contributions will be fully refunded until June 30, 2021, after which half of the contributions will continue to be refunded until December 31, 2021, for all companies that began short-time work by June 30, 2021.
  • The tax exemption for employer subsidies for short-time working has also been extended until December 31, 2021.
  • Temporary employees may also receive short-time allowance if they are employed by a temporary employment agency that has started short-time work by March 31, 2021. This regulation also applies until December 31, 2021.

Extension of the Special Regulations on Video Conferences of the Works Council

The provision of § 129 of the Works Constitution Act (BetrVG) that allows meetings of the works council and other works constitutional bodies to be held via video or telephone conferences has now been extended from December 31, 2020, until June 30, 2021. Previously, such meetings could only be held in the form of face-to-face meetings, which was derived from § 33 (1), sentence 1, of the Works Constitution Act (BetrVG). The possibility of shifting meetings to the virtual realm takes into account the pandemic restrictions, including distance regulations, home office requirements, and reduced physical contacts, while ensuring the functioning of such bodies.

Immigration of Workers

Extension of Western Balkans Regulation

The so-called “Western Balkans regulation” was extended to December 31, 2023. The original regulation was in effect from 2016 through December 31, 2020, and gave workers from the Western Balkans region (i.e., from the states of Albania, Bosnia and Herzegovina, Kosovo, Montenegro, Northern Macedonia, and Serbia) privileged access to the German labor market. Through the regulation, German employers may hire nationals from these countries as workers, regardless of formal qualifications for training or employment.

However, this access is limited because any hiring under the Western Balkans regulation requires the approval of the Federal Employment Agency. The Federal Employment Agency checks whether the particular job could be filled by a German worker and whether the same employment conditions are granted as they would be for German workers. However, the number of approvals that the Federal Employment Agency can grant is now limited to 25,000 per year in order to prevent overloading the offices responsible for granting visas.

Impact of Brexit on Employees From the United Kingdom

As Brexit has been implemented, the conditions for UK citizens with regard to access to the German labor market have changed. As non-EU citizens, they will need residence permits entitling them to work in Germany. However, such a residence permit will be granted under less strict conditions for UK citizens, as the United Kingdom is on the list of privileged states. British and Northern Irish nationals who already resided in Germany on December 31, 2020, are entitled to continue living in Germany under the EU-UK Withdrawal Agreement. They must provide notice of their residence to the immigration office responsible for their places of residence by June 30, 2021, in order to be able to receive the new residence permit, which provides for permanent residence of at least 5 years but no more than 10 years. However, UK citizens who did not live in Germany prior to January 1, 2021, are not eligible under the EU-UK Withdrawal Agreement and may only stay within the Schengen area for up to 90 days with their passports. Future employees can then apply for their residence titles for the purpose of gainful employment in Germany at the respective immigration offices responsible.

Extension of the Payment Period for the “Corona Bonus”

In 2020, in view of the burden of the coronavirus pandemic, the legislature created an option for employers to grant their employees a one-time, tax- and social security-exempt bonus of up to EUR 1,500 in kind or through financial allowances. This regulation has been extended under § 3 (11a) Income Tax Act (EStG).

The regulation covers all special benefits and bonuses paid to employees after March 1, 2020, and until June 30, 2021. The special benefits must be paid in addition to the regular salary (i.e., it may not constitute deferred compensation from, for example, vacation or holiday pay, or as an offset against the employee’s salary).

In addition, there must be a link to the coronavirus pandemic. This means that employer benefits based on an agreement or legal obligation existing before March 1, 2020, cannot be granted as a tax-free “corona bonus.” Employers may choose to make higher bonus payments, but the payments remain tax-free only up to EUR 1,500. The payment of a “corona bonus” is allowed in all sectors and for part-time or marginal employees. Employers may also pay bonuses to mini-jobbers who work in employment relationships on a EUR 450 basis, without the employment relationships thereby becoming subject to social security contributions. This also applies regardless of whether and to what extent short-time allowance is paid.

It should be noted, however, that the extension until June 2021 does not mean that an additional bonus of up to EUR 1,500 may be paid tax-free again in that year. Only the period for granting this one-time “corona bonus” special payment has been extended. If an employer has already exhausted the maximum tax-free amount of EUR 1,500 vis-à-vis an employee in 2020, the extension will not result in an overall increase in the amount of the tax-free bonus.

Ogletree Deakins will continue to monitor and report on developments with respect to the COVID-19 pandemic and will post updates in the firm’s Coronavirus (COVID-19) Resource Center as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.


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