February 07, 2020

Furloughs as a response to economic crises

German companies with a temporarily reduced workload due to economic reasons or an act of God (such as natural disasters) can benefit from a furlough scheme provided by the Federal Employment Agency. In case of a decline in orders due to temporary economic circumstances employers can reduce the working hours of their employees and their salaries accordingly, whilst the employees will receive benefits from the Employment Agency to offset the reduction in salary. Thus, layoffs can be avoided and once the economic situation has improved or the company has adjusted its strategic direction, it can continue operating with its experienced and skilled staff.

Still furloughs cannot be unilaterally invoked by an employer. They must be provided for in a collective bargaining agreement or individual agreements with the employees. The Collective bargaining framework agreement for employees of the Bavarian metal and electrical industry for example has such provisions in ยง 3. In addition, furloughs must be agreed upon with the works council.

Currently, benefits for furloughed workers can be granted for up to 12 months, but the federal government has the option of extending that period to 24 months in times of a general economic crisis. It is possible that this option will be exercised in the near future. Applications for benefits due to furloughs have been increasing significantly since 2019.


Julius Jacoby

Arbeitsrecht, Wirtschaftsrecht, Internationales Recht

Julius Jacoby