German Short-Time Work Calculator 2026

Short-Time Work (Kurzarbeit) in Germany: A Complete Guide for Expats

Short-time work (Kurzarbeit) is one of Germany's most distinctive labour market instruments, widely credited with preventing mass unemployment during economic crises. The system gained international attention during the 2008-2009 financial crisis and again during the COVID-19 pandemic, when it preserved millions of jobs that would otherwise have been lost. For expats working in Germany, understanding Kurzarbeit is essential because it may directly affect your income during economic downturns.

The legal framework is found in §§95 to 109 of the Third Social Code (SGB III). The benefit (Kurzarbeitergeld, KuG) is paid by the Federal Employment Agency (Bundesagentur für Arbeit) and financed through unemployment insurance contributions. Unlike unemployment benefits, KuG is paid while you remain employed, preserving your employment contract, social insurance coverage, and workplace benefits.

How Kurzarbeit Works in Practice

When a company faces a temporary reduction in work (due to an economic downturn, supply chain disruption, or other unavoidable circumstances) it can apply to the Federal Employment Agency for short-time work approval. The process works as follows:

1. The company reports the work reduction: The employer files a notification (Anzeige über Arbeitsausfall) with the employment agency, demonstrating that the reduction is temporary and affects a significant portion of the workforce.
2. Working hours are reduced: Employees work fewer hours than their contract stipulates. The reduction can range from a few hours per week to complete suspension of work (Kurzarbeit Null).
3. Employees receive partial compensation: For the hours not worked, employees receive KuG from the employment agency, calculated as a percentage of their lost net income.
4. The employer pays for hours worked: The regular salary continues for the hours actually worked, and the employer pays social insurance contributions on the KuG as well.

Prerequisites for Kurzarbeitergeld

Several conditions must be met simultaneously for KuG to be granted:

Significant Work Reduction (Erheblicher Arbeitsausfall)

The work reduction must be "significant," meaning:

• At least one-third of the company's employees must be affected by a pay reduction of more than 10% (in crisis situations, this threshold can be lowered to 10% of employees).
• The reduction must be caused by economic factors (Auftragseinbruch, market downturn) or an unavoidable event (natural disaster, pandemic, supply chain collapse).
• The reduction must be temporary: the company must expect to return to normal operations.
• The reduction must be unavoidable: the company must have exhausted all reasonable alternatives (such as using up accumulated overtime or flexible working time accounts).

Employee Requirements

• The employee must be in a position subject to mandatory social insurance contributions
• The employment contract must not have been terminated
• The employee must not be on unpaid leave
• Temporary workers (Leiharbeitnehmer) and minijob holders are generally excluded

Calculating Kurzarbeitergeld: Step by Step

The KuG calculation follows a specific methodology using standardized net income tables:

1. Determine the target gross salary (Soll-Entgelt): This is your regular monthly gross salary, what you would earn without short-time work.
2. Determine the actual gross salary (Ist-Entgelt): This is the gross salary you actually receive for the reduced hours worked.
3. Calculate the standardized net for both: Using the official KuG tables published by the Federal Employment Agency, the standardized net income is determined for both the target and actual gross amounts. The tables use fixed deduction rates for tax (based on tax class), solidarity surcharge, and social insurance.
4. Calculate the net difference: The standardized net of the actual salary is subtracted from the standardized net of the target salary.
5. Apply the benefit rate: 60% (or 67% with children) of the net difference equals your monthly KuG.

Calculation Example

A single employee (Tax Class I, no children) with a regular gross salary of €4,000 per month whose hours are reduced by 50%:

In this example, despite a 50% reduction in working hours, the employee loses only about 15% of their net income. This demonstrates the significant cushioning effect of KuG.

Tax Treatment: The Progression Clause

KuG is tax-free, but it is subject to the progression clause (Progressionsvorbehalt) under §32b EStG. This means that while KuG is not directly taxed, it is added to your taxable income to determine the tax rate applied to your other income. In practice:

• If you receive KuG during any part of the year, you are required to file an income tax return
• The progression effect typically results in an additional tax of 2% to 5% of the KuG received
• Many employees who received KuG face a back-payment (Nachzahlung) after filing their tax return because the monthly payroll deductions did not account for the progression effect

For expats, this is an important point to budget for. If you received KuG for several months, set aside approximately 3% to 5% of the total KuG amount for the expected tax back-payment.

Social Insurance During Short-Time Work

During Kurzarbeit, your social insurance coverage continues in full. The employer pays social insurance contributions on both the actual salary and on 80% of the income difference (the "fictional salary" basis). This means your pension entitlements, health insurance coverage, and unemployment insurance record remain largely intact during the short-time work period.

For expats who are building pension entitlements in Germany, this is reassuring: a period of short-time work has only a minor impact on your future pension amount compared to a period of unemployment, where contributions are significantly lower.

Employer Top-Up (Aufstockung)

Many employers, particularly large corporations and companies with collective bargaining agreements, voluntarily top up the KuG to bring employees closer to their regular net income. Common top-up levels bring total compensation to 80% to 100% of the regular net salary. Whether your employer offers a top-up depends on company policy, your employment contract, or the applicable collective agreement (Tarifvertrag). The top-up is taxable income and subject to standard payroll deductions.

Side Employment During Short-Time Work

If you did not have a side job before the start of short-time work, you may take on additional employment during KuG, but the income is fully offset against the KuG. If you already had a side job before the short-time work began, the existing side income is not offset, only additional new income is deducted. This distinction is important for expats who may consider freelance or consulting work during reduced hours.

Duration and Extensions

The regular maximum duration for KuG is 12 months. However, the Federal Government can extend this to up to 24 months by regulation (Verordnung) during extraordinary circumstances. During the COVID-19 pandemic, the maximum duration was extended to 24 months, and additional temporary benefits were introduced (increased KuG rates after extended periods of short-time work).

Rights and Protections During Kurzarbeit

• No dismissal during KuG: While there is no absolute prohibition on dismissals during short-time work, courts generally view dismissals during KuG very critically. The fact that the company applied for KuG implies the work reduction is temporary, contradicting the premise of permanent redundancy.
• Holiday entitlement: Your holiday entitlement may be reduced proportionally during short-time work if agreed upon in the works agreement or collective agreement.
• Training opportunities: Periods of reduced work are often used for employee training and upskilling. The Federal Employment Agency may fund training measures during Kurzarbeit.

Practical Tips for Expats Affected by Short-Time Work

• Understand your payslip: During KuG, your payslip will show the actual salary for hours worked, the KuG amount, and any employer top-up separately. Verify these amounts carefully.
• Set aside money for taxes: Budget 3% to 5% of your total KuG for the expected tax back-payment when you file your income tax return.
• File your tax return: You are legally obligated to file a return in years when you receive KuG. Missing this deadline can result in estimated assessments and penalties.
• Check your residence permit: For non-EU expats, extended short-time work may raise questions about your income level relative to residence permit requirements. Consult with the Ausländerbehörde if concerned.
• Use the time productively: Reduced working hours provide an opportunity for language courses, professional development, or certifications that improve your long-term career prospects.