EXPLAINED: what you need to know about Germany’s ‘Kurzarbeit’ job support scheme

During the pandemic, any international resident living in Germany will have become familiar with the words ‘pandemie’ (pandemic), ‘maskenpflicht’ (compulsory masks) and ‘impfstoffe’ (vaccines). You may also have heard ‘Kurzarbeit’ being discussed, especially if you're an employee.

EXPLAINED: what you need to know about Germany's 'Kurzarbeit' job support scheme
Photo: Getty Images
Together with the tax-filing app Taxfix, The Local presents answers to the key questions regarding what has become an important job-saving measure. Taxfix is also offering readers of The Local either a free or discounted tax return
What is Kurzarbeit’? 
Kurzarbeit, or ‘short work’, is far from a new idea in Germany – it became fully established in 1924 as a response to the economic crisis of the Weimar Republic. But it has risen to a new level of prominence during the Covid-19 pandemic. 
Essentially, in order to deal with a shortage of work, company employees are put on reduced hours. The federal government then steps in to pay around 60 percent of their salary for a set period of time – normally a year. This payment is known as ‘Kurzarbeitergeld’ (short-time worker payment) and is paid directly into your bank account. 
In 2020, 16 percent of the German workforce were on ‘Kurzarbeit’ as a result of the pandemic – that’s around 7.3 million people. 
Who is eligible for ‘Kurzarbeit’?
All full-time or part-time employees who have had their hours reduced, and that have not been made redundant can apply for ‘Kurzarbeit’. You must also be making contributions to social security, and the loss to your gross monthly salary must be over ten percent. 
Freelancers, interns, students and other types of workers are not eligible to receive ‘Kurzarbeit’. However, the federal government has other forms of aid available to these workers. 
Taxfix is offering a free tax return to those on Kurzarbeit, by clicking hereNot on Kurzarbeit? Taxfix is offering a 15% discount on your return when you use this link and the code 'TX_Localtaxes'
Does the amount of Kurzarbeit vary? 
Yes. The monthly ‘Kurzarbeitergeld’ is normally calculated at 60 percent of your monthly net salary at the time it takes effect. 
However, there are some things that can alter the percentage. For example, parents with one child receive 67 percent of their monthly salary, and this percentage grows over the duration of ‘Kurzarbeit’. 
Photo: Getty Images
Can I take another job while I’m receiving Kurzarbeit?
If your job isn’t affected by workplace agreements, you can take a part-time job while on ‘Kurzarbeit’ to make up for the loss to your income. 
If you took on a part-time job during the crisis, you can earn up to the full amount of your previous monthly income. 
Just note that your main employer must agree to you taking a second job. The pay from your part-time job can also impact the amount of ‘Kurzarbeitergeld’ that you receive. 
What happens if I can’t live on ‘Kurzarbeitergeld’? 
Since the beginning of the pandemic, the government has loosened the requirements for benefits, meaning that there is no means testing, and you don’t even need to have made an in-person appointment to claim benefits. Talking to your local ‘Agentur fur Arbeit’ (Federal Work Agency) office by phone or website chat can give you a clear idea of what benefits you’re entitled to, and how to claim them.
Does ‘Kurzarbeit’ have any impact on the taxes I pay? 
Yes. ‘Kurzarbeit’ is available because almost everybody who works pays a form of social security, deducted from salaries at the source – meaning your workplace pays it to the government. This money is considered tax-free. 
If your tax rate changes because of going onto ‘Kurzarbeit’, you’ll almost certainly need to submit a tax return for 2020 – even if you don’t normally. If you don’t have a tax advisor – which probably means most of us – you’ll need to submit a tax return by July 31st, 2021.
There are many options available to those who wish to do their own taxes in Germany. These encompass paper kits, websites and, increasingly, user-friendly apps such as Taxfix. 
Taxfix is available via their website and their app, which can be downloaded here. It has the benefit of being designed for English-speaking expats, and the average return takes only 22 minutes to complete. Filing a return with an estimated refund of under €50 is free of charge, and there is a flat rate of €39.99 for other returns.
In support of those affected, Taxfix is offering a free tax return to those on Kurzarbeit, by clicking hereNot on Kurzarbeit? You can also benefit, as Taxfix is offering a 15% discount on your return when you use this link and the code 'TX_Localtaxes'
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EXPLAINED: The German tax changes coming into effect in April 2023

April 1st will see many of the recent changes to Germany’s tax regime implemented. Although passed through the Bundestag last year and technically effective as of January 1st, April is the first month many of the changes will be evident on employee payslips. We explain what might look different.

EXPLAINED: The German tax changes coming into effect in April 2023

Employees working in Germany should finally see some changes on their payslips in a month from now, as tax law amendments passed last year finally leave some extra money in their bank accounts at the end of each month.

The most important changes concern tax credits or allowances—and many don’t have to be applied for.

Employees will generally see the new allowances automatically calculated into their monthly payslips.

Freelancers will have to use these new numbers when filing their 2023 tax returns after the end of the year. Here are the most important changes:

Basic tax-free allowance increases

The Grundfreibetrag – or “basic allowance” – is the amount of money you get to make a year before being subject to any German tax. In 2022, the first €9,984 a person made in Germany was subject to no tax at all, with any money made on top of that being taxable. As of April 2023, that number is increasing by quite a bit, to €10,908 annually. Employees should see this extra money prorated by month starting with their April 2023 payslip.

READ ALSO: EXPLAINED: How to understand your German payslip

Higher income threshold before entering top tax rates

Before April 1st, earning €58,597 annually put you into the highest possible income tax bracket in Germany. Any earnings above this were subject to the top tax rate of 42 percent.

As of April 1st, the amount someone has to earn before paying the top tax rate of 42 percent goes up by several thousand euros to €62,810 per year, meaning a little bit extra stays in the accounts for anyone earning less than this. There is still a special tax bracket above this for wealthy people. That threshold starts at earnings of €277,826 annually and will remain the same, with people making at least this amount subject to a top tax rate of 45 percent.

READ ALSO: Reader question: How do I find a German tax advisor?

Employee lump sum tax credit to go up

Although freelancers can deduct almost anything associated with their work on their annual tax returns—from stationary to computer and phone purchases—German tax offices also generally assume that employees have certain expenses related to their work that they may pay out of their own pockets.

These could be phones or LinkedIn subscriptions for example. Crucially, the tax office simply gives an amount to each employee in tax credits—without them having to prove the expense through receipts.

The tax office is now hiking this allowance to  €1,230 per year as of April 1st, and this should be reflected on the April 2023 payslips for employees.

READ ALSO: EXPLAINED: Which German benefits are increasing in 2023 – and how do I claim them?

Tax allowance for single parents to go up

Single parents specifically will have an additional tax-free allowance they get to keep, now set to go up with the April payslip to €4,260 annually, assuming they have one child. If they have more than one child, their allowance will increase by another €240 per year, per child—on top of the base amount.

READ ALSO: What benefits are you entitled to if you have children in Germany?