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Is a four-day working week possible in Germany?

Germany's largest trade union IG Metall has proposed a four-day working week in a bid to prevent mass job cuts, while The Left party is calling for this to become the new norm. Is it possible?

Is a four-day working week possible in Germany?
Is a four-day working week possible in future? Photo: DPA

The coronavirus pandemic has changed daily life for us all. And one of the biggest transformations has been the way we work.

At the peak of the epidemic many people moved from the office to working from home, and that's still the case for lots of companies.

Now, as we all try to continue getting through the crisis, unions and politicians are thinking about the future and how they can protect jobs.

On Saturday, Germany's largest trade union IG Metall, which represents workers from major carmakers such as BMW, Audi and Porsche, proposed a 28-hour working week ahead of the next round of collective bargaining talks due to begin next year.

Union chairman Jörg Hoffmann said the shorter week would be “the answer to structural changes in sectors such as the automotive industry”.

“With this, jobs in the industry can be saved instead of being written off,” he said.

The car industry in Germany is going through major changes due to the transformation to e-mobility amid concerns over climate change.

Meanwhile, Die Linke or The Left party in Germany is proposing a 30-hour week as the new full-time norm for everyone.

READ ALSO: 'Language is a huge barrier': What it's like for internationals working in Germany

Would working less hours benefit everyone?

There may be slight differences in the details of each proposal but they hit a nerve – many employees in Germany feel that the 40-hour week is too much for the modern demands of everyday life, reported news magazine Spiegel.

With household chores, looking after children, caring for parents, exercise and volunteer work, those who can afford it are choosing to opt for part-time work.

In the early 1990s, the ratio of full-time to part-time jobs was still eight to two – now it is six to four.

But it's not just about the individual benefits, it could also arguably benefit society as a whole, experts say.

Working less hours in a full-time job could benefit parents, particularly women, who feel pushed into going part-time when returning to work following the birth of a child. But part-time work can have a negative impact on pensions and financial independence.

Often couples would prefer to share employment and housework, but because men tend to earn more than women, it makes more sense for the woman to take the part-time hours.

A reduced hours working week for both could help with equality.

IG Metall a pioneer in reducing working hours

As similar as they sound at first glance, the approaches are very different: IG Metall is traditionally a pioneer in the reduction of working hours.

The 35-hour week has been in force in the industry since the 1990s, and in 2018 the union fought for the right of many employees to a limited 28-hour week – but salaries were also reduced. In both instances, it was about a better work-life balance.

READ ALSO: Metalworkers win milestone 28-hour week concession from bosses

This time, however, in an interview with the Süddeutsche Zeitung, the head of the trade union Hoffmann justified the move with a crisis that is quite specific to the sector and independent of coronavirus: structural change.

The trend towards e-mobility is already costing jobs and will jeopardise many more in the coming years, especially because the production of e-cars requires significantly less human working time overall.

Hofmann therefore wants to spread this overall reduction in work across the same number of employees, where it makes sense.

He is not calling for a general reduction in working hours, but for an “option for the companies” in the next collective agreement to avoid job cuts. So the four-day working week would only be introduced if the company and the Works Council were in agreement.

And wages would be reduced along with working hours. Hoffmann merely wants a “certain amount of wage compensation”. This model has worked well in the past: in the 1990s, Volkswagen was in a deep crisis, and kept its workforce by introducing a 28.8-hour week agreed with the union.

Workers the VW plant Kassel in Baunatal, Hesse in May. Photo: DPA

On Wednesday Labour Minister Hubertus Heil, of the centre left SPD said IG Metall's proposal could be a good idea to weather out the crisis.

“Reduced working hours with partial wage compensation can be a suitable measure if the partners (employeers, union and works council) agree on it,” Heil told the newspapers of the Funke media group.

What about The Left's proposal?

In contrast, The Left party wants a “general reduction in working time to 30 hours full-time” for all employees.

The demand appears in a comprehensive position paper on digitisation. The paper also talks about the taxation of digital companies as well as the data protection of consumers and employees as well as other topics.

While the other demands are relatively clearly outlined and described in detail, the shortened full-time position remains a very vaguely formulated sentence.  The party says that it is clear why a 30-hour week should be mandatory – “to allow everyone to benefit from productivity gains”.

This is based on two premises:

  • Digitisation will make a lot of human labour redundant, i.e. the total amount of work will be much smaller – in return, the productivity of the remaining work will increase, so society will still become more prosperous
  • This remaining work can be fairly distributed among people in order to avoid the negative consequences: a division of society into high-income job holders and unemployed people without prospects

Is this doable?

The problem is that almost all labour market experts assume that in the long run digitisation will not lead to less work.

“If we invest in qualifications and promote new hires, unemployment will continue to fall even as digitisation progresses,” said Enzo Weber from the Institute for Employment Research (IAB).

And the second premise may also have a catch. Economists use the “lump of labour fallacy” – the misconception that there is a fixed amount of work – a lump of labour – to be done within an economy which can be distributed to create more or fewer jobs. Like a big cake that can be divided into pieces of different sizes.

For many companies it makes a difference whether a position is filled by a full-time employee or, for example, by three people doing 33 percent of the work each.

Hiring and training costs are incurred three times, insurance premiums are due, and there is an increasing coordination effort. A general reduction in working hours, as proposed by the party, could therefore – even without wage compensation – be accompanied by an increase in labour costs for the companies.

Axel Börsch-Supan, an economics professor in Munich, however, told Spiegel that the “lump of labour fallacy” is “one of the most damaging myths in economics”.

He said it's been argued often in the past that the jobs market would change negatively. For example when more women entered the jobs market, some thought men would be pushed out or older workers would take the jobs away from younger workers. But these things never happened.

He said the problem is that people imagine the mechanisms in the economy to be similar to the processes in a medium-sized company: that it's customer base is fixed, as is its production capacity – and the company can only use a certain number of employees.

But economies function differently.

“A company is simply not a good analogy to understand an economy,” said Börsch-Supan. He said one example is how innovations such as the use of robots and computers could increase productivity in the long run.

He said it could result in companies becoming more successful and expanding their product line, which in turn will result in them needing more employees.

With more profit going to firms, the economy would become restructured.

Huge low-wage sector in Germany

So the Left's idea that going digital has the potential to significantly increase productivity could be correct.

However, Germany already has a shortage of workers and this could be dangerous. The challenge in the coming years is not running out of work, but a shrinking workforce.

In recent years, the German economy has grown primarily because it has hired more people, but often employed them in a rather unproductive way, IAB researcher Weber said.

There is still a huge low-wage sector in Germany in which almost one in four people work. Demographic change alone will very soon mean that the economy will no longer be able to grow in this way, “but above all by increasing the quality of work,” said Weber.

In concrete terms, this means investing massively in further training and qualifications, creating better working conditions and also paying higher wages. As a result, productivity would also increase significantly. This would at least make up for the decline in the available workforce, say experts.

A nationwide reduction in working hours would then be a possible next goal.

“Working shorter hours is good, for those who want to,” said IAB economist Weber: “But we should not let digitalisation dictate working hours. In general, it should be about more flexibility, not shorter for everyone.”

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WORKING IN GERMANY

7 tips for how to survive as a freelancer in Germany

Taking the decision to go it alone and freelance in Germany can be a daunting prospect. But, if you do it right, it can be an exciting and liberating path. Here are some of our top tips on how to survive.

7 tips for how to survive as a freelancer in Germany

1. Get a tax advisor

The German tax system is complicated, even for Germans. All the associated paperwork uses the Amtsprache (authority language) which is more like legalese than ‘normal’ German, and mistakes when filling out tax forms can cause you, at best, a massive headache and, at worst, a costly fine. So it’s best that you employ someone who knows what they’re doing to help you out.

That person is called a Steuerberater (tax advisor) in Germany. They will help you register with the tax office, correspond with them and submit your tax declarations.

Be aware that, in Germany, different deadlines apply for tax returns depending on whether you employ an official tax advisor or not. If you are doing the tax return on your own, the deadline for submitting your annual tax return is earlier than if you use a tax advisor’s services. 

READ ALSO: What NOT to do when you’re freelancing in Germany

When looking for a tax advisor, a top tip is to use your network to get recommendations. Ideally, you want someone who will do more than just fill in the forms for you, but who will actually advise you on how best to manage your business finances so that you can make tax savings.

2. Keep your accounting in order

The better you keep your own accounts in order, the easier it will be for your tax advisor to compile your tax declarations and therefore the cheaper their services will be.

As a freelancer, there are a lot of costs you can deduct from your taxes – from train tickets, working materials, to meals out – so it’s best to keep hold of all your receipts and to keep them in good order.

2 euros and 50 cents lie on a receipt in a beer garden. Photo: picture alliance/dpa | Peter Kneffel

In Germany, you’re obliged to keep hold of receipts for two years, in case of a tax inspection, so it’s a good idea to photocopy the type of machine-printed receipts you get from restaurants so that they stay legible for a long time.

There are also a few things to be aware of when writing your own invoices. Firstly, make sure that you include your tax number. This isn’t the 11-digit Steueridentifikationsnummer that everyone gets when registering in Germany, but the 10-digit Steuernummer you get from the Finanzamt after registering yourself as a freelancer. 

Most companies won’t pay you if you don’t have this on your invoices so make sure you include it.

You should also make sure that you number your invoices properly – ideally in ascending order so that you can easily keep track of them. You are not allowed to issue two invoices with the same number and if you do so and the finance office notices, you could face an inspection of your whole accounting system.

There are numerous great accounting software programmes you can use to help you, such as Lexoffice and Sevdesk and, even if you have to pay for them, the costs will be tax deductible!

3. Find out if you’re eligible for financial support

In Germany, there are several opportunities for freelancers to gain financial support and to cut their outgoings, and its worth finding out if you’re eligible for them.

If you’re claiming unemployment benefits under ALG 1 and are thinking about becoming a freelancer, the employment office offers a special type of financial support to help you to get your freelance business off the ground.

Called the Grundungszuschuss (“foundation grant”) the payment is a six-month grant equalling your monthly entitlement under ALG 1 plus €300 towards your insurance costs can be applied for those in receipt of this unemployment benefit.

READ ALSO: Will freelancers benefit from Germany’s €300 energy allowance?

If you are engaged in some form of artistic profession in Germany – which can include journalism to pottery – you may be entitled to membership to the Kunstlersozialkasse (artists’ social insurance).

Being a member of the KSK means you only have to pay half of your health insurance and pension contributions, and the KSK will pay the rest.

4. Work out how much you think you will earn

As with starting any business, you need to have some idea of your expected earnings from the outset.

If you’re just starting out as a freelancer, or have some freelance gigs on the side of an employment position, then it might be worth considering registering yourself as a Kleinunternehmer (“small business”).

As a Kleinunternehmer, you can currently earn up to €22.000 per year without having to charge VAT and having to submit only yearly tax declarations. 

An income tax declaration form lies on a table. Photo: picture alliance/dpa/dpa-Zentralbild | Hans-Jürgen Wiedl

Be aware that if you are registered as this kind of freelancer, you must include the following sentence in your invoices: ‘Gemäß § 19 UStG wird keine Umsatzsteuer berechnet’ which means ‘In accordance with Paragrah19 of the German VAT law, no VAT has been added to this invoice.’

READ ALSO: Everything you need to know about your German tax return in 2022

If you think you will earn more than €22.000 per year, you will need to pay Umsatzsteuer (VAT) and will have to submit tax declarations in advance and more often. Depending on how much you earn, this could be every month or every quarter. 

5. Get your insurance in order

In Germany, it’s a legal requirement to have health insurance.

If you’ve just made the move from employment to being a freelancer and want to keep the same health insurer, you should get in contact with your health insurance provider straight away to tell them about your change of circumstances. They will ask you to re-register and to tell them your projected freelance earnings for the year, so they can amend your monthly fees.

If you don’t keep your health insurer provider updated, you could continue to be charged the higher rate that you had from your previous salary.

The insurance cards of the health insurance companies DAK, AOK, Barmer and Techniker-Krankenkasse TK lie with euro notes under a stethoscope. Photo: picture alliance / dpa | Daniel Karmann

It’s not just health insurance you need to think about as a freelancer. It’s also wise to think about protecting yourself from any sort of claims that could arise as a result of any working mishaps. 

If, for example, you lose your laptop which contains confidential client information, you need to be protected against claims.

That’s why it’s good to have both Betriebshaftversicherung (business liability insurance) and Rechtschutzversicherung (legal protection insurance).

6. Plan your time wisely

All of these bureaucratic obligations take time. So it’s really important that you take account of that when planning your time. For example, planning half a day a week to deal with your invoices, filing, emails to clients, and conversations with authorities can be really beneficial when scheduling your working time. 

7. Grow your network

As a freelancer, networking is absolutely crucial to success. 

Keep an up-to-date profile on websites like LinkedIn and German equivalent XING and keep in contact with anyone you’ve ever worked with, no matter how brief the contact was. 

Having a network is not only about getting more clients, but also about building a support network in your field to exchange advice, tips and generally for your own enrichment. 

Participating in workshops related to your field, going to seminars, and meet-ups, can be great ways of broadening your network. 

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