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'
For members


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.