Germany’s freelancers and small firms face uncertain future as inflation bites

The mood among freelancers and small business owners in Germany has fallen to a record low, according to a new study.

Neon signs are switched off on the Hohe Strasse in Cologne, in accordance with a new energy-saving regulation.
Neon signs are switched off on the Hohe Strasse in Cologne, in accordance with a new energy-saving regulation. Photo: picture alliance/dpa | Oliver Berg

With high inflation, rocketing energy costs, and a recession on the horizon, the outlook for the German economy is gloomy at the moment.

According to a study by the Institute for Economic Research (Ifo) freelancers and businesses with less than nine employees are feeling particularly pessimistic about the future in the current climate.

In a monthly study, in which freelancers and small business owners are asked to assess both their current business situation and evaluate their business expectations, the index fell to a record low of minus 12.8 points in August.

Though business expectations rose slightly in July, they still remain very low, with most of those questioned predicting significantly reduced income in the coming months. Those in the retail sector, in particular, are reporting difficult months.

READ ALSO: Germany ‘faces recession’ as energy crisis bites

The Ifo’s head of surveys, Klaus Wohlrabe said he doesn’t expect the results of the survey to improve any time soon. “The worry lines among entrepreneurs are deep with a view to the coming months,” he said. 

High inflation is leading to a loss of purchasing power, which Wohlrabe says means that “even the smallest businesses and solo self-employed cannot escape the general uncertainty”.

The mood throughout the German economy is gloomy in general at the moment, and the Ifo has drastically revised its economic forecasts for the coming year.

Gross domestic product is now expected to decline by 0.3 percent in 2023 instead of growth of 3.7 percent, as Germans are expected to consume less as their purchasing power declines.

“The cuts in gas supplies from Russia in the summer and the drastic price increases triggered by them are spoiling the economic recovery after Corona,” the Ifo’s head of economic research Timo Wollmershäuser said.

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German employers ‘must give notice of holidays expiring’, court rules

Employers in Germany often set strict deadlines for taking annual leave - but a new court ruling states that these deadlines could be invalid if employees don't inform their workers of the rules.

German employers 'must give notice of holidays expiring', court rules

Whether it’s a heavy workload or prolonged illness, there are plenty of reasons that holiday days can end up going unused. In many cases, they simply expire at the end of the calendar year – but are there some cases in which they shouldn’t expire at all?

According to a new decision by the European Court of Justice (ECJ) – the highest court in the EU – some workers may be entitled to compensation for their “expired” holidays after all.

In a landmark ruling based on a dispute in Germany, the ECJ has stated that deadlines for taking holidays are only valid from the date when the employer tells their employees about the rules. It means that if workers are unaware that they have to use their annual leave within a certain time, these holiday days can still be taken after the supposed deadline has passed.

The latest decision comes on the back of a similar ruling by Germany’s Federal Labour Court in 2019, which obliged employers to remind their workers to take their holiday before it expired.

The Labour Court said that the reminders should be addressed directly to the employee in writing and should inform them explicitly that their holiday days could expire if the employee decided not to take them.

READ ALSO: Why German employers will soon have to record staff working hours

Law firm dispute

In the latest case in question, a tax clerk who worked at a law firm from 1996 to 2017 claimed she was entitled to financial compensation for several days of holiday.

Her contract entitled her to 24 days of annual leave, which she said she was unable to take over a number of years because she had too much work to do.

At the beginning of March 2012, her employer certified that she was entitled to a total of 76 days of remaining leave from 2011 and previous years.

This did not expire on March 31st 2013 as usual because she had not been able to take it “due to the heavy workload in the office”, the ruling explained. 

In the following years, the employee once again did not take the full amount of annual leave she was entitled to. During this time, the employer did not remind her to take her holidays, nor did he indicate that the entitlement to leave could be forfeited if she did not take it.

Financial compensation

After the tax clerk left the firm in July 2017, she received just €3,201.38 for 14 days of leave that hadn’t been taken in 2017. 

According to the employee, at least 101 further days of leave were unaccounted for. In a court complaint, she demanded full compensation for these additional days of unused holiday.

However, her previous employer argued that the time limit for taking the holiday days had expired.

The case was initially heard by Solingen Labour Court and then by Düsseldorf Regional Labour Court. It subsequently ended up before the Federal Labour Court, who asked the ECJ to provide an opinion on whether Germany’s three-year cap on taking annual leave was compatible with European law.

READ ALSO: Bildungsurlaub: What is Germany’s ‘education holiday’ and how can I use it?

The entrance to the European Court of Justice in Luxembourg.

The entrance to the European Court of Justice in Luxembourg. Germany’s three-year cap on untaken leave is compatible with EU law. Photo: picture alliance / dpa | Nicolas Bouvy

According to the ECJ, the time limit isn’t problematic. However, it can only apply from the date that the employee is informed about the rule.

That means that, if workers are unaware that their holiday days can expire, the days can be still be taken after the three-year time limit is up. 

“Indeed, since the employee is to be regarded as the weaker party to the employment contract, the task of ensuring that the right to paid annual leave is actually exercised should not be shifted entirely to the employee,” the judgment from Luxembourg states.

The former law firm employee is now likely to be entitled to a hefty payout from her previous employer. In its own judgement, the Federal Labour Court declared that the complainant was entitled to compensation for 76 days of leave at a rate of €228.64 per day.

This equates to a payout of around €17,400 plus interest.  

READ ALSO: Which public holidays are coming up in Germany?