COVID-19 and Employment contracts

Human resources in times of crisis

In many countries, labour laws usually protect employees. In this period of crisis, different kinds of problems arise: some companies face an obligation to stop or reduce their activity, while others need to carry on (or even produce more) in a complex sanitary framework.

How should an employer react when employees cannot go to the office (for sanitary or childcare reason)? Can an employer stop paying an employee if there is a diminution of work? Are there restrictions to redundancy plans during the crisis ?

Our experts give an overview of the financial support measures provided by the governments during the pandemic and of those restricting the possibility to terminate employment contracts.

They also present the leverages offered to employers to adapt working conditions during the emergency period.

Check out the FAQs of the country of your interest and get in touch with our experts for more information.

Tell us how we can help


How to deal with a reduction of business during the COVID-19 pandemic?

Short time work and thus salary reductions are a way of facing the decrease of activity or the complete closedown of business. However, employers cannot implement short-time work unilaterally. Either employees give their consent to short-time work or a collective agreement (collective bargaining agreement with the trade unions or a works agreement with the works council) exists, that allows the implementation of short-time work. If a works council exists, its involvement is mandatory.

If no such collective agreement exists and the employee refuses to give his/her consent to short-time work, a dismissal with the option of altered conditions of employment (i.e. with short-time work) based on operational reasons could be possible under specific circumstances. This is the only, but difficult way to implement short-time work without consent or agreement. However, it seems to be easier to appeal to the employees’ understanding and responsibility.

In case of short-time work, employers can apply for a short-time work allowance with the unemployment agency. The allowance has recently been adapted due to Corona-crisis. Normally, it compensates for 67% (with child) or 60% (without child) of the net pay lost as a result of the short-time work and can be paid for up to twelve months. By the end of 2020 the allowance increases to 77% (with child) and 70% (without child) as of the fourth month of short-time work and 87% (with child) and 80% (without child) as of the seventh month of short-time work.

The duration of the allowance can be extended up to 21 months for employees who have already worked short-time in 2019.

The prerequisites for a short-time work allowance are:

Significant work absences

  • Based on economic reasons or an unavoidable event
  • Temporary and unavoidable
  • At least 10 % of the staff is affected by short-time work and each of them loses at least 10% of their income (the thresholds have been lowered for the Corona crisis)

Operational requirements

  • at least one employee is employed
  • it is possible to implement short-time work only in specific departments of the company

Personal requirements

  • Employment is fully subject to social security

No allowance for

  • so-called “Mini-Jobber” with a monthly gross salary of EUR 450 or lower
  • employees on sick leave for longer than 6 weeks receiving sick payment from the health insurance
  • employees whose employment is terminated

Further improvements of the short-time work allowance during Corona crisis are:

  • social security contributions are reimbursed completely by the unemployment agency
  • short-time work allowance can also be granted to temporary workers
  • in case a company provides flexible working hours and provides a working time account, employees are not obliged to take “minus hours” on the account to avoid short-time work

Employers can apply online via

Foreign companies can apply for short-time work allowance as long as the employees in Germany are subject to German social security and if the activity in Germany can be deemed as an “operation” within the meaning of the provision on short-time work.

Companies can fill the gap between the full time salary and the short-time work allowance voluntarily without any effect on the short-time allowance.

By the end of 2020, the rules on the deduction of short-time allowance due to an extra income have been liberated. It is now possible for employees receiving short-time allowance, to work in a second employment and achieve additional income without deductions of the short-time allowance, as long as the additional income plus short-time allowance do not exceed 100% of the normal full time income.

What if I had just hired someone? Can I take my employment offer back?

If a firm offer (either by sending a draft contract or by mentioning essential contract elements like missions, remuneration and date of start) was made and already accepted, then this means that there can already be a binding contract, whether a formal one has been signed or not.

In this case or if an agreement has actually been signed, a termination notice or a bilateral termination agreement is necessary to step back from the planned employment.

If not excluded explicitly in the employment contract even a termination before the start of employment is possible. In general the termination notice period, that needs to be observed, starts with the receipt of the termination notice and not with the planned start of employment.

As the strict Protection Against Unfair Dismissal Act does not apply to employments during the first 6 months, a termination is valid in case there is any plausible reason. A termination within the first 6 months of an employment is only invalid in case the termination is fraudulent or given in bad faith. However, if the reason for the termination is the Corona crisis, it can hardly be deemed as fraudulent.

Another option is to postpone the start of the employment amicably. Though there are no specific rules on such cases, unemployment agencies have signaled that employees concerned by such a postponement could benefit from unemployment allowances during this period, even if they had resigned from their previous job and would therefore usually not be eligible for those allowances.

Furthermore, short-time work can be implemented for new employees as well under the requirements mentioned in No. 1.

Can I impose my employees to take their remaining vacation days?

No, unfortunately not. The use of vacation can only be granted upon request of the employee or agreed upon amicably.

Although there is the instrument of a companywide vacation closedown which forces the employees to use vacation days during this vacation closedown, this instrument is not a suitable one during Corona crises. A companywide vacation closedown has to be announced with several months’ notice and the employer is bound to the announced vacation closedown. Thus, with this instrument the employer could not react flexible on imposed restrictions or their withdrawal.

What the employer can do is to assign the use of any overtime entitlements.

How to deal with employees that cannot go to work/provide work from home, because they have to take care of their children? Are they allowed to stay at home? Is the employer obliged to continued payment?

First of all, employees with children, whose child care institutions are closed down, have to take every possible step to organize alternative care for their children during working hours. However, in the current situation it is often impossible to find alternative caring options. If the children are too young to be left home alone, an employee is in general allowed to stay home in order to take care of the children. He/She is not obliged to use vacation entitlements.

However, the right to stay home does not automatically go together with continued payment. In such cases of temporary personal reasons to stay away from work, the employee is entitled to continued payment temporarily, i.e. for about one week. Therefore, a lot of parents would face loss of income when taking care of their children in times of a shutdown lasting several weeks.

Employers and employees are encouraged to find practical solutions e.g. shift working, working on weekends, working from home etc.

In order to minimize the loss of income for working parents the current legal situation has been adapted. According to a new provision in the Infection Protection Act, working parents are entitled to a compensation for the loss of income in case the child care institution is closed due to infection protection and they have to take care of their children aged under 12. The compensation is 67% of the income, but 2.016 EUR max. and is paid for up to 10 weeks per parent or up to 20 weeks for single parent. The compensation will be paid by the employer, who can apply for reimbursement with the competent authority.

What should I do if there is still some business to do? How can I anticipate the end of the lockdown?

The Federal Ministry of Labour and Social Affairs has issued a paper on occupational safety and health standards during Corona crisis. An English version of the paper can be found here:

For example, employers are obliged to provide a safe work environment (e.g. keeping safe distance and where not possible providing alternative protective measures; sufficient cleaning and hygiene facilities). Office work should be performed at home if possible. Business trips and face-to-face interactions should be reduced to the absolute minimum. Finally, the employer should always take into consideration that the Corona-crisis does also mean psychological stress for the employees.

Do I have the right to terminate contracts in this period?

Yes, in general, a termination of contract is possible. Unlike in other countries there is no rule prohibiting dismissals during Corona-crisis.

However, the strict requirements of the Protection Against Unfair Dismissal Act for a valid termination have to be fulfilled. A termination based on operational reasons has to be planned carefully. Alleging “economic difficulties” alone will not justify a termination.

Furthermore, participation rights of the works council (if existing) have to be observed.

In particular, if mass dismissals are necessary, the employer can be obliged to conclude a reconciliation of interests and a social compensation plan with the works council.