The new year 2021 has begun and it is already clear that it will be dominated by two major topics: The ongoing Corona pandemic and the German federal elections scheduled for 26 September 2021. Both naturally also have a major influence on labour law: be it through changes that have already become relevant as of 1 January 2021, or be it through further planned and discussed legislative measures in the context of the starting election campaign.
We would like to give a brief overview of some changes in labour law below.
I. Legislative measures in the context of the COVID-19 pandemic
Of course, the measures related to the COVID-19 pandemic to mitigate the social consequences are still of outstanding importance. Many of these regulations have been extended to 2021.
1. Extension of the Corona bonus
Thus, according to Sec 3 No. 11a German Income Tax Act (Einkommenssteuergesetz), employers can continue to grant a tax- and social security-free additional payment of up to EUR 1,500 to their employees until 30 June 2021 (provided that such a payment has not yet been made in 2020).
It is important to note that the payment is made in addition to the existing benefits and does not replace an existing entitlement. Furthermore, the payment must have a connection to the Corona pandemic, but these requirements are to be interpreted quite broadly. The purpose of this provision (which also benefits employers who save on employer social security contributions) is to ensure that such extra payments reach employees in full.
2. Relief short-time work (furlough) remains in place
Not only in the Corona pandemic short-time work proved to be an effective tool to avoid compulsory redundancies and to provide social security for employees as well as financial security for employers, as they do not have to bear the wage costs for a temporary period.
The preconditions for applying for short-time work and for granting short-time work benefits were already massively eased at the beginning of the pandemic in spring 2020. These simplifications are to continue in 2021. Instead of at least one third of all employees in a company, it is sufficient if only 10% of employees are affected by a loss of work. Likewise, the build-up of negative working time balances prior to the granting of short-time allowance will be waived. However, this only applies if short-time work is introduced before 31 March 2021.
In addition, until the end of 2021, employyes will henceforth receive short-time allowance of 70% or 77% (in the case of dependent children) from the fourth month of short-time work and 80% or 87% (from the seventh month of short-time work) instead of 60% (or 67%) of net wages if the entitlement to short-time allowance arose before March 2021.
In addition, employers will continue to receive direct financial support through the full reimbursement of social security contributions during short-time work until 30 June 2021. In the case of short-time work "zero", where there is a 100% decrease in work, the employer consequently bears no costs. From 1 July 2021, however, it is planned to reimburse only 50% of the social security contributions.
Furthermore, the period of eligibility for short-time allowance will be extended to up to 24 months for companies that have started short-time work by 31 December 2020, but no longer than 31 December 2021.
3. Top-up payments for short-time allowance remain partially tax-free
Despite the financial protection shown, employees suffer a financial loss of between 13 and 40% compared to their previous net wage during periods of short-time work. However, at least a partial compensation of this loss by the employer (on a voluntary basis) is possible and typical in some sectors. In contrast to short-time allowance, however, these payments are taxable for the employee.
For a temporary period until the end of 2021, however, a privilege has been included in section 3 no. 28a German Income Tax Act, according to which top-up payments by the employer to a maximum of 80% of the previous net income are tax-free and thus reach the employee in full.
4. Tax-reducing remote work allowance
Working from home has become the norm for many employees in the pandemic. However, this also entails financial burdens (such as electricity costs, wear and tear on furniture, heating costs, etc.). To compensate for these burdens, EUR 5 per day for a maximum of 120 working days can be taken into account to reduce tax, so that the employee's tax burden is reduced. This applies to both 2020 and 2021.
5. Admissibility of virtual works council meetings
The work of works councils has also become more digital due to the pandemic. For this purpose, the legislator has created a possibility in section 129 of the Works Council Constitution Act (BetrVG), according to which the participation at works council meetings is made possible by means of video and telephone conferencing. Pursuant to section 129 (2) BetrVG, this also applies to conciliation boards. Until now, a physical meeting was necessary. The provision has now been extended initially until 30 June 2021. Whether a permanent change will follow is still open and will become apparent in the coming months.
II. Changes to thresholds
Independently of the Corona pandemic, various thresholds with a direct impact on employee remuneration are also changing.
The statutory minimum wage will rise to EUR 9.50 on 1 January 2021 and to EUR 9.60 on 1 July 2021.
Likewise, the abolition of the solidarity surcharge (Solidaritätszuschlag) will bring tax relief for a large number of employees. Around 90% of employees who were previously burdened with this will be completely exempt from paying it, and another 6.5% will pay less. This means that up to an annual income of EUR 73,000, no solidarity surcharge is payable any more; for an income of up to approx. EUR 109,000, it is furthermore only partially payable.
The calculation parameters in social insurance will also change in accordance with the wage and salary development in 2019. This makes it even more difficult to switch to private health insurance and increases the employee and employer contributions to social insurance for high earners. For health and long-term care insurance, the income threshold is now EUR 58,050.00 (or EUR 4,837.50 per month). A switch to private health insurance can be made only from an annual income of EUR 64,350.00 onwards.
III. Further legislative plans
Nevertheless, further developments in labour law are expected for 2021. Of course, the topics of working time and the recording of working time (also driven by the ECJ ruling of 14 May 2019 in case C-55/18 - CCOO) and the topic of work from home will remain relevant. However, it is highly doubtful whether new legal regulations and the modification of the Working Time Act (Arbeitszeitgesetz) as well as the postulation of a binding right to work from home will be passed in these areas before the federal election. Last year, the Federal Ministry of Labour and Social Affairs prepared a draft bill on this politically highly controversial issue, which will certainly be significantly amended.
Likewise, the topic of platform work remains of substantial importance, in particular also due to a decision of the Federal Labour Court of 1 December 2020 (9 AZR 102/20) as well as a key issues paper of the Federal Ministry of Labour and Social Affairs on fair work in the platform economy. A core demand of this paper is to shift the burden of proof for the non-existence of an employment relationship to the platform operator if the platform worker has presented circumstantial evidence of an employment relationship. In addition, minimum notice periods are to be stipulated - de facto as for employees. Furthermore, the inclusion of platform workers in the statutory pension insurance and their coverage in accident insurance is being considered.
Strengthening works councils also remains a core concern of the Social Democratic Party in particular. To this end, the Federal Ministry of Labour and Social Affairs presented a draft law on 21 December 2020 to promote works council elections and to strengthen works councils. In addition to formal regulations on works council elections, this draft aims to extend the co-determination of the works council, e.g. in the case of remote work. Here, too, it is questionable whether such a law can gain majority support before the federal election.
We hope that this overview will give you a good insight into legal developments in the coming months. Of course, we will keep you informed about current developments on an ongoing basis. If you have any questions on the above topics, please do not hesitate to contact our colleagues in our offices in Berlin, Düsseldorf, Munich and Cologne by telephone or e-mail.