The COVID-19 pandemic has hit the German economy hard and led to the introduction of short-time work in many companies. On 10 April 2020 was the first public holiday in the corona crisis (e.g. in accordance with Section 2 (1) No. 2 of the Act on Sundays and public holidays in North Rhine-Westphalia, "Good Friday"), and for companies and employees affected by short-time working the question arose as to whether and, if so, what effects the public holiday has on their entitlement to short-time working allowance.
According to the statutory provision of Section 2 (2) of the of the German Continued Payment of Remuneration Act (Entgeltfortzahlungsgesetz, EFZG), loss of working hours on a public holiday during a short-time working period is to be regarded as such due to the holiday. Due to the fiction, there is no entitlement to short-time working allowance for this day. Instead, the employer must continue to pay the remuneration and thus relieve the Federal Employment Agency.
However, according to the case law of the German Federal Labour Court (judgment of 5 July 1979 - 3 AZR 173/78), the entitlement exists only in the amount the employee would be entitled to without the holiday. This means that if the employee does not have to work on that day, the amount would be that of the (fictitious) short-time working allowance.
The consequences from the employer's point of view with regard to issues under tax and social security law are as follows:
(a) From a tax point of view
The employer's obligation to place the employee in the position he or she would have been in without the loss of working hours results from the provisions of the Continued Payment of Remuneration Act. In times of short-time work, this refers to the short-time working allowance otherwise received. The wording allows both the interpretation as gross salary and that of a claim to net salary.
In principle, however, the employer owes a gross wage. The obligation to pay income tax, on the other hand, is on the employee. The employer is only obliged by law (Section 38 (1) of the German Income Tax Act (Einkommensteuergesetz, EStG) to withhold and pay wage tax (as an advance payment on the employee's later income tax liability). The debtor of the wage tax therefore remains the employee, despite the obligation of the employer to withhold and pay it.
In the opinion of the 3rd Senate of the Federal Labour Court (judgment of 8 May 1984 - 3 AZR 194/82), it cannot be concluded from the statutory provision, not to place the employee in a worse position than he or she would be without the holiday and therefore for the receipt of short-time working allowance, that the employer additionally has to pay the tax debt incurred in this respect in the form of a guaranteed "effective wage", i.e. to place the employee in the same net position as he or she would be without the statutory holiday. By withholding and paying the wage tax, the employer is merely fulfilling his statutory obligation. Thus, it was not the employer, but the legislator who made a different decision on the burden with the special regulation on holiday short-time working allowance and ultimately only excluded the short-time working allowance paid by the Federal Employment Agency (Section 95 et seqq. of the Social Code (Sozialgesetzbuch, SGB), Book III) from taxation.
b) From a social security law perspective
However, this is different under social security law. Since the public holiday short-time working allowance replaces the ordinary short-time working allowance and the employment relationship is therefore considered to be continuing for this period, there is an obligation to pay contributions to the statutory social insurance. The employer must pay the full amount of social security contributions for the public holiday short-time working allowance.
While the employee will therefore receive a lower net amount for this public holiday due to the mandatory deduction of wage tax from the salary, employers must pay particular attention to
correct payroll accounting. The employer's obligation to withhold and pay wage tax is accompanied by a corresponding liability, which may lead to a definitive charge on the employer if no wage tax is withheld or if mistakes are made in doing so.