Overtime during shorter working hours

In 2019, employees in Germany worked around 2 billion hours of overtime, almost 1 billion of them unpaid. A large part of the German economy is now being forced to work shorter hours. The need for overtime, however, remains unchanged. This article explains the risks involved.

Reduce the overtime that has already accrued before applying for compensation for shorter working hours

The question of overtime is relevant when ascertaining whether the employees of a company are entitled to compensation for shorter working hours on the merits. They are only entitled to compensation if a loss in hours worked is unavoidable due to the economic situation, i.e. currently due to the coronavirus. The company must take all reasonable measures to avoid losing any working hours. This generally also includes reducing accrued overtime. In principle, therefore: reduce the overtime that has already accrued before applying for compensation for shorter working hours!

Review by the Employment Agencies

The Employment Agencies will check whether a loss in working hours was indeed unavoidable using the payroll accounting documents. If they come to the conclusion that the loss in working hours could have been avoided by firstly reducing overtime that has already accrued, there is a risk that the Agencies will reclaim any compensation that has been provisionally paid for the shorter working hours. This may affect more than just the compensation for shorter working hours of those workers who had accrued overtime that should have been reduced first. The worst case would be that the compensation paid to all the employees of the company will have to be repaid. This will happen if overtime accounts are uncovered that show that the employees who have incurred unavoidable losses to their working hours with a loss of earnings of more than 10% no longer account for at least 10% of the workforce.

No claim for reimbursement from employees
If the employer has to reimburse the Employment Agency for any compensation for shorter working hours that has been paid in excess, it cannot reclaim this from its employees. The employer is responsible from a financial perspective for ensuring that the calculation of the compensation for shorter working hours is correct. Therefore, the records of the hours worked should be kept diligently and in a manner that the Agency will understand. If, for example, a company has reduced its employees working hours by 50%, the Agency will only be able to determine whether there was actually a 50% loss in the hours worked, and whether this led to a corresponding loss of pay, based on the records of the hours worked that have been carefully kept by the company. Reasonable doubt will be to the detriment of the employer.

Overtime reduces entitlement to compensation for shorter working hours

The number of working hours lost cannot amount to 50% if a company has introduced shorter working hours to half of its employees but those employees are also carrying out overtime. It makes no difference whether the employer pays the overtime or not. This is because the hours of overtime worked reduce the number of working hours lost through the introduction of shorter working hours. This will automatically reduce the employee's entitlement to any compensation for shorter working hours in the month in question. The more overtime worked, the lower the compensation for shorter working hours.

Overtime jeopardises the right to compensation for shorter working hours for all the employees

Companies should check whether it is actually worthwhile telling employees to work overtime while they are receiving compensation for shorter working hours. There is a risk that all the employees in the company will lose their entitlement to any compensation for shorter working hours if some or all of the employees are told to work overtime. This will happen if due to the total amount of overtime worked, the employees who have incurred unavoidable losses to their working hours with a loss of earnings of more than 10% no longer account for at least 10% of the workforce.