Maintaining and creating employment

1. Maintaining and creating employment Short-time allowances and qualification measures to avoid redundancies – experiences with the „German“ answerto the crisis –

2. Agenda • Labour market situation in Germany • Short-time allowances: Objectives & Regulations • The implementation side of things • Lessons learned

3. 1. Labour market situation in Germany • unemployment-rate: • 8.0 % (+0.6 percentage points compared to 2008) • 7.7 % (ILO-standard) • unemployed persons: 3,346,000 (+266,000 since 2008) • short-time work: 1.43 million persons (peak: 1.53 million persons in May 2009) • employment: 40 million persons (-216,000 or rather -0.5%)27.3 million employees subject to social insurance contribution(-102,000 or rather -0.4%)

4. 2. Short-time allowance – Objectives and Regulations 1/4 General objectives • Implementation of preventive labour market policy • Avoiding redundancy of experienced staff • Preservation of jobs during a temporary loss of work • Preservation a functioning plant • Partly compensation for loss of earnings

5. 2. Short-time allowance – Objectives and Regulations 2/4 Preconditions • loss of work leading to loss of earnings for at least one-third of the persons employed in the plant • until end of 2010: simplified rule applies one only has to prove that loss of earnings exceeds 10 per cent • economic reasons or inevitable event • temporary and unavoidable

6. 2. Short-time allowance – Objectives and Regulations 3/4 Benefit • short-time allowance amounts to 60 or 67 (household with child) per cent of lost net wage Period of receipt • in general: maximum period of six months • possible extension by ordinance in case of exceptional situation on the labour market Social insurance • in general: social insurance contributions have to be borne by employers

7. 2. Short-time allowance – Objectives and Regulations 4/4 • extension of the maximum period of receipt of short-time allowances up to 24 months • reimbursement of social insurance contributions (by employment agencies) • 50 % of the social insurance contributions payable in respect of short-time work • 100 % for staff members who take part in further training measures during short-time work (temporarily applicable up until the end of 2010) • 100 % of the social insurance contributions payable in respect of short-time work from 7th month on

8. 2. Short-time allowance – Objectives and Regulations 2/5 Skill building instead of lay-offs • Federal programme on the financing of qualification measures in 2009/10 (co-funded by the ESF) • Support rates (EU General block exemption Regulation) • general training measures up to 60% of training costs • specific training measures up to 25% of training costs • in respect of SMEs, the support rates are raised by 20% resp. 10% • Preconditions • Qualifications at certified training institutions or inside companies (but than proof of raising the general employability of the employee in the labour market) • Qualifications ordered by law are not being supported (First Aid, Occupational Health and Safety, etc.)

9. 3. The implementation side of things Financial effects • 2.1 billion Euro short time working scheme • 835 million Euro Social Insurance contribution (50%) • 42 million Euro Social Insurance contribution (100%) • average costs per employee working “short” per month: 275 Euro Remanent Costs for Companies • One time payments (vacation allowance, christmas allowance, etc.) • Voluntary social contributions and payments (capital forming payments, company pension) • Leasing costs for companies cars • Remaining costs from the 7th month on in average 24%

10. 3. The implementation side of things Employment effects • Average loss of work: 32,5% • 25% of unemployed people are entering the hidden reserve/ inactivity • several 100,000 job losses are avoided • structure of short term woking: • 200,000 (18%) recipients in automotive industry • more than 150,000 (14%) in engineering • 150,000 (13%) in other metal-based manufacturing Qualification • 35,000 entries in qualifications financed by ESF • 60% of these entries are realized by companies with less than 250 employees

11. 3. The implementation side of things Abuse/Deadweight effects • Misuse of instrument is dangerous – it only subsidies a company, it damages the image of the instrument itself and it reduces the acceptance of the instrument • 130 cases are known in local Employment Agencies; another ca. 100 cases are known at customs and attorney's offices(equivalent of 0,06% with 36000 companies applied for the short term working scheme) • 80% of abuse are known through filed charges, mostly anonymously • Measures • Cooperation • further qualification of employees • development of an “Assessment Guide”

12. 4. Lessons learned • Structure of staff: adjustment aiming at delivering local and timely advise to companies  increase from 430 to 1030 employees • Institutionalized Employer’s Service: key for success in reaching employers • Fight against abuse necessary due to damage to acceptance of instrument but too much effort was not necessary • Information campaign and easy-to-use tools for customers proved to be helpful • e.g. Kug-Calculator for employees • single hotline for employers • Qualification during short term work sounds useful but was very difficult/ nearly impossible to organize

13. BACK-UP

14. Assessment Criteria • Substantial loss of work – to be proved by e.g. loss of turnover, increase in stocks, companies in short term work as main customer of own company • Loss of work is unavoidable – to be proved by e.g. reduction of flexi-time account, use of complete annual leave • Loss of work is temporarily and after the crisis full time employment is to be expected – to be proved by lack of economic difficulties prior to the crisis • Loss of work was indicated at the local Employment Agencies and being assessed

15. Kug-Calculator source: http://kugrechner.arbeitsagentur.de