How Kurzarbeit works, and why the maximum falls to 12 months in 2027

Kurzarbeit, or short-time work, lets a German employer reduce working hours temporarily instead of laying staff off, while the Federal Employment Agency (Bundesagentur für Arbeit) makes up part of the lost pay. The allowance, called Kurzarbeitergeld, is 60% of the shortfall in net pay, or 67% for employees with at least one child. Under the rules in force today, a business can draw it for up to 24 months. That extension expires at the end of 2026: from 1 January 2027 the statutory maximum of 12 months applies again.

The federal government calls Kurzarbeit an alternative to dismissals. Employees keep their jobs and part of their lost income is replaced; employers keep a trained workforce and can ramp up production quickly when business improves. It proved itself during the coronavirus pandemic, the government says, and in January 2026 it noted that many companies currently rely on it.

When a business qualifies

The rules are set out in Book III of the Social Code (SGB III), which governs employment promotion. Employees are entitled to the allowance if there is a substantial loss of working time with a loss of pay, the operational and personal conditions are met, and the loss has been notified to the employment agency.

A loss of working time counts as substantial if it is caused by economic factors or an unavoidable event, is temporary and cannot be avoided, and if in the calendar month concerned at least one third of the employees in the business each lose more than 10% of their gross monthly pay. The loss can be as high as 100%. Apprentices are not counted. Short-time work does not have to cover the whole business (Betrieb): it can be limited to individual departments, in which case the one-third test applies to that department.

An unavoidable event includes unusual weather and official measures for which the employer is not responsible. The agency says that if the Federal Network Agency (Bundesnetzagentur) had to regulate gas supplies because of shortages, this could count as an unavoidable event for businesses directly affected. A loss of working time counts as avoidable if it is mainly usual for the industry or the business, or seasonal, or could be prevented by granting paid leave or by using permitted fluctuations in working time, such as working-time accounts.

How the allowance is calculated

The basis is the net pay difference (Nettoentgeltdifferenz): the gap between the flat-rate net pay that the employee would have earned without the loss of working time, excluding overtime, and the flat-rate net pay from what they actually earned. The target and actual gross pay are each rounded to the nearest euro figure divisible by 20, and one-off payments are ignored. The allowance is 67% of that difference for employees who would qualify for the higher rate of unemployment benefit, which the government describes as employees with at least one child, and 60% for everyone else.

As an illustration: if the net pay difference for a month is €1,000, the allowance is €600, or €670 for an employee with a child. The employer pays the allowance to the employees and then claims it from the agency; the claim for each month must be submitted within three months, and the employer must keep records of hours worked and lost.

How a business applies

The employer or the works council must notify the employment agency for the area where the business is based, in writing or electronically. If the business has a works council, the employer's notification must include the council's opinion. The notification has to reach the agency in the month in which short-time work begins, because the allowance is paid at the earliest from that month; after an unavoidable event, a notification made without delay counts for the month of the event. The agency then decides in writing whether the conditions are met.

Inside the company, cutting normal working hours temporarily is a matter on which the works council has a right of co-determination under the Works Constitution Act, so where there is a works council, short-time work rests on a works agreement (Betriebsvereinbarung) with it; otherwise on agreements with the individual employees. Our explainer sets out how co-determination works. The self-employed cannot receive Kurzarbeitergeld because they are not employees subject to compulsory insurance.

How long it lasts, and what changes in 2027

By law, the allowance is paid for a maximum of 12 months. The period applies to all employees in a business alike and begins with the first month for which the employer pays the allowance. If no allowance is paid for at least one whole month in between, the period is extended accordingly; if three months pass without it and the conditions are met again, a new period begins.

The federal government may extend the period to up to 24 months by ordinance, without the Bundesrat's consent, if there are exceptional conditions on the labour market. Such an ordinance must be time-limited. The current one, the Fourth Ordinance on the Duration of Kurzarbeitergeld of 17 December 2025, set the maximum at 24 months from 1 January 2026 and expires at the end of 31 December 2026. The government justified it with trade and geopolitical uncertainties and said that without it there was a risk of substantial job cuts at businesses on short-time work.

The return to 12 months has a practical consequence that the agency spells out: from 1 January 2027 only the regular 12-month limit counts, even for businesses that have not used up the full 24 months by the end of 2026. Unless the government issues a new ordinance, any business whose current period of entitlement has reached 12 months by the end of 2026 will therefore lose access to the allowance in January 2027.

How many people are on it

According to preliminary extrapolated figures published on 30 September 2026, the agency paid cyclical short-time work allowance to 118,000 employees in July 2026. That was 13,000 fewer than in June and around 69,000 fewer than in July 2025, but the agency said the figure remained slightly elevated over the longer term. Between 1 and 24 September, employers notified short-time work for 18,000 people for economic reasons. At the same time, registered unemployment stood at 2,994,000 in September, a rate of 6.4%.

There is also a seasonal variant, Saison-Kurzarbeitergeld, for businesses in sectors such as construction that lose working time during the bad-weather period (Schlechtwetterzeit); it does not count towards the maximum duration of the regular allowance.