Employment Law14.10.2022 Newsletter

Securing liquidity in the energy crisis: short-term savings on personnel costs

The massive cost increases in the context of the energy crisis, especially for raw materials and electricity, weigh heavily on companies. The entire cost structure is being reviewed. Many companies are also focusing on reducing personnel costs and, in particular, wage costs. At the same time, fears of losing skilled workers due to overly harsh cuts are growing. We provide you an overview of the options.

Short-time work

In case of short-time work, the savings in personnel costs are obvious and companies are aware of this (see, among other things, the requirements for short-time work: What do you do with staff when the energy and raw materials required for production are lacking? - Oppenhoff). Most recently, the legislator facilitated access to short-time work (Current legislative proposals to combat the energy crisis - Oppenhoff). The focus therefore subsequently lies on different elements of the remuneration.

Focus on one-time payments

Companies should focus on voluntarily granted benefits and employees’ remuneration claims to one-time payments. This includes, in particular, Christmas and holiday bonuses, loyalty bonuses and variable remuneration components.

The extent to which other measures can or must be taken has to be assessed for the specific company. For example, a cash-effective measure may be achieved by changing working time systems. However, if this leads to overtime accounts filling up and corresponding reserves having to be created, this may only make sense in individual cases.

Implementation of individual measures

The implementation of the measures depends on various factors. Before reducing or cancelling a supposedly voluntarily granted benefit, companies must first determine whether employees do not indeed have any claim to this benefit. In practice, this often fails because, although a blanket reservation of the voluntary nature of the benefit is agreed in the employment contract, companies have not additionally specifically made the voluntary payments granted in individual cases subject to the reservation of their voluntariness. Voluntarily granted benefits can be unilaterally cancelled by companies in their entirety without further ado, thus achieving an immediate cost saving. 

Another effective means of saving costs in the short term is through mutually agreed deferral or waiver agreements with employees. A deferral agreement must precisely specify the individual remuneration components and the period of deferral in advance. As a result, the company does not have to pay the amount owed until a later date. 

Insofar as employees are prepared to mutually agree to a salary waiver in respect of future remuneration claims, this requires careful preparation. In particular, the effects on social security, the company pension scheme, the German Minimum Wage Act [Mindestlohngesetz, MiLoG] and any existing impediments to waivers on the basis of shop agreements or collective bargaining agreements must be considered and coordinated. As a rule, claims arising from a shop agreement can only be waived with the consent of the works council. Claims under a collective bargaining agreement may only be waived in a settlement that has been approved by the union.

If benefits are granted on the basis of overall commitments or company practices, one must bear in mind the fact that these are individual claims over which each employee can individually dispose.

Implementation of measures under collective law

At first glance, the termination of remuneration provisions collectively agreed in shop agreements and collective bargaining agreements and the conclusion of restructuring agreements do not appear to provide any relief. The potential greater time and costs involved opposes the short-term realisation of liquidity.

Nevertheless, the far-reaching instruments effective in the context of corporate restructuring should not be disregarded here either. A liquidity crisis is not a snapshot of a single month. This means that collectively agreed regulations to reduce weekly working hours, interventions in pension schemes, etc. are also conceivable.

The measures listed are by no means exhaustive and various possibilities for reducing personnel costs exist in individual case

Communication is crucial

With respect to all measures, HR managers must - in addition to ensuring their careful legal preparation - focus their attention on transparently and comprehensibly communicating the personnel cost reductions in order to maintain a positive working atmosphere and thus prevent the loss of skilled employees. Otherwise, there is a high risk that the measure will encourage the departure of skilled workers. The loss of highly qualified personnel may nevertheless be unavoidable in times of a shortage of skilled workers.

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Jörn Kuhn

Jörn Kuhn

PartnerAttorneySpecialized Attorney for Employment Law

Konrad-Adenauer-Ufer 23
50668 Cologne
T +49 69 707968 140
M +49 173 6499 049

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Moritz Coché

Moritz Coché

AssociateAttorney

Konrad-Adenauer-Ufer 23
50668 Cologne
T +49 221 2091 321
M +49 171 9970 069

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