Not every company meets the criteria for short-time working. There are other ways companies can reduce labor costs and so maintain liquidity in times of crisis. The alternatives ‘pay waiver’ and ‘pay deferment’, however, require a good relationship between the company and its employees, since they are only possible with the employees’ agreement. We have assembled the key facts for you:

Pay Waiver
The term speaks for itself – employees voluntarily waive a certain percentage of their gross pay for a certain period, thus helping the company through the crisis. The saving on the gross amount will not impact the net amount one to one. Any pay cut will not be repaid when the crisis ends, although the employer can, of course, decide to give a voluntary bonus as a sign of gratitude if there is a subsequent upswing. When choosing this option it is important to remember that waiving a percentage of the gross amount will also impact pension insurance and company pension fund contributions.

Pay Deferment
In this case employees temporarily waive payment of a percentage of their pay. This amount is paid at a later fixed date that is agreed in advance. In other words, employees only waive their pay for a certain period of time. The disadvantage of this model can be that the company is merely delaying the fallout from the crisis or even the moment at which it becomes insolvent. Why is this? Because when agreeing the due date, it is often not possible to foresee if the company really will have sufficient funds at that time to honor its debt. The deferment period can only be extended past the agreed due date with the employees’ consent.

Hybrid Option
Both models are not without their problems, so a hybrid of the two can be better for all concerned. In such cases, subsequent payment of any pay that has been retained is linked to a predetermined target, such as a specific annual profit. Repayment is thus not linked to any one date but instead will be made when the company is in a better position.

All of these solutions can only function if the company’s managers and the workforce have a good, mutually trusting relationship. In practical terms, the employees assume some of the business risks – voluntarily. “Even if this should be the case, it is still necessary to examine in detail whether and how these measures should be applied in each individual case,“ says Dr. Monika V. Kronbügel (PhD.), CEO of Global Division.

Just talk with us about your individual approach…