Germany Introduces Reduced Work Week, Help Businesses

By Ilya Rzhevskiy, Epoch Times
December 8, 2008 Updated: December 8, 2008

MUNICH—The eurozone is experiencing a recession for the first time since the adoption of euro. Germany is one of the many European Union nations that sunk into recession during the third quarter.

Many German companies are in financial crisis and as a result are laying off some of its workforce.

Companies such as state bank BayernLB, automakers Daimler AG and Opel GmbH and semiconductor manufacturer Infineon Technologies are all experiencing challenging economic situations, leading them to cut costs by laying off personnel.

One of the most recent major job cuts announcement came from BayernLB. It projects to cut 5,600 jobs within the next 5 years. This move would help it to cut costs by $850 million, the company estimated.

To keep as many people employed as possible, the German government introduced a state-sponsored reduced work-week program. The goal of this program is to avoid layoffs, while at the same time enabling the workers to get their full salaries.

Reduced work-week usually ranges from three to four full working days per week.  The company pays only for the actual amount of hours worked, and the government helps bridge, or pay for, the remaining compensation.

Benefits of this program are visible to all sides. The company achieves the goal of saving on employee expenses without the need to cut staff. The government keeps the unemployment rate low. The employees get to keep their jobs, earn a full income, and also have more free time.

The reduced work-week program will be prolonged on January 1, 2009 from six to eighteen months.

Not every company is eligible. A company must show that it is experiencing a financial crisis, in which the only way out is to reduce employee costs.

Daimler, the car manufacturer that makes Mercedes-Benz vehicles, is one of the companies to implement reduced work-week program.

Four of Daimler’s factories will start a four-day work-week beginning in January 2009 until April, at the earliest. The factories together employ thousands of German workers.

Daimler hopes to emerge out of the crisis to coincide with the release of its new E-Class model, which debuts mid-2009.

“We have determined with our internal planning, that in the second half of 2009 we will reach the lowest point and from then on we will see positive tendencies,” said Dieter Zetsche, Daimler CEO.

By keeping its full workforce with the reduced work-week program, the company hopes to weather the economic storm and come out stronger.

Similar programs are in process at many other German companies already. The government chose to play an active role in helping to boost the economy by keeping the workforce engaged.