Compensation for Lost Earnings due to Daycare Center Closures

Covid-19 – Compensation for Loss of Earnings due to Closure of Daycare Centers and Schools in Germany



In response to the ongoing coronavirus (COVID-19) crisis, the laws on people’s protection for epidemic situations of nationwide importance and social care, which were passed last week in an emergency procedure, have become effective on March 29, 2020.

The Social Care Act is intended to deal with the social impact of the COVID-19 pandemic. This will simplify access to social benefits, raise the supplementary income threshold to the retirement pension and extend minimal employment in the form of short-term employment. Furthermore, earnings from secondary employment in system-relevant areas taken up during short-time work will no longer be fully accounted for. Social service providers will also be provided with financial support to help them partake in measures to counter the effects of the pandemic. Finally, an amendment to the Working Hours Act allows for exceptions to maintain the operation of system-relevant areas.

Together with the “Act on people’s protection for epidemic situations of nationwide importance”, the Infection Protection Law has also been amended. Alongside additional federal competencies in the fight against epidemics, it now also provides for a compensation claim for parents who suffer loss of earnings due to the closure of schools and daycare centers by the authorities.

Below we provide an overview of the significant changes in labour law for companies in Germany as a result of the COVID-19 pandemic.

In Depth


In order to ensure the maintenance of system-relevant operations, such as in the healthcare sector, public safety and order, services of general interest and the supply of the population with existential goods, the Social Care Act includes an amendment to the Working Hours Act. It has been extended by a statutory ordinance, which allows nationwide exceptions to the working time regulations to ensure the maintenance of critical infrastructure. The Federal Ministry of Labour and Social Affairs, together with the Federal Ministry of Health, can now permit temporary exceptions from the regulations of the Working Time Act for certain employees in system-relevant occupations in the event of exceptional emergencies with nationwide implications, such as epidemics. Previously, the Working Hours Act only allowed local exceptions in urgent public interest by the authorities responsible under state law.


Following the nationwide closure of daycare centers and schools by the authorities as a result of the pandemic, both employers and employees demanded precise legal regulations on how to compensate for the loss of earnings of working parents. The government has now reacted to this by passing the “Act on people’s protection for epidemic situations of nationwide importance”. The act introduces an extension of the Infection Protection Act (IfSG) until the end of 2020. Parents who are unable to work (even remotely at home) as a result of closed childcare facilities or schools may be entitled to compensation in accordance with the new § 56 (1a) IfSG.

According to this law, persons entitled to compensation are employed custodians of children up to the age of 12 or disabled children who are dependent on help,

  • if they have to look after their child themselves due to the closures and therefore suffer a loss of earnings; and
  • if they have no other reasonable possibility of care (e.g. by the other parent or emergency care in the facilities; however, currently identified risk groups such as the child’s grandparents should not have to be given priority for care). The burden of proof for the lack of alternative childcare possibilities lies with the employee.

Loss of earnings does not apply if there are other legal ways of staying away from work temporarily on a paid basis, for example by reducing the amount of accumulated time credits. Just as with short-time working compensation, credit balances on working time accounts will therefore have to be reduced to “zero” before a claim for compensation exists. A possible claim for short-time work compensation takes precedence over the compensation claim. It is still unclear how to deal with holiday entitlements. It is imaginable that, in line with the approach to short-time work compensation, at least any remaining holiday entitlements from the previous year will have to be reduced.

There is no entitlement to compensation during periods of time when the childcare facility or school would have been closed anyway (e.g. during school holidays).

The compensation payment amounts to 67% of the loss of earnings (net remuneration) of the working custodian, up to a maximum of €2,016 per full month. It is granted for up to six weeks, based on the continued payment of wages in the case of illness.

The employee’s claim for compensation is directed to the state, but the employer acts – as in the case of the IfSG – as a “state payment office”. The employer makes advance payments and pays the compensation to the employee. On application, the employer can then have the amount paid out refunded by the relevant authority. Responsible authorities are to be determined according to state law. In most federal states, these will presumably be the local health departments.

Employers should submit the application – in accordance with the deadline regulation for claims under § 56 (1) IfSG – at the latest within three months. It is unclear whether the period begins with the official closure order or only when the loss of earnings of the employee begins. As a precaution, the deadline should be calculated from the time of the closure order.