Social security contributions also to be deferred for most affected sectors of the economy.

On 19 March 2020, the European Commission adopted its initial Temporary Framework for State aid to support the economy in the current COVID-19 outbreak. The aim is to give Member States greater flexibility in the State aid rules in order to provide companies with sufficient liquidity in the form of direct grants, subsidised interest rates on loans and guarantees so that they can maintain their economic activity during the crisis.

Expanded Temporary Framework

The European Commission has now expanded this Temporary Framework with an additional five measures, which further increases the leeway afforded the Member States. The Amendment to the Temporary Framework adopted on 3 April 2020 now allows Member States to provide targeted support by deferring social contributions for the sectors, regions and types of businesses most affected by the outbreak.

Member States could already implement measures to support all companies in accordance with the State aid rules in force, including suspending social contributions. The EU Commission had already pointed this out in its Communication on an EU-wide coordinated economic response from 13 March 2020 where it proposed using all available EU tools to mitigate the consequences of the pandemic.

Deferral of social contributions

The umbrella organisations of the German social security system also recommend a deferral of social security contributions for companies which are struggling during the pandemic. According to the National Association of Statutory Health Insurance Funds (GKV-Spitzenverband) and the German Pension Insurance (Deutsche Rentenversicherung), social insurance contributions should be temporarily deferred. Employers, who have understandably gotten into financial difficulties due to the Corona crisis, should be allowed to pay their employees’ social security contributions later in March and April. The prerequisite for this, however, is that all other measures from the various aid packages and support provided by the federal government have been exhausted. The German Social Accident Insurance (DGUV) also points out that its institutions are offering relief regarding social insurance contributions to companies in financial distress.

Outlook

The Temporary Framework is initially valid until the end of December 2020, but the European Commission will review whether an extension is necessary before the end of this period.