Become self-employed with the short-time allowance

At the beginning of the Corona crisis, the employment agencies recorded a historic increase in short-time work (external link). According to this, around six million people received the so-called short-time allowance (KUG). For many, however, this is not enough to cover everyday expenses. A secondary business offers many founders the opportunity to increase income and compensate for the missing salary. We have researched what needs to be considered when setting up a sideline and what subsidies are available.

The corona pandemic has worsened the economic situation of many people, and the number of companies in difficulty has increased rapidly. Due to a lack of orders, managing directors have to give up their company foundation partially or even completely. This leads to workers being laid off or being sent on short-time work.

Fortunately, there is state support for the latter through the KUG of the Employment Agency (AfA). With this subsidy, employees can currently receive at least 60% of their original net wages for 24 months (limited to the end of 2021, previously 12 months). Increases (external link) can also be approved if at least 50% of the work is lost. From the fourth month, the KUG increases to at least 70% and from the seventh month to at least 80%. The aim of this support is to at least partially compensate for the loss of earnings and to keep the job if the current situation would make redundancies from the company necessary. Short-time work is requested by the employer. The employees of a company therefore do not have to become active themselves and apply for this on their own.

Top up the missing salary with the sideline

Nobody knows how long the pandemic and the restrictions and measures associated with it will continue. Employees are therefore backing the right horse if they use the time gained through short-time work and become self-employed as a part-time job. However, you have to specific points get noticed.

In the case of business founders who start their side business after registering for short-time work, the income is credited to the KUG. Here you have to distinguish whether the income from the business start-up higher or lower is as the KUG. Example for the first version: If an employee receives a subsidy of 500 euros during short-time work and would like to become self-employed with a side business with which he earns 1,000 euros per month. The KUG is then reduced in full so that it is completely eliminated. Nevertheless, the employee has more money available than without a secondary job.

Is the Commercial income lower as the KUG, however, the situation is somewhat different. For example, 300 euros are earned by starting a part-time job. The KUG of 500 euros will be reduced proportionately by 300 euros and only 200 euros will be paid out. Accordingly, the founder would have a total of 500 euros at his disposal. One could come to the conclusion that it is not worth starting a secondary business if the income is not higher than with the subsidy anyway.

But be careful: It should be borne in mind that the KUG is not a permanent solution and the income that is generated with the sideline business may even remain permanent even if you work full-time again. As soon as the company employs its employees fully again, founders have 300 euros more in their pockets. Perhaps this part-time activity can also be converted into a full-time start-up, from which entrepreneurs can later make a living. The current crisis therefore also offers an opportunity for founders – at least as far as self-employment is concerned. Regardless of the type of business start-up, it is recommended to create a business plan to avoid mistakes in the business model.

Business founders who were already running a side business before registering short-time work and whose income is increasing should note that the amount of the increase is partially offset against the KUG. Founders who also applied to start their own business before registering for short-time work and whose earnings remain the same need not fear any cuts.

The corona pandemic may have serious economic consequences, but this can also be an opportunity to start the company foundation that has been put on the back burner for months. Even if this initially means that the AfA shortens the KUG, in the long run you can still benefit from the step towards self-employment. Because at some point the current crisis will be over and who knows, maybe the secondary business will become a successful main business.

Tackle the sideline project safely with business start-up advice

However, the complex topic of founding a company should not be started alone. Business start-up advice can help here. Thanks to the large funding landscape in Germany, founders can enjoy inexpensive advice. You can find out which funding is right for you with our free funding check.