Partial incapacity for work

With the recently announced healthcare reform, the Federal Government intends, for the first time, to codify the concept of so-called partial incapacity for work. Should the draft legislation be enacted in its current form, the question arises: what are the implications under employment law? We provide an initial overview.

Current legal situation: “All or Nothing”

Under employment law, an employee is either fit for work or fully incapacitated for work. It is immaterial whether, due to illness, the employee might be able to perform work to a limited extent. An employee who is certified as sick does not work.

Partial incapacity for work constitutes an exception — provided that both parties to the employment relationship agree to it

The concept of partial incapacity for work, planned for introduction in 2027, departs from this principle. Under the proposal, incapacity for work may exist to the extent of 25%, 50%, or 75% of the employee’s weekly working time. Such certification is made by a physician. If the employee is partially fit for work, the employee may continue to perform their previous duties to that extent notwithstanding the illness. For the remainder, the employee does not work and continues to be deemed incapacitated due to illness.

However, a medical certification of partial incapacity for work does not operate automatically; it requires both the employee’s willingness and the employer’s consent. First, the employee must elect this option and consider themselves medically able to do so. If the employee then notifies the employer of this request, the employer has seven calendar days to review whether partial work is feasible and to issue a response. The employer may consent, but may also refuse partial performance of work. If the employer fails to respond (in a timely manner), the position is deemed suitable and consent is deemed granted (legal fiction).

Partial incapacity for work is not intended for all employees

The Federal Government intends to implement the planned changes by amending the sickness benefit provisions in the Social Code Book V („Sozialgesetzbuch Fünftes Buch“). One declared objective of the reform is to reduce reliance on statutory sickness benefit and to ease the financial burden on the statutory health insurance funds.

Accordingly, partial incapacity for work is directed at individuals covered by statutory health insurance. In addition, the rule requires an anticipated incapacity for work lasting longer than four weeks. Where a certain residual capacity to work exists, the measure is intended to facilitate an earlier return to the workforce. Partial incapacity is particularly relevant in cases of illnesses that do not result in complete inability to perform work, such as mental health conditions, musculoskeletal disorders, and oncological diseases.

Short-term illnesses and employees with private health insurance are not covered.

Employer’s obligation of payment

Where an employee performs work on a partial basis, the following applies:

During the continued-remuneration period (six weeks), everything remains as before: the employer pays the full salary, regardless of whether the employee works not at all or only partially. The provisions of the Continued Remuneration Act („Entgeltfortzahlungsgesetz“) remain expressly unaffected.
If the employee receives statutory sickness benefit, the employer must remunerate only the hours actually worked. In addition, the employee will receive the newly regulated partial sickness benefit.

Example: If a statutorily insured employee is 25% incapacitated for work, they perform the remaining 75% of their weekly working time. During the continued remuneration period, the employee receives 100% of their salary from the employer. If the employee receives sickness benefit, the employer pays only 75% of the remuneration. The partial sickness benefit compensates for the remaining 25% (at 70% of the pro rata gross salary or 90% of the net salary, as with standard sickness benefit).

Key Takeaways for employers

The employer may not unilaterally order partial performance of work or pressure the employee into it. At the same time, the employer may refuse consent to partial work within seven calendar days. The law does not provide for any obligation to state reasons.
The employer is not required to create or modify a position in order to enable partial performance of the existing duties. The only requirement is to assess whether the specific position is suitable. In doing so, considerations include operational organization as well as occupational health and safety requirements.
A gradual return to work (the so-called “Hamburg Model”) remains possible. There is a hierarchy: priority must be given to assessing whether partial incapacity for work allows partial performance of the existing role (with an obligation to pay remuneration).
Occupational Integration Management („Betriebliches Eingliederungsmanagement (BEM)“) remains unchanged as a separate procedure. Partial incapacity for work may be one of many potential models discussed within the Occupational Integration Management process.
Employers will need to adapt internal processes and should expect increased administrative effort, in particular in payroll administration. Employers will also need to clarify responsibilities to ensure a documented assessment and a timely response.

Outlook

Partial incapacity for work constitutes a social insurance law innovation that will affect all companies. It offers employers the opportunity to retain institutional knowledge and to make earlier use of employees’ labor capacity. However, this will not always be desirable, and the existing role may in some cases be unsuitable. In any event, companies must clearly understand the required steps.

Nevertheless, it remains to be seen for now how the legislative proposal will develop. The initiative is still at an early stage and must first go through the legislative process; substantive amendments remain possible. Moreover, the Federal Joint Committee will issue implementing guidelines only after promulgation of the statute, specifying further details on how partial incapacity for work is to be determined and structured. It will therefore take some time before the concept is established in employment law practice and outstanding issues are resolved. We will continue to monitor further developments.