The employment agency's start-up grant

A media designer receives €1,500 of unemployment benefit a month. She registers her design studio when 140 days of entitlement are left, and only then applies for the start-up grant. The agency refuses on two counts at once: she is ten days short of the 150-day threshold, and the application came after the start. She misses out on up to €13,500 of support.

A discretionary benefit for unemployed people who start a business

The start-up grant, the Gründungszuschuss, is set out in section 93 of Book III of the Social Code (SGB III). It is aimed at employees who end their unemployment by taking up self-employment. Its purpose is twofold: to secure a living in the first period after the start, and to fund the social protection an employer no longer shares.

The activity must be self-employed and a main occupation. A side business carried on while drawing benefit is not enough, because it does not end unemployment. Where the line lies between a side activity and the end of being without work is governed by section 138(3) SGB III; the course on unemployment benefit covers that hours threshold in detail.

One small word in the statute is decisive: founders may receive the grant. There is no legal entitlement. The employment agency decides at its dutiful discretion, even when every condition is met. Anyone who meets the conditions is therefore entitled only to a discretionary decision free of legal error, not to the money itself.

The statute does take one obstacle out of the agency's hands. Under section 4(1) SGB III, placement in work generally takes priority over cash benefits. Section 4(2), third sentence, makes clear, however, that this placement priority does not apply to the start-up grant. A refusal may therefore not rest solely on the existence of vacant jobs.

In practice this means the discretionary decision must give reasons and must be guided by the aims of the support. A decision that weighs viability, aptitude or the labour market can be challenged if it overlooks facts. An objection is open against it, within the period stated in the notice of legal remedies attached to the decision.

At least 150 days of entitlement left on the start date

The most important figure is in section 93(2) no. 1 SGB III. Until self-employment begins, there must be an entitlement to unemployment benefit, and its remaining duration must still be at least 150 days when the business starts. What counts is the day the activity is taken up, not the application or decision date.

Anyone who hesitates for long therefore loses eligibility. Every day on which unemployment benefit is paid reduces the remaining duration under section 148(1) no. 1 SGB III. Someone with twelve months of entitlement stands at exactly 150 days left after seven months of receipt. Every further day of benefit rules out the start-up grant, however good the project is.

Section 154 SGB III helps with converting between months and days. Unemployment benefit is calculated for calendar days, and a full calendar month counts as 30 days. Twelve months of entitlement thus correspond to 360 days. How many days remain in a given case appears in the agency's award notice and can be checked there before planning.

The statute expressly rules out one case. If the entitlement rests solely on the shortened qualifying period for people in short fixed-term jobs, that is on section 147(3) SGB III, it does not count for the start-up grant. Such entitlements are short anyway: the table in subsection 3 ends at five months of entitlement.

In addition, section 93(3) SGB III blocks the grant for as long as a ground for suspension under sections 156 to 159 exists or would have existed. The main practical case is the benefit suspension period. Anyone who resigns in order to start a business must expect that no start-up grant is paid during such a suspension either.

The suspension works twice over. It delays the earliest start of funding and also cuts the entitlement period, by at least a quarter after a resignation. An already tight remaining entitlement can thus fall below 150 days. How the suspension arises and how long it lasts is explained in the course on unemployment benefit.

Proving viability and aptitude

Besides the remaining entitlement, section 93(2) SGB III requires two pieces of evidence. Under number 2 the founder must prove to the agency that the new business is viable. Under number 3 the founder must set out the knowledge and skills needed to carry on the self-employed activity. Both conditions rank equally.

For viability the statute prescribes the means of proof: the opinion of a competent body. The founder's own assessment or a mere hope of turnover is not enough. The opinion assesses whether the project is likely to support a living, and as a rule it is based on the founder's business plan.

Section 93(2), second sentence, lists competent bodies by way of example. The word "in particular" shows that the list is not exhaustive. Anyone who wants to use another body, such as a start-up advisory service, should first check with the agency whether it will accept that body's opinion.

• chambers of industry and commerce
• chambers of crafts
• professional chambers, for example for tax advisers or architects
• trade associations
• credit institutions

Knowledge and skills are not certified by the competent body but set out by the founder. Suitable evidence includes qualifications, employment references, proof of experience in the sector and attendance certificates from start-up seminars. The more concrete the link between past experience and the planned activity, the more convincing the account will be.

In practice it pays to prepare both pieces of evidence together. The business plan describes the offer, target group, competition and prices, together with a forecast of capital needs, turnover, costs and living expenses. The more comprehensible the figures, the more likely the body will certify viability and the harder it is for the agency to refuse.

The application must be made before the start

The start-up grant is an employment promotion benefit, and section 324(1) SGB III applies to such benefits. They are paid only if they were applied for before the event giving rise to the benefit. For the start-up grant that event is the taking up of the self-employed activity.

The order is therefore compulsory: first apply to the agency, then start the activity. Make the application in a provable way, and agree in writing with the agency which documents follow later. Anyone who registers the business first and accepts a first order may already have missed the cut-off date.

A late application is not ruled out entirely. Under section 324(1), second sentence, the agency may accept a later application to avoid undue hardship. Nobody should rely on that, because this decision too lies within the authority's discretion.

Taking up the activity has consequences beyond the agency. It starts the deadline for registering with the tax office, and for a trade the municipality must be notified. The course on registering with the tax office shows how these notifications work. For the grant, what matters is that the start date is documented and falls after the application.

Two phases: six months and nine months

Duration and amount are governed by section 94 SGB III. In the first phase, for six months, the founder is paid the amount last received as unemployment benefit, plus 300 euros a month. Under section 93(1) the flat amount serves social protection, for instance health and long-term care insurance and retirement provision.

In the second phase the grant may be paid for a further nine months, but only in the amount of the 300 euros. The condition is that the founder demonstrates business activity with suitable documents. This extension too is discretionary and is applied for separately.

If the agency has well-founded doubts about the business activity, section 94(2), second sentence, allows it to require a fresh opinion from a competent body. Suitable documents include invoices, statements of the business account, a current cash-basis profit statement or proof of registration with the tax office.

Together the two phases come to no more than fifteen months. The amount of the first phase depends solely on the unemployment benefit last received; income from the new business is not offset against it. Anyone who does not yet know their benefit amount can estimate it with the unemployment benefit calculator.

An example shows the order of magnitude. With 1,500 euros of unemployment benefit, the first phase pays 1,800 euros a month, 10,800 euros in total. The second phase brings nine times 300 euros, that is 2,700 euros. The full support therefore comes to 13,500 euros, the sum in the opening case.

What the grant uses up of unemployment benefit

The start-up grant is not a gift on top of unemployment benefit. Section 148(1) no. 8 SGB III reduces the entitlement period by the days for which a grant equal to the unemployment benefit last received was paid. That concerns the first phase. The second phase, with its 300 euros, uses up no entitlement.

A remainder can therefore be left over. Someone who starts with 240 days of entitlement and receives the first phase for six months still keeps a remaining entitlement afterwards. It only becomes payable if the founder later becomes unemployed again and registers as such. While the business is running, this remainder lies unused.

The remainder does not keep for ever. Under section 161(2) SGB III an unemployment benefit entitlement can no longer be claimed once four years have passed since it arose. The period runs from when the original entitlement arose, not from the start of the business. Anyone who gives up after three years of self-employment therefore has little time left.

If a new entitlement arises in the meantime, for example through voluntary unemployment insurance, the old one lapses under section 161(1) no. 1 SGB III.

Its remainder is not lost, though: section 147(4) SGB III extends the new entitlement by the remaining period if fewer than five years have passed since the old one arose. The third module takes up this route.

Exclusions: earlier support and pension age

Two further bars are found in section 93 SGB III. Under subsection 4, support is excluded if fewer than 24 months have passed since the end of earlier support for self-employment under Book III. Someone who starts two businesses in quick succession will therefore usually receive the grant only once.

The agency may waive this period where there are special reasons relating to the founder personally. The statute gives no examples. What is meant are circumstances the founder is not responsible for, such as an illness that ended the first project. Here too the agency decides at its discretion.

Under subsection 5, support ends at pension age. Anyone who has reached the age for the standard old-age pension under Book VI receives no start-up grant from the beginning of the following month. This also applies in the middle of an approved phase: the grant then ends early.