Unemployment > Commencement Benefit

Commencement Benefit: Independent Business after ALG II

Definition, Explanation

Tips, Checklist

Definition, Explanation

Foundation of an independent business out of unemployment are subventioned by the government. For unemployed getting regular unemployment benefit, this is the starting subvention. Starters who get unemployment benefit II (ALG II), which is Hartz IV, can be allowed a commencement money (Einstiegsgeld). The decision of allowance depends on the evaluation of your responsible case manager at the federal labour agency (Bundesagentur für Arbeit). There is no legally guaranteed entitlement. Even if every 'requirement' is satisfied, the application can be refused, e.g. for extension of provided budget quota. Aim of the commencement money is the rehabilitation in the job market. That is why there is another kind of occupation that is subventioned, given it is subject to social insurance contribution, namely one that is

• low-paid
• at least 15 working hours a week
• and considered permanent

Legal basis is § 29 SGB II. Unlike the starting subvention, the commencement benefit does not end the unemployed-status. Meaning that both unemployment benefit II and rent and heating are paid on, and contributions to pension and nursing care insurance are paid by the labour agency. Concerning health insurance it depends whether it is a compulsory or a voluntary insurance. The commencement benefit is paid in addition. Prerequisites are:

• You run an independent business
• You are entitled to UB II and are capable of work, that is at least 3 hours a day
• Your occupation is of a full-time, primary-occupation kind
• For the time being, no sufficient income can be expected
• But in the long run, the income of the independent business is going to lift you out of UB II entitlement.

The better you can picture that you would become independent of supportive pays, the greater your chance to gain commencement money.

Calculation of the amount of the commencement money is conditioned on the duration of previous unemployment and the number of people living in the household. Duration of payment is normally 12 months. Extension up to 24 months is possible. As soon as the receiver is rated no longer in need of support, entitlement is ceased.

Regional labour agencies are autonomous in their pocedure of allowing for commencement money. Recommendations of the federal agency tell to allow for 12 months at first and design further pays degressively. They also recommend as an initial amount of commencement money 50 per cent of the UB II. This means additional € 172,50 (50 per cent of € 345,00) for the receiver and 10 per cent, appr. € 35,00 for every other member of the household. The money should not, though, exceed a 100 per cent of the pure UB II pay (€ 345,00), in addition to UB II and rent and heating costs.

Commencement money is non-taxed income and is not included in tax progression. Turn-overs and profits are to be reported regularly to the case manager. Profits are offset against UB II. Thus, a profit of € 1000 will diminish the extra pay to € 165. As soon as profits exceed UB II, it is better to dispense with UB II. The commencement money, on the other hand, facilitates building an independent livelihood starting from the security of UB II.

Tips, Checklist

• From the very first considerations about your business, talk to your case manager about your plans
• Determine with your case manager in the ARGE your individual amount of pays, to be able to well make up your business plan
• Seek to convince your case manager of your plans. He alone decides whether you get supported
• Show clearly that your plans prove successfull in taking you out of unemployment
• Put up a business plan with a turnover- and profits- calculation
• Apply for commencement money at your case manager, and hand in to him your business plan in combination with a curriculum vitae
• An assessment of the business plan by a third party is not necessary, in contrast to the case of starting subvention, but it can be demanded region-dependently
• The praxis is to grant commencement money for 6 months, first. After that, a re-examination decides in how far the plans have turned out well and if the development of business is promising
• Check repeatedly, when your profits have increased, whether it would not be better to let go of the UB II and thus keep the complete profits

Last update: 12/27/2009