Social partners promote transitional employment options

In April 2010, the social partners in the west-central German state of Hesse announced a new initiative called ‘HessenTransfer’. The measure aims to support small and medium-sized enterprises at regional level by offering them transitional employment schemes in times of economic crisis. The social partners aim to promote transitional employment agencies and transitional companies to place surplus labour.

On 8 April 2010, an initiative called ‘HessenTransfer’ was launched by the Hessian branch of the Confederation of German Trade Unions (Deutscher Gewerkschaftsbund Hessen, DGB Hessen) and the Confederation of Hessian Employers’ Associations (Vereinigung der hessischen Unternehmerverbände, VhU). In cooperation with the Ministry for Labour, Family and Health (Hessisches Ministerium für Arbeit, Familie und Gesundheit, HMAFG) of the west-central German state of Hesse and the Federal Employment Agency (Bundesagentur für Arbeit, BA), the initiative was set up at regional level to support local companies, especially small and medium-sized enterprises (SMEs).

As mentioned in the joint press statement (in German), Hessian companies had experienced substantial cutbacks in orders due to the global financial crisis and the subsequent economic recession in 2009 and 2010. The social partners stated that many companies had so far tried to avoid redundancies and keep their staff – for example, by introducing short-time work (DE0904039I, DE0909029I, DE0910039I). However, they needed further support to deal with the negative consequences of the crisis. SMEs, in particular, tended to be unfamiliar with instruments offered by legislation or lacked the funds necessary to exploit them. For example, transitional companies were often used by larger companies, but seldom by SMEs.


HessenTransfer has been launched to inform SMEs on alternative ways of dealing with their staff surpluses – that is, other than through lay-offs or by offering severance pay. The initiative firstly provides advice and practical help for SMEs on how to manage such surpluses in times of economic hardship. At the same time, it supports employees affected by redundancies in their search for a new position.

To this end, HessenTransfer supports companies wishing to set up their own, or to cooperate with an already existing, transitional employment agency (Transferagentur) or transitional company (Transfergesellschaft). These companies work in the following way:

  • a transitional employment agency tries to place workers who are still employed with their (old) company, but threatened by unemployment, in a new position outside the company;
  • after workers’ employment contracts with their old employer are terminated, employees are offered the opportunity to sign a new fixed-term contract with a transitional company, which then tries to place them in new jobs.

Funding and costs

Both variants are jointly financed by BA and the company which is restructuring and reducing staff. When employees are directly employed by a transitional company, BA offers to pay the transitional short-time working allowance, which amounts to 60% or 67% of the employee’s former net wage (for a maximum of 12 months). The old employer pays the social security contributions of its former employee, the accumulated administrative and consulting costs of the transitional employment agency or transitional company, and any costs incurred for further training courses.

Legislative framework

It should be noted that these measures are already covered by German legislation. For example, Section 216a of the Social Security Code III deals with transitional measures for employees threatened by unemployment, while Section 216b covers transitional short-time working allowances.

Promotion of initiative

As part of the new initiative, regional meetings are to be held to publicise, and encourage companies to take advantage of, the existing legislative measures in Hesse. The aim is to give advice and practical support to SMEs with up to 250 employees. Experts will explain the transitional employment instruments, the legal framework and provide practical examples – for instance, on the inner workings of transitional employment agencies or transitional companies, on how to apply for funds, and on how to inform, advise and train employees. These meetings are also to be attended by local government departments and other relevant authorities, such as the local employment agency.

Position of social partners

On 8 April 2010, the President of the regional DGB branch in Hesse, Stefan Körzell, told the press that the new initiative was intended to support employees affected by dismissals. Such employees are to be provided with advice, rapidly placed in new positions or offered further training. He emphasised that HessenTransfer aims to keep employees longer in regular employment liable to social security contributions. Mr Körzell pointed out that employees applying for a new job had better chances of success while still employed (by a transitional company) than when unemployed.

The General Manager of VhU, Volker Fasbender, added that employers that finally decide to reduce staff in order to protect their companies’ existence and the remaining jobs can support their (former) employees with such transitional measures. While the affected employees had the advantage of not falling into unemployment, employers could better calculate the cost of job cuts and even support workers who had to be laid off during the last stages of their employment.

Sandra Vogel, Cologne Institute for Economic Research (IW Köln)

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