- Response to COVID-19
- Income support for workers
Transfergesellschaften, Beschäftigungs- und Qualifizierungsgesellschaften
Transitional and qualification employment agencies
In case of business alterations and planned dismissals, the employer together with the works council may under article 11 Social Code Book III decide on establishing or involving a transfer agency for supporting to-be-dismissed workers in finding new employment.
The main purpose of transfer agencies is support in finding new employment via job placement, advice and guidance and provision of further or vocational training.
Management and works council first have to sign a contract with the transfer agency; typically a private company, which has to provide proof of its qualification as a vocational and further training provider.
In a second step workers affected by collective dismissal are individually asked whether they agree to transfer to the transfer agency. In this case the individual employment contract is terminated and a new fixed-term employment contract (12 months duration) with the transfer agency is concluded. Over the duration of this fixed-term contract the federal employment agency carries the worker's wage by providing short-time working allowance.
The use of the short-time working allowance for transfer activities is covered by the Social Code III (called Transfer Kurzarbeitergeld, Transfer KUG). Transfer KUG is 67% of the previous wage for parents and 60% for workers without children. In case of agreed supplements by the previous employer, the worker may reach net income levels between 75% and 90% during the transfer period. The maximum period for which transfer-oriented short-time working allowances are granted under this instrument is 12 months (this has not been modified in relation to COVID-19). If the employee participates in a necessary transition measures, the local labour agency provides a grant of 50% for the expenditures and a maximum of €2,500 per employee participating in such measures. Further expenditures have to be borne by the employer.
Before agreeing on involving a transfer agency, management and works council are obliged to report to the employment agency and to use the employment agency's advisory service. This service advises employers on how to balance employer and employees interests when setting up a social plan regulating substantial alterations of an establishment. The advisory service is mandatory for employers if they wish to apply for grants for transfer measures or short-time working allowances in the context of their restructuring (no changes made for COVID-19).
The new rules explicitly state that, if the transitional short-time working allowance is granted, the employer has to make job proposals to the affected employees. For evaluation purposes, these measures have to be documented by the employer in a so-called 'transfer file'. If employees' skills are deficient, the employer has to offer corresponding training measures. Furthermore, recipients of the transitional short-time working allowances can be qualified by working for a short period for another employer. However, the hiring out of recipients of the scheme is not allowed.
- National funds
- European funds
- European Funds (ESF)
- Trade union
- Employers' organisation
Funding is provided for the short-time working allowance (Transfer Kurzarbeitergeld).
There are examples of cooperation with the local government, as was the case for the company Quatro Transfair. This was established by the German Metalworkers' Union branch in Siegen, the association for the metal industry in the region.
Public employment services
Coordination and funding role.
Employer or employee organisations
Social partners are involved in the establishment/deployment of a transfer agency. Employers provide funding.
In November 2019 (according to the latest available data), 8,549 workers were employed by transfer agencies.
Due to Germany's stable economic situation, the number of workers employed by transfer agencies decreased from nearly 15,000 people in December 2013 to 10,600 in September 2017.
Evaluations of transitional employment agencies come to different conclusions on their effectiveness. An evaluation (Mühge et al, 2012) shows that 51.4% of respondents were in a job liable to social security contributions after leaving the transitional employment agency in 2010. Another 2.3% became self-employed, whereas 42.5% of the respondents were unemployed. Thannheiser et al (2015) show that, after having entered a transitional employment agency in 2011, 38% of respondents were transferred to other companies and 7% became inactive while another 9% retired. Hence, about 46% of respondents remained unemployed (Thannheiser et al, 2015). In contrast, Schneider et al. (2007) do not find any indication that the job transfer scheme improves employment perspectives of participants interviewed in 2006 considerably more in comparison to offers made by the local employment agencies.
Furthermore, a study by the Institute for Social Research (ISG) (2013) on behalf of the Federal Ministry of Labour and Social Affairs considers the ESF-funded qualification short-time allowance (QualiKug Transfer) to be positive, as target values in the ESF-OP have been met in previous years. Significantly higher are only the employment rates for ESF-founded employees with 10 year of employment or more. Other effects can also be concluded, such as more positive employment effects for women. However, those are statistically not significant.
Goepfert and Reinhard (2020) conclude that an important advantage of the instrument is that people placed in a transitional employment agency are supported financially by public funds (for example short-time working allowance). Gnann (2019) similarly highlights that the major advantage for employees is the safety net provided by the agency - be it with regard to the financial or legal support.
Overall advantages for the employee include:
- no (immediate) unemployment;
- being able to continue to claim unemployment benefits after the scheme;
- the fact that benefits received in the framework of the social plan do not reduce unemployment benefits; and
- gaining a qualification;
- job placement activities on behalf of the agency.
Regards companies, Goepfert and Reinhard (2020) conclude that a major advantage is the (public) financial support that is available for firms if they qualify their labour placed in a transitional employment agency. Similarly, Gnann (2019) shows that the public support is of importance for companies that need to restructure and decrease personnel.
Advantages for the employer include:
- avoidance of dismissals and potential legal consequences and lawsuits;
- the option of dissolving employment relationships more quickly;
- and a better social image, which has relevance regarding potential investors.
This scheme is costly, both for the former employer and the unemployment insurance fund. The PES financially supports transfer services although it does not order these services - this results in weak monitoring and control of the scheme. It is rarely implemented by companies without works council; this means 50% of employees cannot avail of it, most of whom work for small and medium enterprises (SMEs). No support is provided unless a substantial proportion of employees are negatively affected.
Companies do not want to publish information about restructuring at an early stage of the process. This makes it difficult for them to initiate an external consulting process. Worker representatives aim to maintain jobs, so the suggestion to establish a transfer agency is typically only announced when negotiations fail.
Beneficiaries are employees of individual companies, for each company at a different point of time. Hence, there is little possibility of bringing together a sufficient number of affected workers to offer differentiated support. In other words, all workers of affected companies will receive the same treatment, irrespective of their individual needs.
Decisions regarding European Social Fund (ESF) and European Globalisation Adjustment Fund (EGF) support can come too late, leaving little interest in workers’ reintegration. The importance of maintaining the company's image can have a limiting effect, particularly in cases of insolvency or closure. The division of work between transitional employment agency/transitional company and PES is unclear. The mechanism is complex and difficult to explain to the general public and affected stakeholders. The scheme has little relevance to SMEs due to the bureaucratic and financial burden involved.