EMCC European Monitoring Centre on Change

Germany: ERM Comparative Analytical Report on ‘Public policy and support for restructuring in SMEs’

  • Observatory: EMCC
  • Topic:
  • Published on: 14 May 2013

Birgit Kraemer

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

In Germany, SME promotion is statutory in most federal states. Apart from established support structures, a range of SME promotional programmes is in place. Federal policies are predominately growth and innovation-oriented and proactive. It is indicated that funding lines tend to privilege technologically innovative SMEs in accessing finance, consultancy and training. Support for restructuring ‘as such’ and employee-oriented instruments strongly depend on the ESF and the Federal Employment Agency. Instruments in result of collective bargaining are rare.


Part 1: Overall policy context

1.1. Has there been public or policy debate on the specific challenges for SMEs and/or their employees in restructuring before the global recession of 2008/09? Please specify, for example:• If so, since when (e.g. up to 3 years before, 3-10 years before, longer), at which level (national, regional, sectoral, all of them) and in which form (‘real’ policy debate mirrored in policy documents or rather public debate mirrored in media, or both)?• Which policy areas (for example, SME policy, entrepreneurship policy, employment policy, social policy, regional policy etc.) were involved? Particularly: Does SME policy specifically deal with restructuring? Does ‘restructuring policy’ specifically deal with SME issues?• Did the public and policy discussions deal with restructuring as such or were specific types or phases of restructuring covered?• Which were the issues/contents that have been discussed? Which specific characteristics of SMEs in restructuring were considered in this context? Was the specific case of SMEs as subcontractors a topic for discussions?• Did the discussions rather deal with the enterprise perspective or with the employee perspective or both?

In German public and policy debates SMEs are covered by the term Mittelstand, which traditionally holds the notion of family ownership, quality production and export-orientation. The Mittelstand is said to be the backbone of the German economy, which is to say that the Mittelstand’s well-being has been a standard topic in policy debates. For support, publicly-backed finance institutions (socalled Mittelstandsbanken) are in place at the national level (KfW Mittelstandsbank), the level of the federal states and at local level; the Federal Office of Economics and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle, BAFA) provides annual financial assistance to the Research Institute for SME (Institut für Mittelstandsforschung, IfM), advice is given by the Chambers of Commerce and Industry and the Craft Chambers, which are public statutory bodies.

In the 1970s, the Federal government set up ‘Guiding principles for structural SME policies’. During the 1990s and into the 2000s almost all Bundeslaender passed SME Promotion Acts (Mittelstandsfördergesetze), which stipulate considering the Mittelstand in economic policies.

Restructuring ‘as such’ has never been an issue in public debate. But the development of particular SME instruments became an issue in the 1990s when SMEs in eastern Germany and in weakening western German regions were said to need financial and entrepreneurship support in order to grow. The EU Structural Funds, the Special Fund of the European Recovery Package (ERP) (a fund that originates from the post-war Marshall Plan) and the Joint Fund of the Federal State and the Bundesländer to Improve the Regional Economic Structure (GRW) – which all apply a social partnership approach – have been used for providing investment capital and venture capital by KfW, counselling, training and funding of research and development activities.

From the 1990s into the 2000s, federal policies shifted to the promotion of self-employment/start ups, to innovation and growth policies. A policy on SMEs as sub-contractors has not been put in place as Mittelstand firms are seen as forming part of networking structures rather than of hierarchical supply chains. Innovation policy is considered a main path for promoting internationalisation. The current Federal Economics Ministry’s internationalisation policy for SMEs rests on two pillars - the promotion of export activities of predefined innovative sectors and assistance in finding foreign business partners or in participating in trade fairs abroad.

SME innovation policy implies a proactive promotion of change. SME funding is provided within the frameworks of ‘Innovative Growth Cores’ (2001, promoting eastern German high-tech clusters), the ‘ERP Innovation Programme’ (2005), ‘High Tech Starter Fund’ (2005), ‘SME innovative’ (2007), ‘Central Innovation Programme for SMEs’ (ZIM)(2008) and ‘Innovation in Services’ (2008) (DE100039Q; DE1108039Q, compilation by IfM in English ). These funding lines target technologically innovative firms to develop new product fields by cooperating with research institutions and linking up with defined sectoral or regional clusters. Restructuring is not addressed, but in practice, funded measures may involve internal restructuring. Findings by the WSI works council survey indicate that product-, process- or market-oriented innovations trigger effects on employment, training needs and changes in working time. However, most innovation funds do not require a social partnership approach and funding is not tied to employment.

The SME innovation programmes are in place at the federal level. In contrast, programmes financed by the structural funds are detailed by the Bundeslaender and thus vary slightly depending on governmental coalition and economic landscape. Due to lack of resources, development of instruments at the local level is largely limited to the utilisation of Laender and federal funds.

The fast majority of promotional programmes provide for instruments that classify as ‘anticipating change’, according to the Eurofound definition. In respect to instruments financed by innovation funds, this classification is highly critical as they are less ‘anticipatory’ than ‘change-promoting’.

Since the mid 2000s, the European Social Funds (ESF) has been decisive with respect to employee-oriented instruments as well as to all measures managing the effects of restructuring (SMEs at risk ). That is to say that funding of instruments aimed at supporting employees has been limited if compared with the overall funding landscape.

National legislation does not provide for particular instruments with respect to SME-employees. However, a particular short-time work scheme (Saison-KuG) for employees affected by structural (seasonal) stoppages of work is in place. In practice, it applies to SMEs in the construction and the gardening sector. Allowances are covered by the Federal Employment Agency.

1.2. Did the global economic and financial crisis of 2008/09 cause any change in focus of the above (for example, increased/decreased focus on SMEs and their employees in restructuring, change in policy areas or issues covered)?

For SME support during the crisis please refer to the CAR on SMEs in the crisis (DE100039Q). According to the Federal Finance Ministry, SMEs profited from the German Economic Fund that was set up during the crisis and from the Federal guarantee programme channelled by the Bundeslaender guarantee banks. Additionally, major funding lines were expanded (Start up promotion, ZIM, nexxt – the central programme for supporting business succession – as well as funding of the energetic refurbishment of buildings (support of skilled crafts and construction sector)).

For ailing companies a so-called reorganisation clause (Sanierungsklausel) was enacted in 2009 under German corporate tax law that enabled an ailing company to offset losses in a given year against profits in future years despite changes in its shareholder structure. The clause was ruled as non-complying with European legislation by the European Court in 2011. The Act privileged large companies over SMEs. Changes to the taxation system for SMEs included the depreciation of produced or purchased mobile goods (for example machines, vehicles) for SMEs (Investitionsabzugsbetrag für KMU).

2009 amendments to the cyclical short-time work scheme eased the access of SMEs to the scheme. Typically, short-time work allowances by the Federal Employment Agency are granted if at least a third of the employees are affected by unavoidable stoppages over at least four weeks. From 2009-2011, the threshold was lowered to one single employee. Also, the employers’ social security contributions were covered for a lengthened period of time and companies of all sizes could apply for training measures during short-time work. In response to economic recovery, in January 2012 the 2009 amendments were changed to pre-2009 standards.

1.3. Are social partners or employers’ and employees’ organisations involved in public and policy debate on restructuring in SMEs?• If so, which (types of) organisations and at which levels?• What are their opinions, perspectives, recommendations?• Did they succeed in convincing governments or public authorities at various levels of their viewpoints?

Since 1956, the Federal government is advised by an appointed Mittelstand advisory committee consisting of individual Mittelstand-representatives. At the Laender level, the SME Promotion Acts stipulate the consulting of Mittelstand organisations. The trade unions’ formal involvement is confined to regional policies due to the social partnership approach of the EU Structural Funds, the EAFRD, the German ERP and GRW. Employer organisations and trade unions are represented on the boards of the Chambers and of the Federal Employment Agency.

At the federal level, the trade unions are typically represented by the Confederation of German Trade Unions (Deutscher Gewerkschaftsbund, DGB) and the employers by the Confederation of German Employers Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) and the German Confederation of Skilled Crafts (Zentralverband des deutschen Handwerks, ZDH).

DGB lacks the resources for actively engaging in SME policy matters other than on skilled craft policies. The trade unions say that the social partnership approach is insufficiently implemented in the governance of funding and that the chambers do not sufficiently represent employees’ interests. They point to a substantial SME insolvency rate, an ongoing decline of the skilled crafts, low collective bargaining coverage and low works council coverage, wage dumping and a deterioration of working conditions. In their view, a change in the regulatory framework is needed, as is a transformation towards social and ecological policies. Business promotion and public funding should imply that social standards (collective bargaining agreements) are met and that the level of employment is raised. A statutory minimum wage is to be enacted. Support in restructuring for innovation should aim at the improvement of work organisation, working conditions, training provision and the participation of employees and employees’ representatives.

The employers call for a lowering of social security contributions and taxes, a simplification of administrative procedures and for support in gaining a well educated and skilled labour force. Public venture capital in support of start ups should be limited to a maximum of two to five years and public support instruments should be limited in duration.

During the crisis, the government consulted with both sides on the stimulus packages. This resulted, amongst other issues, in the extension of public funding and in the amendments to the short-time work scheme. Since the recovery, trade union influence on the strategic lines of the conservative-liberal governmental coalition is again limited. However, by 2012, 10 out of 16 Bundeslaender have concluded procurement laws according to which public contracts should be given only to those companies which apply collective agreements. SME organisations are critical because they see it as being too bureaucratic.

Part 2: Support instruments

2.1. Please provide an overall assessment about how accessible and suitable public and social partner based restructuring support for companies in general are for SMEs or their employees.• Do SMEs and/or their employees generally have access to the available instruments and are these suitable for their specific needs in restructuring?• Are there specific (types of) instruments (for example, targeting specific types or phases of restructuring, offered at specific administrative levels) that are more/less accessible and suitable for SMEs and/or their employees that for larger firms? If so, why?

Like large companies, SMEs in general do have access to most instruments available.


There was no SME credit crunch during the 2008/2009 crisis and ,according to 2011 KfW SME panel data, credit access has since improved. This is attributed to trust-based relations between SMEs and local savings and cooperative banks and to publicly-backed guarantee banks. However, the smaller the enterprise the more difficulties it says it has in accessing credits. SME organisations criticise Basel II and Basel III. Federal policies have been promoting private venture capital (VC) involvement, but , according to the Federal Association of Venture Capital Companies, the amount of interest in private VC , as shown by companies, decreased from 2008 to 2012

Innovation support

Problems of access to instruments supporting innovation arise because of funding lines rather than company size. Various reports indicate:

  • Strong support of manufacturing industries to the detriment of cost of service sectors and combined product-services development,
  • poor support of low-tech and medium-tech firms because of low understanding of incremental innovation processes,
  • difficult access for innovative SMEs in regions where research institutions or large companies are scarce,
  • improvements of work organisation and training of management and employees is not sufficiently addressed,
  • low ongoing support of SMEs for process innovation within research networks, due to focus on product innovation

The above notwithstanding, the 2010 evaluation of ZIM, the largest SME programme, carried out by Fraunhofer ISI, indicates positive results with regard to small business involvement and employment figures. A simplification of administrative procedures and external consultancy support of application procedures (used by two thirds of all SMEs) are given for reason: funding supports research and development by single SMEs, by SME research networks and by SME cooperations with research institutions. About half of the companies said they had otherwise not realised their plans. It is to be noted that ZIM provides consultancy support over various phases of product innovation and is also available for process innovation.


Consultancy is the most widespread support instrument and is provided by publicly-backed organisations (Chambers, consultant agencies) and private agents. Quality standards and evaluation criteria are in debate. Problems of consultant-management relations and of evaluating the impact of consultancy are theoretically analysed by German research institutions in the ESF-funded Work-In-Net project. A trust-based community comprised of companies, employees, consultant agencies and other stakeholders of an innovation process is called for. In December 2011, consultancy provision by the ESF was regulated under a Federal directive.

The ESF, which funds consultancy on a broad range of issues, is restricted to private businesses and to free professions. Public enterprises, non-profit organisations and ecclesiastical organisations are excluded, which, in practice, affects many social service providers. It is to be noted that innovation funds such as ‘SME-innovative’ and ZIM; which also finance short-term and long term consultancy for employers, are not accessible to trade unions.

Support for employees

Amendments to the short-time work scheme showed positive results during the crisis. According to a 2012 study by the Institute for SME Research (Institut für Mittelstandsforschung, IfM (based on Federal Employment Agency data), in 2009 SMEs made up 98.4% of the company users of the short-time work scheme (small enterprises up to 10 employees: 44.9%; medium-sized enterprises up to 499 employees: 49.4%, large companies: 1.6%). As said before, the 2009 amendments were changed to pre-crisis standards in 2012.

Measures by the Federal Employment Agency for supporting the transfer of employees to new jobs (transfer work allowances, transfer to job transfer agencies) rest on a social plan being reached by the employer and the works council. This is to say, access to these schemes depends on a works council being in place.

Results of support for further training (for example, training checks, training counselling, training projects, training schemes during short-time work) are critical, as the willingness to invest time and resources has stayed low if compared with large companies. The need for consultancy on training issues (management) and training guidance (employees) is attested, but no quality standards are set. An evaluation on behalf of the Federal Research Ministry by the Research Institute Vocational Training FBB recommends quality standard setting and public structures for training counselling provision.

A June 2012 statement on ESF-funded counselling by the Federal Ministry of Labour addresses the consultancy problem saying that it has shown that efficient consultancy should be tailored to individual needs and should approach SMEs proactively. For wider awareness, integration into regional networks is recommended. The state of Hessia funds mobile training consultants to approach SMEs.

2.2. Do there exist specific public or social partner based support instruments explicitly targeting at SMEs and/or their employees in restructuring? Please specify, for example:• If so, by whom are they offered (public vs. social partners/employers’/employees’ organisations) and at which administrative levels (national, regional)?• Are the activities of different support service providers coordinated? If so, how and how well does this work?• Which phases of restructuring do they target?• Which types of restructuring do they target?• Do they target SMEs in general, or specific size classes, sectors, regions, legal forms, roles (for example, as subcontractors) etc.? Do they target employees of SMEs in restructuring?• What type of support do they provide? What specific challenges for SMEs in restructuring do they address?• Is there some information about how well they are known among SMEs and their advisors and about how they are generally assessed by the SME sector? What are their strengths and weaknesses? Are there recommendations for improvement?

According to the 2011 Report on state aid expenditure by the Federal Ministry of Finance, the main SME support instruments were:

  • the consultancy of SMEs and start-ups,
  • the training of employers, employees and trainees,
  • continuing vocational training,
  • setting up of training centres and transformation into ‘Centres for technology transfer’.
  • changes in taxation for simplifying the acquisition of a business
  • changes in taxation of private households for fostering the renovation of buildings (support of construction sector).

€ 114 million were spent under the heading ‘support of SMEs, free professions and vocational training’, which was low if compared to the innovation programmes. State aid only to the ZIM programme amounted to € 656 million.

As indicated above, a range of instruments is in place, which according to Eurofound definitions, can be classified as anticipatory, proactive and change-promoting; at regional and local level ESF-funds are also utilised to address ‘at risk’ cases.

As an example of a combined approach, centres for technology-transfer can be identified Generally speaking, these centres combine the traditional concepts of local start-up centres, technology centres and SME vocational training centres for fostering innovation. For example, the GTZH Magdeburg in the eastern German Land of Saxony-Anhalt was set up in 1994 by the municipality and the regional craft guilds. Today, services comprise a) advice (start-ups and skilled crafts) in respect to funding lines and application procedures, to new technological developments, to finding cooperating partners (such as research institutions), b) consultancy with regard to resource efficiency, occupational health and safety and the implementation of management systems (QM, ISO 14001, etc.), c) in-company training, online-based training and training guidance and d) support in developing marketing skills. Additionally, rooms are available for small businesses.

Regarding the fostering of innovation at company level, a contested debate on the role and impact of works councils has been going on for years. Trade unions and trade-union related consultant agencies have made use of the ESF for training works council members in order for them to get involved in innovation processes. For example, TBS Hessia, a DGB-related agency, has developed a SME-oriented tool (Innokenn) to analyse problems and innovation potentials in an enterprise. It targets manufacturing companies and technologically-oriented service companies and can be applied by employee representatives as well as by management. Another example is a university-based further training programme for employee representatives that is run by the Bochum University’s Further Training Academy in cooperation with the Metall Workers Union (IG Metall) and the DGB-Training Centre (DGB Bildungswerk).

Finally, it is worth mentioning that four SME-dominated sectors are covered by collective agreements that arrange for sectoral further-training funds (bakeries, garment/textile, forestry/gardening, construction (scaffolding)). Depending on the collective agreement, the employer or both employers and employees pay a low annual contribution. The funds are managed by sectoral social funds that are based on extended collective agreements (tarifliche Sozialkassen). The social funds were set up to cover agreed pensions and additional labour costs; in recent years, the fields of activity have been expanded to also cover further training. Another example is given below.

Part 3: Good Practice

  • Name of the instrument in national language and English:


  • Justification for selecting this measure as Good Practice:

According to WSI works council survey data, enterprises of all sizes made use of working time accounts to safeguard employment during the crisis. A spreading of time accounts in medium-sized firms has been ongoing, yet they are still rare in small ones. It is noticeable that in 2011 time accounts were promote d for the electrical trades. In 2008/2009 it became an issue in public debate that in the event of insolvency employees face the risk of losing credits and reimbursement. The 2009 Act for improving the framework conditions of safeguarding flexible working time arrangements addressed the problem with regard to long-term working time accounts.

In the construction sector, a sector affected by structural work stoppages, working time accounts are regulated by a collective framework agreement. Sikoflex is an instrument in place in the scaffolding trade to adress the problem of short-term accounts of 12 months duration.

  • Date of launch of the instrument and end date (if applicable):

Late 1990s, ongoing.

  • Initiator/administrator (organisation):

Social partners. Administrator is Soka-Bau, the social security fund for the scaffolding trade.

  • Other involved actors and their roles:


  • Source of funding:


  • Target group/eligibility/coverage:

Utilisation is voluntary. All scaffolding companies as well as interested companies in the building trades. Blue and white collar workers.

  • Phase of restructuring targeted:

Management, anticipation

  • Type of restructuring targeted:


  • Purpose/content/characteristics/description of services provided:

Sikoflex is said to be less expensive than bank guarantees. The instrument guarantees a 100% payment in lieu of all accumulated time credits to employees in case of employer’s insolvency. Payments are made according to agreed hourly wages at the time of payment, not of deposit.

Individual security tickets guarantee reimbursement of time accounts based on monthly per person/per hour (gross wages) deposits by the employer. The employer pays an additional lump sum of € 7.50 and € 1.50 per employee. External IT-service (DATEV) can be utilised for lowering bureaucracy. In the event of bankruptcy, Sokabau manages the insolvency case.

  • Outcome of the instrument (e.g. number of beneficiaries, effects):

The Federal Association of Scaffolders (Bundesverband Gerüstbau) has about 650 members. Yet, as of December 2011, 1,151 companies held a Sikoflex account. 19,962 employees were covered by the scheme.

  • Strengths/success factors of the measure:

Simple administrative procedure supporting small business utilisation of working time accounts; 100% reimbursement.

  • Weaknesses/bottlenecks of the measure:

Willingness of employer to act pro-actively.

  • Was the instrument formally monitored/evaluated? If so, please specify (by whom, how, what were the finding and how were the findings used etc.)

No. It was promoted as a sectoral solution by information released by the Federal Labour Ministry of North Rhine-Westphalia.

Ms. Anja Grebert, Soka-Bau, 65189 Wiesbaden, agrebert@soka-bau.de


The Mittelstand has profited from the economic upswing since 2010 and public debates have focussed on the skilled labour demand within SMEs rather than on support in restructuring. A broad range of SME-oriented instruments is in place, which, however, tend to privilege technologically innovative firms. Statistical data indicate a substantial insolvency rate of small enterprises, of start ups, craft shops and service providers in particular. For weathering the upcoming crisis, new instruments need to be developed which address at risk establishments and employees at risk to loose their jobs.

Birgit Kraemer, Institute of Social and Economic Research, WSI

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