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Employment Company: Temp Work Organization for Dismissed

Definition, Explanation

One way to alleviate dismissal consequences such as unemployment, for the dismissed, is to react to impending mass dismissal or bankruptcy by founding an employment company (Beschäftigungsgesellschaft) as a temporary solution. The terms of employment company, transfer company (Transfergesellschaft), absorption company (Auffanggesellschaft), qualifying company and organizationally independent unit (beE, betriebsorganisatorisch eigenstädige Einheit) are often used synonymous which, actually, is a confusion of organization types serving different main purposes:

A transfer company (Transfergesellschaft) is designed to support the taken-over employees in finding new jobs. Accordingly, main efforts are profiling, qualifying, further education, support of intended self-employment, outplacement and also assistance about placement into new jobs.

An absorption company (Auffanggesellschaft) is created in order to save a company that is going bankrupt, in the course of which employees are supported, as well, in finding the right qualifying measures and new jobs.

The purpose of an employment company (Beschäftigungsgesellschaft) is to lease its employees to other companies for certain tasks and projects, in temporary employment. In so far, it is identical with a temporary employment agency.

An organizationally independent unit (beE, betriebsorganisatorisch eigenständige Einheit) is the legal form of employment companies, transfer companies and qualifying companies. It is considered a social institution according to civil law, since it does not provide products and/or services.

Employment, transfer, absorption and qualifying companies are identical regarding

• the conditions on which government financial support is granted
• the other company’s purpose of staff reduction by founding these companies
• the facts that
  • works council and employer agree on social program and, in a company agreement, on the founding of a respective company
  • employees are “employed” for a maximum of 12 months, resulting from the cancellation agreement and a new fixed term employment contract
  • the new company is run by a new owner
• the means of financing
  • employees get short time work money, that is 60 %, or 67 % for parents living with their children, of the last post-tax income, from the labour agency
  • sometimes completion of that income by the old company up to 80 %
  • contributions to social insurance (outside unemployment insurance), holiday pay and Christmas money are paid by the old company – before end of 2010, 50 % come from the labour agency
  • qualifying measures are paid by the old company and the labour agency. The governmental support part amounts to 50 per cent with 2,500 maximum, per employee
• the effects on employees’ unemployment benefit
  • future unemployment benefits of the employees will amount to the prior post-tax income, not the short time work money
  • vacation and Christmas money are not included

Tips, Checklist

Employees:

• Consider that to change into an employment company is not obligatory, but you can decide freely
• If you decide to not change into the employment company, you risk being dismissed for operational reasons
• Try on your own to find a new job
• Apply for new jobs, even if you are participating in further education
• Do not waste the 12 months, but use any opportunities of finding a new job
• The time during which you are employed in a transfer company does not count as unemployment time
• If you part from the transfer company early, you can ask your employer for giving you the remaining part of the remanence costs as a one-time bonus
• Think whether you can make a cancellation agreement with your employer that provides for you to be given outplacement consulting
• communicate with other affected employees and exchange your experiences

Employers:

• If you intend to receive government financial support, talk to your responsible labour agency office soon, and inform them and be counselled
• Apply for advice directly, or have the bankruptcy manager apply for it
• Apply for the government financial support with the responsible labour agency
• For the application, you need a list of the affected employees. The application must be filed before the restructuring measure starts
• Report your affected employees unemployed, already 3 months before start of their unemployment

Last update: 08/22/2011