Working End > Job Change > Transfer Company

Transfer Company: Re-Employment Support for Dismissed

Definition, Explanation

Some fundamental changes in company require a number of employees to be dismissed. In order to provide the possibility to have those employees not go unemployed immediately, the legal acts of SGB III § 216 a (measures promoting participation in transfer action) and SGB III § 216 b (transfer short time workers money) were enacted and enable the company to found transfer company (Transfergesellschaft): A transfer company is run on governmental financing, partially, and an institutionalized support for the employees in finding their next job soon.

Critics call employment in transfer companies a pseudo employment whose best achievement is raising false hopes by pro-forma employing those who are actually unemployed. Originally, these institutions were called employment- and qualifying- companies. An “Auffanggesellschaft” (absorption company) is a new company founded in order to save a bankrupt company.

Government financial support is legal according to SGB III § 216 a, if:

• the change in the company is necessary according to BetrVG § 111
  • Cutting or cancelling of the company or major parts of the company
  • Relocation of the company or major parts of the company
  • Fusion or separation of companies
  • Fundamental change in the company’s organizational structure, or the company object or assets
  • Introduction of fundamentally new methods and production processes
• the change is performed by a third party
• the change is beneficial for the re-integrating of dismissed employees in the job market
• the change is certainly going to be performed
• and a system of quality assurance is applied

Features of a transfer company:

• For necessary major personnel changes, an agreement is made by works council, employer and trade union, on the subjects of a social program and the foundation of a transfer company
• The transfer company is founded exclusively for the purpose of placing employees threatened by dismissal into new employment and avoiding unemployment
• A transfer company takes over employees dismissed during a company crisis, e.g. when bankruptcy is impending
• A company agreement defines the conditions on which employees are taken over into the transfer company
• The employees to “transfer” have made a cancellation agreement with their former employer and are temporarily employed in the transfer company
• The employment in a transfer company is legally structure-conditioned short time work
• The transfer company is an organizationally independent unit (beE) and thereby a social institution as defined in civil law. It can be run by the changing company itself or by a third party
• The total duration of the transfer company’s existence must not exceed 1 year
• Managers of a transfer company normally specialize in that. They are trustees administrating the granted financial support, responsible for channelling it towards the benefit of the employees. Third parties can be staffing agencies, outplacement agencies and consulting companies, further education institutions, temp work firms or legal practitioners

Services and mandates of a transfer company:

• Profiling employees in order to find professional strengths, preferences and need of further education
• Consulting and qualifying employees by application coaching, further education, internships and possibly support in self-employment during their time in the transfer company
• Placing employees as temporary workers
• Outplacement, Self-marketing, professional orientation
• Placement into new permanent employment

Financing of a transfer company:

• Employees are given short time workers money, that is 60 %, or 67 % for parents living with children, of the last post-tax income, from the labour agency
• In some cases completion of that new income up to 80 % by the company
• Contributions to social insurance outside unemployment insurance. Holiday pay and Christmas-money is paid by the company
• Qualifying measures are paid by the company and the labour agency, with the government financial support amounting to 50 per cent up to a ceiling of 2,500 Euros per employee

Effects of a transfer company on employees’ unemployment benefits:

If the employee cannot be placed, the best thing to do for him afterwards is to report unemployed. The amount of his unemployment benefit, then, will be calculated as the amount of his last post-tax income exclusive of vacation and Christmas money. This calculation is independent of the short time workers money amount.

Advantages of a transfer company:

• for employees
  • No immediate dismissal
  • Delay of potential unemployment
  • Further education and support in finding a new employment
  • Applying for new jobs while being employed
  • Receiving of transfer short time workers money
  • Continued shared payment of social insurance, that means health insurance and pension insurance contributions
• for the company
  • The company saves severance money which can be used for completing short time workers money and for qualifying measures
  • Image of the company remains a good one, despite inevitable job losses
  • Avoiding of dismissal periods
  • Avoiding of dismissal protection legal actions
• for the labour agency
  • Less placement work
  • Saving of unemployment benefit
  • Unemployment statistics are not affected by the employees of a transfer company

Disadvantages of transfer companies:

• Employees are pushed off
• As soon as a cancellation agreement has been signed, the employee will be no longer entitled to being employed in the company
• Senseless trainings may be ordered for keeping employees compliant
• Persons running the transfer company try to optimize the business for themselves

Tips, Checklist

Employees:

• Keep in mind that to change into a transfer company is not obligatory, but you are free to decide
• If you decide to not change into the transfer company, you risk being dismissed for operational reasons
• Try on your own to find a new job
• Apply, 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

Employer:

• 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: 08/03/2010