Labor law and structural change (6): Further education instead of a pension bridge.

 Innovative ideas for transfer companies as the hub from one job to the next.

Labor law and structural change (6): Further education instead of a pension bridge.

Companies have to be highly adaptable to successfully tackle the 3D challenge: digitalization, decarbonization and demographics. Transfer companies can play a key role when used more specifically for re-skilling and up-skilling employees.

Education and qualification are key issues given the shortage of skilled employees, in addition to the digital and green transformation. Structural change requires new skills, whereas various job profiles are becoming obsolete. This is creating major uncertainty among employees. In times of upheaval, HR needs to do more than just secure employment. Above all, HR needs to implement a ‘people strategy’ which also involves the employees. This requires well considered solutions to train aging workforces and develop tailored training programs for low-skilled workers.

Inter-company and industry-spanning networks shape the change

Not every employee is willing or able to be trained for smart factories, electric motors, fuel cells or new work. Nevertheless, these employees may also possess qualifications which other companies are urgently seeking given the continuing shortage of skilled workers. However, it is even more difficult to monitor skills, create transparency about the qualifications relevant for the future and find alternative employment opportunities across company and industry boundaries than it is within a single company. In view of this, large companies have already begun establishing inter-industry qualification and skills initiatives such as the Alliance of Opportunities with the goal of involving employees and shaping the transformation together with all stakeholders. This begins with the companies and works councils, and also involves employers’ associations and trade unions, along with education providers and the Federal Employment Agency. The Confederation of German Employers’ Associations (BDA) is promoting the same approach. It also proposes developing hubs and networking companies releasing and hiring employees in order to enable the essentially seamless transfer of staff between companies: out of work and into work. The cooperation of employers in releasing and hiring employees as well as employment agencies in regional training networks could help to create joint solutions and appropriate qualifications.

Building bridges to employment

Against this background, transfer companies are playing an increasingly important role as a means of building bridges to employment, while also alleviating the shortage of skilled workers and the need for layoffs. Transfer companies were introduced in Germany at the end of the 1980s as a labor market policy instrument enabling employers to release employees in a socially acceptable manner with a severance agreement and, therefore, without dismissal in the event of a change in operations pursuant to Section 111 of the Works Constitution Act (BetrVG). A transfer company is considered as a transfer measure pursuant to Sections 110 et. seq. of the German Social Security Code (SGB) III. The company receives funding for up to twelve months, the employees receive training and are not listed as unemployed in the statistics. Alongside the state subsidy, the most important advantages lie in the legal security and the ability to calculate reliably as this approach prevents unlawful dismissal proceedings. As a rule, social selection is also not necessary. For employees, the transfer company represents an attractive option because it provides social security. The employees do not need to register with the employment agency. Instead, they transfer to a new employment relationship with the transfer company with social insurance contributions immediately after leaving the previous company. They receive a transfer allowance for short-time work and, where necessary, may also receive subsidies from their former employer for qualification activities.

Targeted development of transfer companies

However, as the Association of German Management Consultants (BDU) also states, the opportunities provided by this instrument are not always adequately utilized. In the future, the focus must be on providing participants with the best possible preparation for their next career step, creating access to the labor market and achieving high placement rates, along with organizing forward-looking qualifications. This is why the BDU has developed the basic principles of proper transfer consulting with the aim of establishing quality characteristics as best practice guidelines for companies and employees. The Alliance of Opportunities and the BDA are also promoting the approach of primarily utilizing transfer companies as a means of integration into employment in the future. In contrast, transfer companies have so far been used in part as a pension bridge, with employees intentionally receiving unemployment benefits for a time.

Reward flexibility

Subsidies for companies which support employees facing layoffs with applicant training and placement with new employers could also help to facilitate the transition out of work and into work, for example. In the past, this was only possible if employees were already unemployed or had transferred to a transfer company. Given the fact that employees are at times reluctant to change jobs or learn new skills, abilities and knowledge, financial incentives could reward flexibility and qualification, as proposed by the position paper of the Alliance of Opportunities. Tax relief for severance payments when an employee accepts a lower-paid job is one example. Low-threshold internships with a potential new employer could also help employees to overcome their doubts. The BDA proposes that severance payments, such as those from social plans by the transferring employer, are not only paid out to former employees but also to the receiving companies. This would serve as a contribution to possible qualification costs incurred when integrating the employee into the new company.

Given the challenges posed by the shortage of skilled employees and digital and green transformation, labor market policy instruments such as transfer companies also need to keep pace with the times. Above all, there is a need for better networking between regional employment agencies, transfer companies and potential employers. In light of the changing times, transfer companies are becoming an increasingly important vehicle for HR to shape the transformation.