Germany: the « transfer company » concept seduces companies and unions and goes beyond social plans

Going from one job to another without being unemployed is the main idea behind German transfer companies. Besides, in addition to the management of social plans, these structure companies could become lasting tools to anticipate the social consequences of increasingly « flexible » staff management.

The large « employment companies » (Beschäftigungsgesellschaft) which appeared in the Eastern German Lander after the Reunification serve as a basis for the concept of the « transfer companies » which are expanding in Germany. At that time, the reorganization of the east-German economy forced thousands of people into unemployment.

Super specialized employment. Then, the Federal State favored the creation of employment companies, usually managed by the local authorities, which were both reclassification agencies and corporate incubators. Set up in regions which were economically stricken, these companies, which often gathered thousands of employees from different companies, did not have a real experience in terms of reclassification. They quickly became « occupancy companies », a unique alternative to unemployment and inactivity but also financial abysses with no perspective or boundaries, grants and odd jobs. From these « ancestors », transfer company developers retained that it was better to prevent unemployment than to fight it later, and that reclassification had to be quick, specialized and professional. « Unlike employment companies, transfer companies haven’t existed for more than two years. Besides, their only goal is to post dismissed employees. Finally, they are managed by companies specialized in reclassification and training and which work with one company at a time » explained Harald Müller, manager of the Bonn Economic Academy (BWA), a training company which also manages transfer companies.

The transfer system. In 2004, the legislator included in the Civil Code two new provisions (subsections 216a and 216b) concerning public grants for the transfer of employees (Kurzarbeitergeld) in the event of a social plan. The first provision defines the remuneration rate of an employee transfered by the Employment office, i.e. 50% of the last gross wages (minus the thirteenth month and paid vacation). The second provision defines the structures towards which employees can be transferred. When there is a social plan, the trade unions, the works council and the company’s management can bargain for the creation of a « transfer agency » and/or a « transfer company »:

• The transfer agency can be compared to a reclassification bureau. It is jointly managed by the company’s HRD and/or an outside roleplayer, private or public, specialized in employment. It is usually used for long-term social plans and thus steps in before the dismissal. It concentrates on employees whose profile foretells a quick and straight reclassification.

• The transfer company, which lasts for one or two years, steps in after the establishment of the social plan. It is managed externally and employs on hire employees who have not been reclassified or who could not use an early retirement system. They keep on receiving most of their previous gross salary, in average 70% (two thirds paid for by the Employment Agency and one third by the company). They can also enjoy full reclassification services: evaluations, occupational reorientation, qualifying, employment, assistance for the creation of a new business and follow-up. Among other advantages, the « Transfergesellschaft » offers a good reclassification rate, limits the negative social impact at the local level, decreases the number of legal conflicts and protects the comapny’s corporate image.

619 transfer companies in 2007. Now, transfer companies are about to become a central component of social plans in Germany, like for BenQ (3.000 people) in 2006 or, more recently, for Nokia’s Bochum factory (2.300). According to the figures from the Employmeny Agency, 236 transfer companies managed an average 5.700 employees each year in 2004. in 2007, 619 agencies managed 12.176 employees and €184 million were awarded to public aid. Until now, only the transfer companies operating in North Rhine-Westphalia (18 million inhabitants) have seriously been evaluated. Indeed, it was in that region, badly hit by the coal and steel crisis, that the first transfer companies were created in the mid-nineties. The local government established an observatory of transfer practices – the GIB, promoting groundbreaking employment – which evaluated the results of about thirty companies in 2007. these agencies’ employment rate amounted to 64%, 57% for transfer companies (with peaks at 80%). In average, employees wait for 153 days before reclassification. In addition, 60% of transfer companies deal with SMEs with less than 250 employees, and 30% of employees working in transfer companies are over 50 (65% in 2202).

The future of transfer for restructurings with hindsight. In November 2007, 17 companies managing transfer companies created the Federal Union of Companies Managing the Transfer of Employees (BVTB). The Union immediately presented a quality charter and imposes a certification process on its members. « It is an emergency to impose minimum quality standards, for instance at least one advisor for 50 employees, as well as to give a professional character to this activity at the national level. Even if employment rates can be checked individually, we also need reliable statistics and control mechanisms foe the transfer companies » said Harald Müller, who pointed out that talks on that topic are open with the Federal Labor Ministor and the Employment agency. Mr. Müller thinks that the concept of transfer will become more than a system for crises: « Today, it is not rare to have to move a site, do a merger or quickly adaopt production bulks. In terms of personnel policy, this means increased social risks. Therefore, the companies and the social partners need to learn to anticipate and develop precautionary strategies » he said. He thinks that the perenniality of tools and practices for transfers can actually help improve mobility on the labor market, whether it is forced or not.

Planet Labor, August 18, 2008, No. 080614 – www.planetlabor.com