When companies have to cut jobs, there are not only labor law and organizational and organizational issues as well as the question of how affected employees will transition to a new job can be supported.
There are two established tools available for this purpose: a transfer agency or transfer company . Both aim to provide early support to employees at risk of unemployment in their career reorientation. However, they differ significantly in terms of structure, duration, and organizational framework.
Which transfer solution is appropriate therefore depends on the specific situation within the company. Key factors include the timing and scope of the workforce reduction, the employee structure, the prospects for finding new jobs in the labor market, and the desired timeframe.
And there is another important factor: Transfer solutions should be reviewed early on. This is because the law requires that the Employment Agency provide prior consultation before funding for transfer measures or transfer short-time work benefits can be granted. This consultation must take place before a decision is made on the specific transfer measure—for example, before a corresponding social plan is finalized.
What is a transfer agency?
A placement agency begins its work while the employee is still employed. Employees at risk of unemployment receive early support to develop new career prospects and transition to new employment as directly as possible.
Depending on the individual’s situation, such a transition program may include, for example, profiling and needs assessment, personalized counseling, job application strategies, job market research, or assistance with job placement.
The key difference from a transfer company is that, during the program, employees initially remain employed by their current employer. Eligible transfer programs must generally be completed by the time the current employment relationship ends.
If the legal requirements are met, the Employment Agency may subsidize 50 percent of the necessary and reasonable costs of the program, up to a maximum of 2,500 euros per person receiving assistance.
A career transition agency can be a good option, for example, if you want to start your career transition early and are looking to find a new job as quickly as possible.
What is a transfer company?
In the case of a transfer company, the affected employees transfer from their previous employment relationship to an operationally independent unit (beE).
This creates a temporary transitional space focused on career reorientation, job placement, and—where appropriate—skills training.
Subject to the statutory requirements, transfer short-time work benefits may be granted for this period. The maximum benefit period is twelve months. The transfer short-time work benefits generally amount to 60 percent of the lost flat-rate net pay, or 67 percent if the relevant requirements for the increased benefit rate are met.
A transition company can therefore offer a longer timeframe for career reorientation than a transition agency. However, it is not simply a “holding pattern” between two jobs.
It is crucial to make active use of this time: to assess your current situation, develop a job application strategy, research the job market, seek placement, and—if necessary—pursue targeted training.
Transfer Agency and Transfer Company: The Differences at a Glance
| Transfer Agency | Transfer Company | |
|---|---|---|
| Time | during the term of the existing employment relationship | after leaving the previous job |
| Employment Relationship | will remain with their current employer for the time being | Transfer to the Transfer Company/beE |
| Focus | Early Intervention, Counseling, and Placement | Career reorientation, job placement, and, if necessary, training |
| Funding | Grant for Eligible Transfer Measures Under Section 110 of SGB III | Transfer Short-Time Work Benefits under Section 111 of SGB III |
| Duration | generally until the end of the current employment relationship | Transfer short-time work benefits for a maximum of twelve months |
| Goal | as soon as possible early transition to new employment | Supported Transition and Improved Employment Prospects |
The legal basis can be found, in particular, in Section 110 of SGB III for transfer measures and Section 111 of SGB III for transfer short-time work benefits.
Transfer company or transfer agency: Which one is right for the situation?
There is no one-size-fits-all answer. Even the commonly used simplification—“small-scale layoffs = transfer agency, large-scale layoffs = transfer company”—falls short.
When making this decision, various factors should be considered together:
- How many employees are affected by the layoffs?
- When are the employment relationships scheduled to end?
- What are the current job placement prospects for employees?
- What are the training needs?
- How much time is available for a career change?
- What are the financial and organizational conditions?
- What provisions are included in the reconciliation of interests or the social plan?
Only by considering the interplay of these factors can we determine which approach makes the most sense for the company and the employees involved.
A transfer agency and a transfer company do not necessarily have to be viewed as two separate alternatives. Transfer services can be coordinated as part of a restructuring process.
Why Companies Should Evaluate Transfer Solutions Early On
Timing plays a particularly important role in transfer measures.
The counseling provided by the Employment Agency, as required by law, must take place before a decision is made regarding the implementation of the transfer measure or the receipt of transfer short-time work benefits.
Those who wait to consider transfer solutions until key decisions have already been made or negotiations on a social plan are well underway may, as a result, limit their own room for maneuver.
We’ve already dedicated a separate post to this very topic:
What a Good Transfer Solution Should Offer
Whether it’s a transfer agency or a transfer company: In the end, the chosen structure isn’t the only deciding factor.
A transfer solution must work for the people affected.
This includes engaging employees as early as possible, developing realistic career prospects, and providing them with professional support as they transition to a new job.
Depending on the initial situation, the following may be included:
- Individual assessment and profiling,
- Personal counseling and career guidance,
- Job Market and Company Research,
- Developing a personalized job application strategy,
- Optimizing application materials,
- Engagement of the professional network,
- Preparing for interviews and selection processes,
- targeted training,
- Ongoing support during career transition.
Especially in a competitive job market, simply putting together a good application package is often not enough.
The key is to continually review search strategies, explore new possibilities, interpret feedback from the market, and work together with employees to remain capable of taking action.
For more than 35 years, VBLP has been supporting companies and employees through career transitions and job changes. We combine structured transition processes with personalized counseling and a consistent focus on career reorientation.
Conclusion: Determine the right transfer solution early on
Transfer agencies and transfer companies share a common goal: to provide the best possible support to people who are at risk of losing their jobs or have already lost them as they transition to new employment.
However, the path to achieving this differs. While the transfer agency begins work during the existing employment relationship and aims for a transition as early as possible, the transfer company offers a time-limited framework for more intensive career reorientation, job placement, and, if necessary, training.
Therefore, the appropriate solution for a specific round of layoffs should not be determined on a blanket basis, but rather assessed early on based on the company’s specific situation.
The sooner the various options are known, the greater the flexibility—both for the company and for the employees involved.
