Advancing transformation through continuing education.

Digitalization and decarbonization will radically transform the economy and the working world in years to come. In a series of seven articles, we will examine the labor law issues that employers and HR managers will face as a consequence. Part 1 discusses intelligent concepts for employee training.

Whether companies are transitioning to climate-neutral operations or from combustion engines to electric mobility, or eliminating coal-power generation – these processes are transforming job profiles and requirement levels just as much as the constantly progressing digitalization and automation. A study initiated by the Südwestmetall employers’ association and IG Metall trade union concludes that one-third of the 710,000 employees in Baden-Württemberg’s four key industries – the automotive and supplier industry, mechanical engineering, the metal industry and medical technology – will require additional digital skills over the next five years. These skills include the software-based control of business processes, data management, artificial intelligence and data security, as well as interdisciplinary skills such as flexibility and leadership. In view of this, the path toward innovative business models and climate neutrality demands that both companies and employees demonstrate a high level of willingness to change, and also creates new requirements in the field of human resources. In seven articles, we will describe the fundamental labor law framework for employers and HR managers.

Investing in training instead of employee layoffs

In contrast to earlier times of economic upheaval, companies now confronted with a shortage of skilled workers are usually less focused on downsizing, and more interested in upskilling their employees. Therefore, one important vehicle is strategic human resources management oriented on life phases, which motivates employees to be flexible and willing to change, and also provides specifically tailored training opportunities. This process always begins with an analysis of qualification requirements. In addition to the above-mentioned study, studies carried out by the Donors’ association for the promotion of humanities and sciences in Germany, the IW Cologne or the Future Skills Report from the chemical industry, for example, also provide guidelines.

Qualification unit improves management and transparency

Establishing qualification units within the company may be an effective means of qualifying employees for the new requirement profiles. Prominent examples include Volkswagen’s Faculty 73 or the Software Academy at Continental, which aim to train classic production workers in IT skills. The advantages lie in the lower costs due to the better management and greater transparency while also enhancing the company’s image.

Qualification unit or company?

If a qualification unit is implemented as a qualification company, the employees are transferred to the newly created company while remaining with the same employer. The employer can then deploy the employee throughout the company as needed for the duration of the qualification process. Alternatively, a change of employer to a qualification company with a temporary contract may be agreed. As a consequence, the employer no longer bears the risk of the qualification failing to achieve the expected success. If the qualification activities are successful, the employee may apply for a vacant position with their previous employer. For the duration of the qualification process, the deployment at the employee’s previous employer can be regulated on the basis of the internal personnel leasing policies.

The works council has a say

Transferring an employee to the qualification company requires the approval of the works council. As such, HR managers need to prepare the communication carefully and handle the issue adroitly in order to emphasize the opportunities offered by qualification in comparison to the imminent loss of employment. The works council must be involved in determining whether and also how the qualification measures are carried out: For example, this includes determining the employees to be qualified as well as the specific transfer to the qualification unit.

Plan for the long term

It is important to develop a long-term concept as early as possible in order to address the identifiable qualification requirements, and also to specifically determine the future workforce. The earlier qualification procedures are initiated, the lower the risk of the employee selection being disputed on the basis of social concerns if layoffs do occur at a later point in time. Ultimately, selecting the employees for qualification must not bypass the social aspects in the event of dismissal.

No entitlement to training

Are employees are entitled to training if their knowledge and skills are inadequate for future requirements? Not according to law. As a rule, the employee and company representatives develop training and qualification models based on framework agreements. Without a separate agreement, there is no entitlement to training and qualification simply due to the employment relationship.

Conversely, employers may only instruct employees to undertake training and education to a limited degree due to their right to issue directives. This does not cover the qualification for a new position because this exceeds the scope of training for the specific performance obligation.

Increasing funding options

According to the 2020 further education survey by the German Economic Institute, companies invest 1,236 euros in further education per employee per year. As such, qualification is already a major issue. However, small companies face greater difficulties than larger companies. There is a risk of more talented employees receiving training than the less talented. In particular with a view toward small and middle-sized companies, as well as untrained and low-skilled workers, the previous government had already expanded the further education options. Under the Qualification Opportunities Act, both the further education costs and the remuneration of the employee being qualified are subsidized. The Work of Tomorrow Act further expanded these options. The Protection of Employment Act creates further incentives for qualification during short-time work.

As we have reported, the Federal Minister of Labor, Hubertus Heil, has stated that Germany intends to become the German Further Education Republic during the legislature period of the current coalition government. Plans include enabling further education during part-time work based on the Austrian model. If employees utilize the Austrian model, they remain in the employment of their current employer. Their employer must agree to reduce the employee’s working hours by at least one quarter to a maximum of one half. The employee must continue to perform ten hours of work subject to compulsory insurance for the company per week. The employee receives a monthly part-time training allowance for every hour they invest in the qualification. However, this is lower than their previous income.

Further education is the key to successful structural transformation. The time has already come for employers to determine the qualification needs within the company, and with a view towards specific employees. As always, transformation can only succeed in cooperation with the works council, never against it. That is why the works council needs to be involved in developing the concepts from early on. Whether a qualification company or unit, whether training during short-time work or possibly during part-time work: HR managers need to coordinate closely with the Employment Agency to determine how the planned measures affect the subsidization options. In the next article of our series, we will describe when new working requirements result in an operational change. And the benefits a qualification social plan offers.