Transfer Company or Severance Pay? The 2026 Decision

What is a transfer company?

When an employer cuts a large number of jobs, for example due to a plant closure or major restructuring, a transfer company (Transfergesellschaft) is often part of the social plan. It’s a temporary transitional company (also called an “employment and training company”) that affected employees can join instead of becoming unemployed straight away.

The basic idea: you look for a new job while still formally employed, supported by coaching, training, and application support. It typically runs for 6 to 12 months.

Transfer short-time allowance: what does the transfer company pay?

The basis is transfer short-time allowance under § 111 SGB III: 60% (without children) or 67% (with children) of your standardised net pay. That alone would be a significant cut, which is why many employers top it up through the social plan, often to 80 to 90% of your previous net pay.

Do the maths: what matters isn’t the percentage alone, but what actually ends up in your account, and for how many months. You then compare that total with an immediate severance payment.

The three-way contract: the small print

The switch happens through a three-way contract between you, your former employer, and the transfer company. This contract ends your previous employment by mutual agreement, similar to a termination agreement (Aufhebungsvertrag).

The most important consequence: by signing, you generally give up an unfair dismissal claim against your former employer. This also blocks the route to securing a higher severance payment through a settlement in court proceedings. That’s exactly why this decision shouldn’t be made under time pressure.

Transfer company or severance pay?

A transfer company often makes sense if:

• your job prospects are uncertain or the regional labour market is difficult,
• you need training or retraining,
• you want to avoid a gap in your CV,
• there’s usually no benefit suspension period for unemployment benefit.

Immediate severance pay (possibly with a claim) often makes sense if:

• you have good chances of finding a new job quickly,
• the dismissal is vulnerable to challenge (procedural errors, social selection, works council consultation),
• you want to secure the maximum financial outcome now,
• you’re close to retirement, where bridging time brings less benefit.

Rule of thumb: the transfer company secures time and employment, while severance pay plus a claim aims for the higher lump sum. Which route pays off more for you can be worked out, we do exactly that in a no-cost initial consultation.

Check before you sign

Before you sign the three-way contract, we check with you:

• How long does the transfer company run, and how much is the top-up?
• Is severance pay paid in addition, or does the transfer period replace it?
• What claims do you give up through the contract (especially protection against dismissal)?
• How does it all affect unemployment benefit, pension, and tax (the one-fifth rule)?

The legal review and representation are handled by our partner law firm MK Law, on a success basis for you, with no upfront cost risk.