Make your staff part of the restructuring process

Business is about change. Requirements, fashions and markets change constantly, so companies must adapt as well. The challenges are enormous: The entire economy, industry and service sector alike, is subject to transformation. This constant need for change also makes restructuring a challenge. Especially when employees are affected by transformation processes, including those resulting from financial distress – for example during periods of uncertainty as to what will happen to the company or whether there will be staff reductions – sympathetic and fair treatment for those affected is particularly vital.

If a company is aiming to overcome financial difficulties via insolvency proceedings, labour and social security law will play just as much of a role in the internal restructuring process as insolvency and restructuring law – regardless of whether the company opts for standard insolvency, self-administration or protective shield proceedings.

When a company is realigning its business model, even outside insolvency proceedings, it is important to get employees and workers involved, to take their fears and concerns seriously, and to have answers readily available. For employees, restructuring is an existential matter. They need their wage or salary to live. So for them it is vitally important to remain in their jobs and secure them for the future.

For this reason it is essential to actively shape the transformation. The challenge is to lead employees into a new (working) world. Skills and qualifications are absolutely key here. With a systematic plan for further education and support to help employees in reskilling, this can be successfully achieved. The main task is to make effective use of the tools that are already at hand.

Crises have multiple causes. One factor is the current labour and skills shortage that presents new challenges for companies. A lack of human resources reduces productivity. The impact that this has on revenue and earnings can push a company into crisis.


The right advisors by your side

We have supported companies through transformation processes for decades, so we know exactly what it takes to develop projects of this kind – both during and outside insolvency proceedings – and help companies implement them in a changing environment. While the custom 20 years ago was for employees to get through periods of unemployment and find new roles in the regular labour market, the practice today is to move straight into a new job and manage the transition based on trust by making the best possible use of notice periods. In many cases, restructuring and transformation involves changing the skill structure of a company’s workforce so that, when the process is complete, the company has the employees it needs to build its future. Another factor is that labour and skilled employees must be available. Therefore, another of our tasks is to develop and implement models for targeted employee recruitment and onboarding.

In restructuring and insolvency, the company’s management plays a key role – but so too do its restructuring advisors and insolvency administrators. They must sort out what is needed for operational restructuring, provide explanations, and sometimes lay the groundwork for – or make – uncomfortable decisions. For change management to succeed, they need a team of specialists who can weigh up the scope for measures and options under labour and social security law and devise and implement suitable solutions. When restructuring or implementing other transformation processes, they need to bring in many different stakeholders and deal with a whole range of different issues to enable them to implement practical solutions.

The focus is on providing information to employees and engaging in dialogue with them. It is vitally important to retain key personnel so that the company’s functional effectiveness is not jeopardised. Sometimes discussion and negotiation with the works council and/or trade union is required, for example when there is a social compensation plan. When it comes to insolvency payments, advance financing of insolvency payments or short-time allowance for employees who are moved into a transfer company, the German Employment Agency (Agentur für Arbeit) has to be involved. If the company has an occupational pension scheme, an agreement must be reached with the Pensions-Sicherungs-Verein (PSVaG, an association for the legal protection of retirement plans in case of insolvency of the employer) and information and support provided to current recipients of occupational pension payments. And finally, if the company is sold, the transfer of business must be organised for employees.

In short: when restructuring is affecting employees, there are a whole range of employment law-related aspects that have to be dealt with carefully if a business is to be successfully reorganised. And every case will have its own specific features that must be taken into account.

Schultze & Braun helps you meet the challenges that employment law poses

Schultze & Braun has a team comprising employment lawyers, business administration specialists and HR managers and administrators that specialise in situations like those described. Our experts have worked in labour law-related aspects of restructuring proceedings for decades and have the expertise and experience to help you plan your transformation and reorganisation with the involvement of your employees and implement them in compliance with the law.

We act for your company in negotiations with trade unions and works councils, the Employment Agency and the PSVaG and help you implement appropriate solutions. With our extensive expertise of the specificities of insolvency law, we can work out an effective response to the challenges you are facing. We also take the pressure off management and HR by supporting them with all restructuring and insolvency-related processes – the filing of claims and advance financing of insolvency payments, for example. If the company is sold, we organise the transfer of the business and ensure that it is legally watertight.

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Alexander von Saenger
Rechtsanwalt (Attorney at Law), Fachanwalt für Arbeitsrecht (Certified Specialist in Labour Law)


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