Severance Pay in Germany

Contrary to a widespread assumption in Germany, employees have no legal claim to severance pay upon termination of their employment relationship. However, there are exceptions where employees can claim payment of such a severance payment. Corresponding compensation regulations that justify such claims can be found in social compensation plans, collective bargaining agreements, management contracts and even in employment contracts. In addition, the parties to an employment contract may voluntarily enter into a contractual agreement on the payment of a severance payment upon termination of the employment relationship under a termination or settlement agreement.


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Practice Group for German Employment Law and Severance Payments

Dr Thomas Bichat

Dr Thomas Bichat
Certified Labour & Employment Lawyer

Jens Schmidt Lawyer

Jens Schmidt
Certified Labour & Employment Lawyer

Contact our Practice Group for German Employment Law

Entitlement to severance pay under the Dismissal Protection Act

Ultimately, within the framework of Section 1a of the German Dismissal Protection Act, a claim for severance pay may arise under the following conditions:

  • The employer makes a dismissal for operational reasons,
  • The employer expressly points out in the letter of termination that the termination is based on urgent operational requirements and that the employee can claim a severance payment in accordance with §1a KSchG after expiry of the three-week period for an action for protection against dismissal,
  • The employee does not file an action for protection against dismissal until the expiry of the three-week period for filing an action.

In this case, the employee will “automatically” receive a severance payment entitlement in the amount of half a month’s salary per year of employment, whereby working periods of more than 6 months will be rounded up to a full year. An example of this is where a person has worked for a period of four years and seven months – this will be rounded up to five years.


Severance Payment after Filing of an Action for Unfair Dismissal

An action for unfair dismissal does not automatically give dismissed employees the right to compensation, since it is directed at the court’s finding that the dismissal did not terminate the employment relationship. However, the dismissal protection lawsuit is strongly geared towards an amicable settlement of the dispute. In 2014, for example, about half of all actions for unfair dismissal were terminated by a settlement. The better the prospects of success for the employee in a dismissal protection lawsuit are, the more willing the employer will be to pay a settlement “voluntarily” in order to avoid the financial risk of losing the lawsuit. This is because, especially if the proceedings are protracted, the risk is that if the employee wins the lawsuit, the employer will have to pay back the wages for the time during which the employee did not work because of the dismissal.

Theoretically – but rarely in practice – it is also possible that the employer may be ordered to pay a severance payment under §§910 KSchG. This is the case in the following conditions:

  • if, in the opinion of the court, the termination was invalid, and
  • if the employee cannot reasonably be expected to continue the employment relationship (e.g. in the case of derogatory statements by the employer during the proceedings).

These steps shows that the prospect of receiving a severance payment in a dismissal protection case is good.


Amount of the Severance Payment

The amount of the severance pay proposed by the Labour Court depends primarily on the prospects of success of the claim, as well as the employee’s length of service and earnings. The amount of the severance payment proposed usually varies between half a gross monthly salary and full monthly salary per year of employment. In individual cases, however, a higher severance payment may be negotiated under certain circumstances.

The payment of a severance payment does not, in principle, have a negative impact on the entitlement to unemployment benefit. However, something else may apply if the severance payment was agreed in a termination or liquidation agreement. In this case, there may be a blocking period due to cessation of work.

If you have any further questions on the subject of severance pay, we will be happy to advise you. Simply call us at 0241 4757140 or send us an e-mail message to info@se-legal.de or use our online form.


Employment Law Expertise

If you are looking for an experienced and knowledgeable legal team who speak your language then you have come to the right place. Dr Thomas Bichat and Jens Schmidt are here to ensure that when it comes to legal issues relating to severance payments that you are covered. Our team of highly competent lawyers will be there using their legal know-how, gathered from years of working with all forms of employees and employers, to provide the counsel you deserve.

Our firm has offices in Aachen, Cologne and Düsseldorf as well as meeting rooms in Berlin, Frankfurt, Hamburg, Stuttgart and Munich and are on hand to provide you with legal assistance. If you do wish to contact our employment law team, to get advice on issues concerning severance packages, termination, notice periods and/or other issues in the field of employment law, then please use the form below. Our team look forward to working with you.

Contact a lawyer for German Employment Law

Please use the online form to inform us about your concerns in the field of employment law. After receiving your request, we will make a short preliminary assessment on the basis of the information provided and give you a cost estimation. You are then free to decide whether you want to instruct our lawyers for employment law about your case concerning severance pay.

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