LAWYER SPECIALISING IN SEVERANCE PAY IN MUNICH

In most cases, no. There is no general legal entitlement to a severance payment. One well-known exception is redundancy under Section 1a of the German Employment Protection Act (KSchG). In such cases, the employer must expressly offer a severance payment in the notice of termination and state that payment will be made provided no action is brought under the Employment Protection Act.

There is no fixed amount for severance pay. As a rough guide, half a month’s gross salary per year of service is used. This formula is derived from Section 1a of the German Employment Protection Act (KSchG) and serves as a well-known benchmark, but it is not a universal rule applicable to every case. Depending on the risk to the employer, the length of the employment relationship, the salary and the negotiating situation, the severance payment may be lower or significantly higher.

A good severance package isn’t simply about getting the highest possible figure. What matters is whether the offer is in line with the legal situation. If the grounds for dismissal are weak or the employer faces significant disadvantages in a dispute, it is often possible to secure more than a standard offer. At the same time, you should not focus solely on the sum, but also on issues such as leave of absence, your reference, remaining holiday entitlement, bonus entitlements and the implications for your unemployment benefits. The correct assessment always depends on the overall package.

The key factors are the validity of the dismissal, the length of service, the gross salary, the position within the company and the financial pressure on the employer. Added to this are practical considerations such as the timing of the negotiations, the willingness of both parties to reach a swift agreement, and the question of what other terms are being negotiated. A severance payment is therefore not determined by a standard formula, but rather by the specific merits of the individual case.

The biggest mistake is often signing too soon or accepting an offer hastily. Make sure you have a notice of termination or a mutual termination agreement thoroughly reviewed first – this often reveals additional points of contention and thus provides better opportunities for negotiation. A higher severance payment is usually not achieved through hardship, but through a stronger legal position, good timing and skilful negotiation. It is often the very first steps taken after receiving the notice of termination that determine how much can realistically be secured in the end.

Yes, very often in fact. Many severance payments are agreed as part of a termination agreement. However, this is precisely where caution is required. A termination agreement can result in you not receiving unemployment benefit. This happens mainly in two situations: 

• if it appears that the employment relationship was terminated voluntarily
• if the standard notice period is not observed 

In such cases, the Jobcentre may impose a waiting period or delay the start of payments. That is why, before signing, you should not only have the amount of the severance payment checked, but also assess the overall risk.

Not usually. If you resign of your own accord, you are generally not entitled to severance pay. A payment is only considered in exceptional cases, for example if the employer and employee negotiate a mutually agreed solution at the same time. In practice, severance pay is much more commonly paid in cases of dismissal by the employer or in the context of termination agreements.

Receiving a severance payment does not automatically mean that you will not be eligible for unemployment benefit. The situation becomes particularly problematic in the case of mutual termination agreements, voluntary resignations, or if the employment relationship ends before the relevant notice period has expired. In such cases, there may be a waiting period or a suspension of your entitlement to unemployment benefit. The Federal Employment Agency expressly points out that the start of payments may be deferred if severance pay is paid and the standard notice period has not been observed.

Yes, in principle that’s correct. Severance payments are taxable. They can be treated as extraordinary income for tax purposes. That’s why it’s not just the agreed gross amount that matters, but what is actually left after tax. Depending on the individual case, the tax treatment may be more or less favourable.