Definition
A social plan is a written agreement between an employer and the works council designed to compensate for or mitigate the financial hardship suffered by employees as a result of operational changes – such as mass redundancies, plant closures or relocations. Typical provisions include severance pay, retraining allowances, relocation costs and hardship provisions. The social plan establishes immediate and enforceable entitlements for the employees concerned. In larger companies, it can be enforced by a conciliation committee if no agreement is reached.
Specialist solicitor in employment law
With over 15 years’ experience in employment law
Classification under employment law
A social plan (Section 112 of the Works Constitution Act) regulates the compensation for or mitigation of economic disadvantages arising from operational changes (mass redundancies, closure of a business, relocation). It is negotiated between the employer and the works council and has the same effect as a works agreement.
Distinction from related terms
Reconciliation of interests: The reconciliation of interests determines whether and how a change in operations is to be implemented. The social plan, on the other hand, compensates employees for the economic disadvantages.
Severance pay: Severance pay is often part of a social plan. However, the social plan also includes other benefits and provisions.
Practical tip
The benefits under a redundancy plan are not necessarily the maximum you can secure. Alongside the redundancy plan, there is often scope for individual negotiations – particularly for managers or employees with a strong legal position (e.g. special protection against dismissal).
