- A severance payment is not automatically due, but is usually a matter for negotiation
- As a rough guide, half a month’s gross salary per year of service is often cited, but this is not a fixed rule
- In many cases, a severance payment falls somewhere between a few months’ salary and significantly more, depending on the circumstances
- The key factors are, above all, how strong your position is and how easily or difficult it would be for the employer to terminate the employment relationship without an agreement
- Our employment lawyers will assess what severance pay is realistically achievable in your situation
Specialist solicitor in employment law
With over 15 years’ experience in employment law
Are you automatically entitled to severance pay?
No. You are not automatically entitled to a severance payment. Many employees assume that money is automatically paid out in the event of dismissal or a mutual termination agreement. That is not actually the case. In many instances, a severance payment is only payable if it has been expressly offered, agreed or negotiated. What this means for you is that if your contract does not mention a severance payment, you will generally not receive any payment. The crucial question is therefore not just whether the employment relationship is ending, but how strong your position is in this situation.
How much is a severance payment typically worth?
As a rough guide, half a month’s gross salary per year of service is often cited. This rule of thumb can help to put the figures into perspective. However, it is not a fixed rule, nor is it a guarantee. For example:
- 5 years with the company
- €4,000 gross per month
This works out at roughly €10,000 gross. It is important to note that this is not an entitlement. It is merely a starting point. Depending on the situation, the severance pay may be significantly lower or significantly higher.
“The well-known rule of thumb of ‘0.5 gross monthly salaries per year of service’ is not a legal requirement, but merely a rough guide based on court practice. It helps to get a sense of the figures – but that is all. In reality, we negotiate severance payments of up to more than two months’ salary per year. Anyone who clings rigidly to ‘0.5’ without examining their personal situation in detail often ends up losing out on a lot of money.”
What does your severance pay really depend on?
The amount of your severance pay depends not only on your salary and length of service. Above all, your individual circumstances are key. Important factors include:
- How long you have been with the company
- How much you earn
- How keen the employer is to reach an agreement
- Whether the employer could dismiss you without difficulty
- How well you assess your position
The more difficult it is for the employer to dismiss you, the more likely it is that a higher severance payment will be possible.
These three areas help with an initial assessment
A rather low severance payment
This is likely if:
- short length of service
- The employer has a clear advantage
- little pressure on the employer’s side
A fairly average severance payment
Typical if:
- several years with the company
- Situation unclear
- The employer wants a clean solution
A somewhat higher severance payment
More likely if:
- long service
- Termination would be difficult
- The employer needs a quick solution
- several issues need to be resolved
This classification is no substitute for a formal assessment, but it does help to better categorise offers.
“An employee with several years’ service assumed that his severance pay would amount to around 0.5 months’ salary per year. An initial offer from the employer was exactly in this range and seemed reasonable.
Together with the client, we assessed the actual starting position and based the negotiations on that. The result: the severance pay ended up being well over double the original estimate – with better terms on leaving as well.
The difference was not down to the formula, but to a correct assessment of the client’s own situation.”
Two typical examples
Example 1: limited scope
Short length of service, clear starting point for the employer.
→ Severance pay is usually on the lower side.
Example 2: significant leeway
Long-term employment, uncertain dismissal, time pressure on the employer.
→ Significantly more is possible.
This is precisely where the difference lies between a rough formula and the real-life situation.
How to estimate your severance pay more realistically
Ask yourself the following questions:
- How long have I been with the company?
- What is my salary?
- Have I already received an offer?
- How much pressure is the employer under?
- Could resigning be problematic?
- Could I face disadvantages regarding my unemployment benefits?
- Are there any outstanding claims?
The more points in your favour, the more is often possible.
How can you tell if an offer is too low?
A bid is often too low if:
- time pressure is being applied
- no justification is given
- the amount is only slightly above the minimum required
- important points are missing
- additional disadvantages arise
Particularly critical: a seemingly good severance package can quickly turn out to be worth significantly less if you do not receive unemployment benefit for several weeks afterwards.
When you should have your severance pay reviewed
- A specific offer has been made
- The amount seems unclear or low
- The employer is putting pressure on you
- You are unable to assess your position
- Other issues, such as unemployment benefit, remain unresolved
Our severance pay solicitors in Munich will assess your specific situation and show you what is realistically possible.
Instead of looking for a ‘magic number’, do the following:
- Define a lower limit
- Set a target range (e.g. 0.75–1.25 times your annual salary)
- Adjust upwards if the grounds for dismissal are legally weak, you have special protection, or the employer fears reputational risks.
- This range is the area within which you realistically want to settle.
- Set your initial claim deliberately higher – and justify it objectively
- Example: “We see significant risks here regarding the selection of employees for redundancy and special protection against dismissal, plus 20 years’ service. Against this background, we consider a severance payment of … to be appropriate.”
- A well-justified high demand comes across as far more professional than an uncommented-on figure of your choosing.
In this way, you are not merely negotiating “anything above 0.5”, but operating within a structured range that allows room for upward adjustment – without the risk of ending up below your own lower limit.
