- A severance payment may affect your unemployment benefit
- A potential waiting period of up to 12 weeks is particularly critical
- The timing of the termination and any period of leave also play a role
- Our employment lawyers will assess how to avoid any adverse consequences
Specialist solicitor in employment law
With over 15 years’ experience in employment law
Does a severance payment affect your unemployment benefit?
Many people assume that a severance payment is automatically deducted from their unemployment benefit. That is not strictly true. In many cases, a severance payment is not directly deducted from unemployment benefit.
This means that, in principle, you can receive a severance payment and still claim unemployment benefit later on. The real problem lies elsewhere.
The biggest risk: the closing hours
The key point is not the severance payment itself, but the way in which the employment relationship ends. If you play a part in the termination of your employment, the Jobcentre may impose a waiting period. This applies in particular to:
- mutual termination agreements
- voluntary resignations
- Agreements that have the effect of a voluntary termination
The result: you will not receive unemployment benefit for up to 12 weeks
Why a blackout period arises
From the Employment Agency’s point of view, the situation is often as follows: you could have kept your job, but you yourself agreed to the termination of your employment. This is precisely why they investigate whether you contributed to your own unemployment. If this is found to be the case, a waiting period will apply.
Why this causes the severance pay to lose value quickly
Many people focus solely on the severance pay. The problem is that even a substantial severance payment can be quickly used up if you don’t receive unemployment benefit for several weeks.
A simple example:
- 12-week waiting period
- no income during this period
That can amount to several thousand euros. The severance pay then looks good on paper, but is worth significantly less in financial terms.
“Strategically important: a ‘generous’ severance payment can quickly be rendered virtually worthless by a vesting period and a deferral period. It is therefore not only the amount of the severance payment that is decisive, but also the type of termination (dismissal vs. mutual termination agreement) and the termination date (whether or not the notice period is observed).”
When a suspension is more likely to be imposed
A waiting period is more likely if:
- you sign a termination agreement
- you resign
- there are no clear grounds for the termination
- the employer was not obliged to dismiss you
Particularly critical: if you agree without good cause, the agency will often view this to your disadvantage.
When a lockout period can be avoided
It is not always possible to avoid a waiting period, but it can be influenced in many situations. Key factors include:
- whether the employer would have terminated the contract anyway
- whether the dismissal would have been legally valid
- how the contract is worded
- whether there is a valid reason
What matters is not just that the employment relationship ends, but how this is set out in the contract.
Common mistakes to avoid
In practice, the same mistakes are made time and time again:
- You sign a termination agreement without checking it
- You focus solely on the severance pay
- You don’t think about the implications for your unemployment benefits
- You let deadlines slip by or act too late
- You accept wording that is detrimental to you
The most common mistake: the severance pay is assessed, but the waiting period is ignored.
"An employee was offered a termination agreement with a substantial severance payment and signed it without giving it further thought. The sum seemed attractive at first glance. Following the termination of the employment relationship, the Jobcentre imposed a waiting period. In addition, his entitlement was temporarily suspended due to the shortened notice period. The result: several months without unemployment benefit. A significant portion of the severance pay was effectively eaten up as a result. The difference lies not in the amount of the severance pay, but in the drafting of the contract and the nature of the termination."
When you should have your situation assessed
You should have your situation reviewed if:
- you have been offered a termination agreement
- you have been offered a severance payment
- you are unsure whether a waiting period applies
- you do not have a new job
- your employer is putting pressure on you
Our severance pay solicitors in Munich will assess your situation and identify any risks involved.
"The key piece of advice regarding severance pay and unemployment benefit: do not sign any termination agreement, settlement agreement or compromise involving an early termination date until you have clearly established whether you face a waiting period or suspension of your unemployment benefit, and for how long.
Therefore, the rule of thumb is: first have a specialist solicitor assess the risks to your unemployment benefits (waiting period, suspension, structuring of the termination date), then decide on the severance pay – not the other way round."
Do you have any questions about your situation?
A severance package often sounds appealing. However, what really matters is what you actually end up receiving. If you sign without checking the details, you risk financial losses that will be almost impossible to rectify later on. Our specialist employment lawyers will assess your situation and explain what matters most right now.
