When you can get severance pay
Although there is no statutory entitlement to severance pay on termination in Germany, severance pay is frequently paid by employers in Germany as compensation for wrongful terminations. In Germany, terminations are often unlawful because most employees are protected against groundless terminations by law. However, some employers abuse their power and terminate employees despite being protected by law.
Since Germany is a state under the rule of law, every employee is entitled to challenge the lawfulness of their termination. If a termination is considered to be unlawful in effect, employers must continue the employment. This is however usually undesirable for both parties. Returning to your old job is usually not an option as it can result in a stressful working atmosphere or you no longer want to work for this employer. Employers on the other hand generally want to avoid any risk of the notice being called ineffective meaning they would have to continue employing the employee and would have to pay his/her salary. Employers have however no interest in doing so because they tried terminating the employee in the first place. So, employers often agree on a severance payment even after the notice of termination has been given to avoid any risk of having the termination declared ineffective.
How to claim severance pay
You could start negotiating your severance pay with your employer right after receiving your notice and without any pre-conditions. However, employers usually are not interested in negotiations if they do not face the risk of having the termination called ineffective. Therefore, you will need to challenge your termination (or threaten to do so) within 3 weeks after receiving your notice by filing a dismissal protection claim to the labour court. Without its timely submission, the termination will be considered lawful regardless of its original legitimacy. In effect, the employer would not face the risk of continuing the employment and hence would not be willing to pay you severance pay.
Often employers already agree to a severance payment before the start of the dismissal protection proceedings to avoid high legal costs and attorney's fees in addition to the retrospective payment of the employee's wages.
» Find out more about challenging termination in our article on the dismissal protection suit.
If you have been terminated, it is advisable to seek professional help by experts in labour law to assess your prospects and increase your chances of success. Being familiar with the arguments of your employer, filing a well-founded dismissal protection claim and knowing exactly what is important in negotiations and will largely affect whether you receive severance pay and the amount of the payment.
Offers of termination agreement
In order to avoid legal action against dismissal, some employers offer employees a termination agreement, including a severance payment. By means of the termination agreement, employer and employee agree amicably to terminate the employment. However, you should be careful: As an employee, a severance agreement may in some cases put you in a worse position than if the termination is contested by lawyers. In addition, the severance payment provided for in the contract is usually less than a negotiated severance payment. And lust but not least, the employment office can impose a blocking period for the payment of unemployment benefit or even deduct the severance payment from the unemployment benefits.
Special cases of severance pay
Severance pay as temporary or contract worker
Even if you are not permanently employed by your employer, there is a chance of receiving severance pay on termination. If you are a temporary or contract worker, severance pay is possible if you were employed by the hiring firm for more than 3 months before being terminated by the hirer.
Severance pay terminations with the option of reemployment under altered conditions
You may receive a severance payment not only in the event of termination. If your employer terminates the employment under the previous conditions and at the same time offers the employee the option of continuing the employment under changed working conditions, e.g. with a reduction in working hours. Since the new employment conditions are usually disadvantageous for the employee, a severance payment can be considered as compensation for the disadvantage. In these cases, you may challenge the termination in order to persuade your employer to pay a severance payment or to have your termination called ineffective.
Entitlement by employment contract, collective agreement, severance scheme
In these cases, entitlement to severance pay may arise from termination:
- A severance payment claim may be provided for in the employment contract in the event of termination.
- Collective agreements sometimes stipulate a severance pay entitlement. To find out whether such a collective agreement exists that is applicable to your employment relationship, you should contact your trade union or the relevant employers' association.
- If a works council exists in your company and a social compensation plan has been agreed upon with your employer, you may be entitled to a severance payment. To find out whether such a severance scheme exists, you should contact your work council.
Explicit stipulations of a severance payment are not always given. However, even without a contractual claim, severance pay can be enforced - for example, by challenging unfair terminations.
Entitlement due to dismissal for operational reasons
You may claim a severance payment without challenging the termination if you are terminated for operational reasons and your employer indicated in the written notice that you can claim a severance payment after the 3-week period has expired. However, accepting the offer of severance pay could be interpreted as an amicable termination of the employment relationship, which would later lead to disadvantages in claiming unemployment benefits. It is therefore better to seek professional advice to avoid unintended consequences.
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