Outplacement Guide

What should be the amount of your severance pay?

The question of severance pay is first and foremost a legal question. Whether and how you can enjoy severance pay depends first of all on how your employer wants to part with you and whether there is a legal reason for dismissal. Only if there is no reason for dismissal do you have a right to severance pay. In these cases, your employer can offer you a severance payment if you waive your right to take legal action against dismissal in return.

The typical case of legally permitted dismissal is that of the so-called "operational dismissal".

If you have been dismissed for operational reasons, you are not initially entitled to severance pay.

In order to be able to give notice of termination for operational reasons, however, it is necessary that a position is eliminated completely and also in the future, i.e. that it is not to be filled. In these cases, however, the company must examine whether continued employment in a comparable position would be possible and must also have carried out the so-called social selection.

If, for example, the head of central controlling is dismissed because in future controlling will only be carried out in the regions, the "operational dismissal" is permissible if there is only one head of controlling. If, however, it is decided six months later that a head of central controlling is needed again, the person initially dismissed would be entitled to reinstatement. If, on the other hand, the regional controlling department is reduced from eight to seven employees, the so-called social selection must take place before the dismissal and the works council must be heard, i.e. in simplified terms: the young unmarried employees go first. In company practice, however, the rules of social selection are so complex that a severance payment is usually agreed in court.

So if you have been formally dismissed on time, you should consult with a lawyer. If you have not been offered either a redundancy payment or outplacement, this may be the way to go. However, if there is a reasonable offer of severance or outplacement on the table, it may make more sense for you to focus your energy forward on a new job rather than "exhausting" the last euro of severance by taking legal action.

In our offices all over Germany we are happy to support you on your way to your new job. Contact us today.

After the dismissal, you have exactly three weeks to file an action for protection against dismissal, otherwise you have accepted the dismissal. From a legal point of view, your action against your employer is an action for reinstatement, because a legally fixed legal claim to severance pay does not usually exist. In practice, this often leads to you having your job "bought" by means of a severance payment, since your employer has no interest in a theoretically infinite employment.

However, the moment you accept new employment, your interest in the unfair dismissal claim is extinguished and so is the opportunity to negotiate a severance package. As things are very simplified here, it is best to seek advice from a lawyer.

Very often, however, you will be offered a severance package and not given notice in the legal sense.

Many companies try to avoid the legal disputes from the outset and offer a termination agreement with severance pay and outplacement on their own initiative in cases where there is no legal reason for termination. A usual severance payment is calculated by multiplying the years of employment by half to a full month's salary. We last surveyed the actual severance packages paid in our 2017 study. If such a severance offer is well structured, it is often advisable to accept it. Because only then will you have your head free to look ahead to a new perspective. In doing so, you run the risk of forfeiting up to 50% of your entitlement to unemployment benefits, since from the point of view of the employment office you were "actively" involved in your redundancy. In practice, HR managers therefore often offer to include the wording "This agreement is made to avoid termination by the employer at the same time." in the termination agreement so that the employee who is no longer wanted receives unemployment benefits in full.

There is almost always room for negotiation on the employer's part, which you can explore without going to court or hiring a lawyer. If possible, you should negotiate

  • a release from work in order to be able to concentrate fully on the professional reorientation,
  • a partial conversion of the severance pay into a longer remaining term of the employment contract, which will give you a safety cushion and allow you to reorient yourself from your existing position,
  • the assumption of costs for an outplacement consultation.

Only in the last place should you think about maximizing the severance pay, because experience shows that the money is used up quickly and does not bring you any new career prospects. The decisive factor for you should be a sensible overall package.