Wrongful Termination Compensation:
How Much Severance Pay Can You Get in Germany?

Introduction: Why Severance Pay for Wrongful Termination Matters

Wrongful termination can affect any employee and often represents an existential threat. The question of possible severance amount immediately concerns those affected, as it provides financial security in an uncertain situation. In Germany, hundreds of thousands of employees receive severance pay annually – but the amount varies greatly depending on individual circumstances.

The importance of adequate severance pay goes far beyond mere compensation. It enables orderly professional reorientation, bridges financial gaps, and with skillful negotiation can even be significantly higher than statutory minimum standards. At the same time, severance law is subject to complex legal regulations that are difficult for laypeople to understand.

Legal Foundations of Severance Pay

Statutory Regulations

German employment law recognizes various bases for severance claims. The most important is § 1a Employment Protection Act (KSchG), which provides for severance pay of 0.5 gross monthly salaries per year of employment if the employee waives a wrongful termination lawsuit. However, this regulation only applies to operational dismissals and under certain conditions.

§ 9 KSchG regulates the dissolution of employment relationships in exchange for severance pay by the labor court. Here, the court can award severance pay of up to 12 gross monthly salaries if continued employment is unreasonable for one party. § 10 KSchG even enables severance pay of up to 18 gross monthly salaries for employees over 55 years old.

Works constitution law (§ 113 BetrVG) provides for disadvantage compensation in case of operational changes without interest balancing, which is factually equivalent to severance pay. The amount depends on the employee’s age, length of service, and maintenance obligations.

Contractual Agreements

Employment contracts, collective agreements, or works agreements may contain severance regulations. Change-of-control clauses are particularly common for executives, providing severance pay in case of company takeovers or structural changes. Social plans regulate severance pay for plant closures or major restructuring.

Factors Determining Severance Amount

Length of Employment

Length of employment is the most important factor for severance amount. The basic formula of 0.5 gross monthly salaries per year of employment often forms the starting point for negotiations. With very short employment periods under two years, severance pay can be significantly lower or eliminated entirely.

Longer employment periods not only mathematically lead to higher severance pay but also strengthen the negotiating position. Employees with decades of company loyalty enjoy special protection against dismissal and often have claims to increased severance pay.

Employee Age

Age significantly influences severance amount. Older employees often have poorer job market prospects and therefore receive higher severance pay. From age 50, premiums of 0.75 to 1 gross monthly salary per year of employment are common, from age 55 even up to 1.5 gross monthly salaries.

This age scaling considers the more difficult job search and often shorter remaining working life of older employees. Especially in management positions, age-related severance pay can be significantly above standard rates.

Position and Salary Level

Executives and specialists often receive higher severance pay than regular employees. This is due not only to higher base salaries but also to more complex interests and often longer reintegration periods. Managing directors and board members can receive severance pay in the millions, while regular employees must expect standard rates.

Salary level directly affects the severance amount, as it is usually calculated as a multiple of gross monthly salary. Variable salary components like bonuses or commissions are considered differently.

Legal Success Prospects

The strength of the legal position significantly influences negotiating power. With obviously invalid terminations, employees can enforce higher severance pay because employers fear the risk of continued employment orders. With legally sound terminations, severance pay is often lower.

Especially with terminations without proper works council consultation, inadequate social selection, or violations of special dismissal protection, severance prospects increase significantly. Employers are then often willing to compromise to avoid lengthy court proceedings.

Practical Tips for Those Affected

Immediate Measures After Termination

After receiving a termination, you should act immediately. Register as unemployed with the Federal Employment Agency within three days to avoid blocking periods. Collect all relevant documents such as employment contract, termination letter, and references.

Document the circumstances of termination in detail. Were witnesses present? Were there previous conversations or warnings? This information is important later for legal evaluation.

Negotiation Strategies

Remain factual and professional in negotiations. Emotional reactions weaken your position. Don’t let yourself be pressured and don’t sign documents without prior review.

Prepare for negotiations by structuring your arguments. Emphasize your achievements for the company and weaknesses in the termination. Refer to comparable cases and industry-standard severance pay.

Legal Support

Hiring a specialist lawyer for employment law significantly increases your chances of success. Experienced lawyers know local case law and can realistically assess your chances. Legal costs often pay for themselves through higher severance pay.

Use free initial consultations to evaluate your options. Many lawyers also offer success fee agreements that limit cost risk.

Tax Aspects

Severance pay is subject to income tax but can be favored by the fifth rule. This rule significantly reduces the tax burden if the severance is paid out in one calendar year.

Plan the payout in a tax-optimal way. Sometimes it’s worthwhile to split the severance over two calendar years or choose other arrangements. A tax advisor can provide valuable support here.

Checklist: Successfully Conducting Severance Negotiations

Before Negotiation:

• Collect and review all relevant documents
• Have legal success prospects evaluated by specialist lawyer
• Research comparable cases and industry standards
• Define financial situation and minimum demand
• Develop negotiation strategy

During Negotiation:

• Remain factual and professional
• Emphasize own achievements and importance to company
• Point out weaknesses in termination
• Show flexibility on side aspects (release, reference)
• Request time to consider important decisions

After Negotiation:

• Have agreement documented in writing
• Review tax optimization of severance pay
• Plan unemployment registration and next steps
• Secure references and testimonials

We support you in successfully enforcing your severance claims. With our many years of experience in over 10,000 cases, we can competently evaluate your situation and develop the best possible solution for you.