If your job is in danger, a severance payment can quickly seem like a saving solution. However, every decision should be based on solid facts.
Severance pay in Germany
In Germany there is no legal right to severance pay. Employers usually pay them voluntarily to compensate for job losses or to avoid legal disputes. In cases of operational structural change or closure, a social plan that regulates severance payments is often used. Otherwise, it is often a result of individual agreements within the framework of termination or liquidation agreements, according to Rechtsanwalt.de.
Opportunities and negotiation options
A severance payment can create financial flexibility, be it for professional reorientation, further training or a precautionary exit from a stressful employment relationship. Companies offer them as an alternative to dismissal protection lawsuits because a lawsuit could potentially be more expensive for them, as it goes on to say. The usual amount is based on 0.5 gross monthly salary per year of employment, although according to Rechtsanwalt.de values of one or more gross monthly salary per year can certainly be achieved in negotiations. Especially if the employer is afraid of the risk of a lost lawsuit, the chances of a higher sum increase.
Be aware of traps and risks
Anyone who accepts a severance payment accepts the end of the employment relationship and often loses the chance of being reinstated or continuing the job through the courts. In addition, there is a risk of social and financial disadvantages, such as blocking periods when receiving unemployment benefits, especially in the case of termination agreements, warns the German Press Agency (dpa). A lack of legal advice can lead to poor conditions and weaken the negotiation situation, especially if deadlines such as the three-week filing deadline are not observed.
Tax and social security consequences
Severance payments are subject to income tax, but are exempt from social security contributions. According to the dpa, the so-called fifth rule can help to reduce the tax burden by taxing the severance payment over several years. In this context, advice from tax experts or the employment agency may be advisable.
When should it be better to refuse a severance payment?
A high offer is not automatically a good offer if disadvantages outweigh the disadvantages in the long term. Anyone who has a good chance of successfully taking action against the termination of their employment relationship with a dismissal protection claim should not take action too quickly. Even in uncertain negotiations or possible disadvantages due to age or the market situation, it is worth showing restraint, as Rechtsanwalt.de emphasizes.
Care, advice and strategic action
Before making a decision, it is important to check all the details. This requires time for legal and financial advice, requesting a written offer and renegotiating additional benefits such as time off, better references or specific payment arrangements. According to the dpa, a realistic assessment of your own position on the labor market and your personal situation is crucial.
Editorial team finanzen.net