A severance payment initially sounds like a financial gift from the employer. But not every severance package is so advantageous that employees should sign it immediately. However, anyone who rejects the offer must be fully aware of their rights and possible consequences.
What a severance payment actually means
A severance payment is a one-off cash payment that employers often offer when an employment relationship is to be terminated. It is not guaranteed by law, but is the result of an agreement, for example in a termination agreement or as part of a social plan. The purpose is to compensate employees for the loss of their jobs and in return to create legal peace, as Dr. jur. Jens Usebach, lawyer for dismissal protection and labor law, explains in an article on fachanwalt.de.
Can you refuse a severance payment?
The basic rule is: Nobody is obliged to accept a severance payment. Anyone who does not sign a termination agreement will remain employed by the company. If you refuse, it is up to the employer to issue a notice of termination and provide a legally tenable justification for it. According to the law firm Pöppel Rechtsanwälte, the Dismissal Protection Act applies particularly in companies with more than ten employees and for periods of employment of over six months.
What consequences can a rejection have?
If a severance payment is rejected, the employment relationship will initially continue. However, termination often follows if the employer no longer wants to keep the employee in the company. In this case, there is the possibility of a dismissal protection claim. If the termination is incorrect or there is no valid reason for termination, the court can declare the termination invalid and the job remains. According to the law firm, many proceedings still end with a settlement in which a severance payment is negotiated again.
Special features of social plans
In larger companies, for example in the case of mass layoffs, severance payments are often regulated by a social plan. This may contain conditions under which a claim no longer applies. For example, it can be stipulated that the entitlement to severance pay no longer applies if a reasonable job in the company or a transfer is rejected. According to Pöppel Rechtsanwälte, it is important to carefully check whether the alternative offered is actually reasonable.
Financial and tax aspects
Anyone considering whether to accept a severance payment should know the tax consequences. Severance payments are considered income and increase the tax burden. However, with the so-called fifth rule, this burden can be reduced by arithmetically spreading the severance payment over five years. The impact on unemployment benefits should also be taken into account. In the case of a termination agreement, there may be a blocking period of up to 12 weeks for unemployment benefits if the Federal Employment Agency assumes that the cooperation is voluntary.
When rejection can be worthwhile
Rejecting a severance payment can make sense if you absolutely want to keep your job or if the chances of a successful unfair dismissal claim are high. Even if the severance package offered is very low, it may be strategically better to wait for termination and then renegotiate. On the other hand, an agreement with severance pay can have the advantage of quickly creating clarity and making the transition to new employment easier, says Usebach.
Jennifer Vogel, editorial team at finanzen.net
