No Entitlement: The Reality for Many Employees
In Germany, there is no general legal entitlement to severance pay upon dismissal. This surprises many employees who, due to frequent media coverage of severance payments, assume that severance is automatically due. In reality, severance payments are the result of negotiations, social plans, or court settlements — not legal requirements.
The only true statutory severance provision is found in Section 1a KSchG: in the case of operational dismissal, the employer can offer severance of half a gross monthly salary per year of service if the employee waives their right to file an unfair dismissal claim. But even this is only an option, not an obligation of the employer.
When There Is Definitely No Entitlement
In several situations, there is regularly no entitlement to severance. In small businesses with fewer than 10 employees, the Employment Protection Act does not apply — the employer can dismiss without special reasons, and severance is rarely paid. During the probation period (maximum 6 months), employment protection also does not apply, with a notice period of only 2 weeks.
In cases of behavioral dismissal due to serious breaches of duty (e.g., theft, refusal to work), there is generally no entitlement. The same applies to personal dismissal when the employee can no longer permanently provide the contractually owed service. In summary dismissal for cause, severance is also unlikely — here the question is rather whether the summary dismissal is even valid.
Fixed-Term Employment Contracts
With fixed-term contracts that end when the term expires, there is generally no severance entitlement. The employment relationship ends automatically without notice. An exception may exist if the employer terminates the fixed-term contract early and the fixed term was invalid.
What to Do Without Severance Entitlement
Even if there is no legal entitlement, there are options for action. First check whether the dismissal is even valid. Formal errors (missing written form, improper works council consultation, failure to observe notice periods) can make the dismissal invalid and strengthen your negotiating position.
An unfair dismissal claim at the labor court can also be worthwhile even if the chances of success are limited. Many employers shy away from the effort and uncertainty of court proceedings and are willing to agree to severance in a settlement. The first instance at the labor court is also relatively inexpensive for employees, as each party bears their own legal costs.
Negotiating Alternative Benefits
If severance is not achievable, you can alternatively negotiate other benefits. A good reference letter, paid garden leave for the remaining contract period, outplacement services (career counseling for reorientation), continuation of the company pension, or extension of health insurance after departure are valuable negotiation items.
Special Dismissal Protection
Certain groups of people enjoy special dismissal protection, which makes dismissal significantly more difficult for the employer and often results in higher severance. These include pregnant women and mothers up to 4 months after delivery, employees on parental leave, severely disabled persons and those of equal status, works council members, members of the youth and trainee representation, and data protection officers.
Collective Agreements and Works Agreements
In some industries, collective agreements or works agreements regulate severance amounts upon dismissal. Particularly in the metal and electrical industry, banking, and the public sector, there are often collective provisions for social plans and severance. Check whether a collective agreement applies to your employment that provides for a severance entitlement.
Works agreements may also contain severance provisions. These then apply to all employees in the company regardless of individual negotiation. Ask your works council whether such agreements exist.
Severance in Employer Insolvency
When the employer becomes insolvent, severance claims are particularly at risk. Severance from a social plan is treated as an insolvency claim, but the distribution rate in insolvency proceedings is often only 5-10% — meaning you receive only a fraction of the agreed severance. Unemployment benefits and insolvency pay (for the last 3 months before the opening of insolvency proceedings) take priority.
If insolvency is foreseeable, you should try to have the severance paid out before the opening of insolvency proceedings. After the opening, payments by the insolvency administrator are only possible on a limited basis.
Conclusion: Professional Advice Is Worth It
Even if there appears to be no severance entitlement at first glance, professional advice from an employment law specialist is worthwhile. Negotiation opportunities can often be identified even in seemingly hopeless situations. An initial consultation typically costs around €250 — an investment that can pay for itself many times over in a successful negotiation.