Severance and ALG I: The Key Rules
Many employees fear that severance will be deducted from their unemployment benefits. The good news: severance is generally not deducted from Unemployment Benefit I (ALG I). The full ALG I entitlement remains intact — provided certain conditions are met.
The decisive condition: the standard notice period must be observed. If employment ends before the notice period expires (e.g., through early release with immediate departure), the employment agency can partially offset the severance against ALG I. The offset then applies for the period between the actual end and the end of the notice period.
The Waiting Period: 12 Weeks Without Unemployment Benefits
The biggest risk with termination agreements is the waiting period (Sperrzeit). The employment agency imposes a waiting period of typically 12 weeks when the employee has voluntarily given up their employment — and a termination agreement is considered voluntary resignation.
During the waiting period, you receive no unemployment benefits. Additionally, the total benefit period is reduced by one quarter of the entitlement period. With a regular entitlement of 12 months, this means: 12 weeks waiting period plus 3 months less total benefit duration.
How to Avoid the Waiting Period
There are several strategies to avoid a waiting period. The safest method: the employer issues an operational dismissal, and the severance is agreed in a separate settlement agreement (Abwicklungsvertrag). Since the dismissal comes from the employer, there is no voluntary resignation.
Alternatively, a termination agreement can be waiting-period-free if there is an important reason for consent. This is the case, for example, if the employer has threatened an operational dismissal and the severance amounts to at least 0.25 gross monthly salaries per year of employment. Health reasons, workplace bullying, or relocation for personal reasons can also be recognized as important reasons.
Important: Register as job-seeking with the employment agency at least three months before the end of your employment — otherwise you risk an additional waiting period for late registration.
The Rest Period for High Severance Amounts
In addition to the waiting period, there is the so-called rest period (Ruhezeit) under Section 158 SGB III. It applies when employment ends before the standard notice period expires. In this case, the unemployment benefit entitlement is suspended until the day the employment would have ended with proper notice — but for a maximum of one year.
The rest period primarily affects cases where the termination agreement provides for a shorter period than the standard notice period. Therefore, always ensure that the termination date in the agreement at least corresponds to the end of the standard notice period.
Severance and Health Insurance
While receiving ALG I, you are health-insured through the employment agency. However, if you are not eligible for benefits due to a waiting or rest period, you must insure yourself. In the statutory health insurance (GKV), you can insure yourself as a voluntary member — the minimum contribution is approximately €200 per month.
Factor these costs into your financial planning, especially if a waiting period is likely. In some cases, it may be cheaper to let the notice period run in full and only then transition to unemployment.
The Three-Month Rule: Registering as Job-Seeking
Regardless of how employment ends, you must register as job-seeking with the employment agency at least three months before the end of employment. If you learn of your dismissal less than three months before the end date, you must register within three days. Late registration can result in an additional one-week waiting period.
Registration can be done in person, by phone, or online. Keep proof of timely registration carefully — it can be important in later disputes with the employment agency.
ALG I Amount and Calculation
Unemployment Benefit I amounts to 60% of the last net salary (67% with children). It is calculated based on the average gross salary of the last 12 months before unemployment. The severance payment does not factor into this calculation — it has no influence on the amount of ALG I.
The benefit duration depends on age and insurance periods: with 12 months of contributions, you are entitled to 6 months of ALG I. From age 50, it can be up to 15 months; from 55, up to 18 months; and from 58, up to 24 months. Factor these timeframes into your negotiations.
Conclusion: Optimally Combining Severance and ALG I
Combining severance and unemployment benefits requires careful planning. Ensure the notice period is observed, avoid termination agreements if possible (prefer employer-initiated dismissal plus settlement agreement), register as job-seeking in time, and plan for possible waiting periods financially. When in doubt, consult an employment law specialist.