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Patent & Legal

Severance pay in the event of dismissal

Severance payments are a matter for negotiation.

Employment law

What is a severance payment and when is it paid?

In German employment law, severance pay is a one-off cash payment made by the employer to the employee on termination of the employment relationship.

There is no statutory regulation on the amount of severance pay. The amount of severance pay in the event of dismissal is therefore not prescribed. The amount of severance pay is therefore partly determined by human and social factors (e.g. length of service and number of minor children), but above all by the litigation risk. The litigation risk refers to the danger of the employer losing the legal dispute. The higher this risk is for the employer and the more serious the consequences would be, in particular due to back pay and any claims for damages by the employee, the more willing the employer is to pay a higher settlement amount.

To ensure that the severance payment in the event of dismissal is not too high or too low, we recommend consulting a severance payment lawyer.
The law firm white ip | Patent & Legal advises employers comprehensively on severance payments in the event of dismissal, employee claims and the usual severance payment amount in your industry and region.

Our team is available for you by telephone on 0351 -896 921 40 or by e-mail at recht@white-ip.com.

We are available for consultations in Dresden, Leipzig, Berlin, Cologne, Munich, Hamburg and beyond. Contact us with your request and your wish for an online or on-site consultation!
We will find an appointment together.

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Frequently asked questions about severance pay in the event of dismissal

01.

Who is entitled to severance pay?

Whether and when a severance payment is made and how much it is depends on the specific circumstances. In principle, a severance payment in accordance with Section 9 of the Dismissal Protection Act can only be considered if either the employer or the employee cannot reasonably be expected to continue the employment relationship. One reason for this is, for example, a significant dispute between the parties.

Nevertheless, a severance payment is often agreed as part of a settlement in the course of the labor court proceedings.
In this way, the employer practically buys an amicable termination of the employment relationship and thus avoids the uncertainty of a legal dispute and a court decision.
Advice from a lawyer for employment law and severance payments is recommended, as the amount of the severance payment is a matter for negotiation.

02.

Why should a lawyer be involved in negotiations about severance payments?

The amount of a severance payment depends on many factors: negotiating skills, but also the industry and region or existing agreements.

Depending on the court district, certain “basic amounts” have developed for the question of severance pay in the event of dismissal. For example, a severance payment of half a gross monthly salary per year of employment is common as a basic amount. This severance payment amount can then be increased or reduced depending on the circumstances of the individual case.

If provisions have been made in works agreements or collective agreements regarding both the reason for and the amount of a severance payment, these must be examined in each individual case and must be observed.

03.

What consequences can a severance payment have?

When concluding a settlement agreement, the question of the blocking period with regard to the payment of citizens’ allowance is also of great importance for the employee. In principle, both a blocking period and a deduction can be avoided if the settlement is formulated correctly. Advice from a severance pay lawyer is essential for an advantageous severance pay settlement, as even minor inaccuracies can have undesirable consequences. Depending on when the severance payment is made and how much is paid, the taxes can be correspondingly high. If the severance payment is paid while the employment relationship is still ongoing, it is usually paid with the last salary payment and still in tax class 1. If, for example, the severance payment is only paid retrospectively due to a lengthy legal dispute and you are already in a new employment relationship at this point, the severance payment will be taxed under tax class 6 and therefore significantly higher. In addition, a high severance payment can naturally lead to a sharp increase in taxes due to tax progression. In the end, this is all put into perspective by the tax return. Here, the disadvantage of taxation in income tax class 6 is offset and the tax progression due to a high severance payment can also be reduced by the so-called fifth rule. Our law firm and tax consultants will be happy to answer any questions you may have.

We support you from the examination of the severance payment claim to the calculation of the severance payment amount.

Our lawyers for employment law work in Dresden and throughout Saxony for companies, managing directors and senior executives and will answer your questions about dismissal and possible severance pay with confidence and competence at all times.

Employment law

Consult our Employment and Labour Law experts

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