275,000 euros as a farewell – corporations are now paying this as a severance payment

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Last Thursday, Commerzbank presented a new severance program to enable the planned reduction of 4,300 jobs quickly. Some employees can already consider at the age of 55 whether they want to go into early retirement by paying a severance payment, reports the “FAZ”. Such an early departure costs Commerzbank around 139,000 euros per partial retirement contract. But Commerzbank is not the only company with such a strategy: According to the FAZ, Deutsche Bank, for example, wants to part with 18,000 employees and is also offering high severance payments.

Change of strategy for downsizing

The car manufacturers BMW and Opel are currently trying to permanently reduce their personnel costs through severance payments. But how is a severance payment made up?

The amount of the severance payment in Germany is calculated using a formula: Age times months of service times the last gross monthly salary divided by 396. This means: For a 40-year-old employee who worked for the bank for 20 years and last earned 6,000 euros a month, this results a severance payment of just under 150,000 euros. The amount of the payment is capped so that severance payments are not incalculable.

“Severance programs and downsizing have moved into the focus of companies because of Corona,” Inga Dransfeld-Haase, President of the Federal Association of Personnel Managers, told the FAZ. According to a study by the association, the issues of downsizing and outsourcing currently have priority for 32 percent of the companies surveyed. That is 7 percentage points more than in 2017. A change can thus be clearly seen: “The structural change, especially in the automotive sector, has been around for a long time,” says Dransfeld-Haase, “But Corona acts like an accelerator”.

Severance payment plus special payment in the event of a quick decision

In the case of Daimler, a severance payment consists of two components: a base amount, the amount of which is based on the age or seniority of the employee, and an additional amount, which – also depending on age or seniority – is a multiple of the last gross salary. In addition, employees who make a quick decision receive a special payment, the so-called “turbo bonus”. For example: A 45-year-old employee who last earned EUR 6,500 gross comes to a minimum amount of EUR 215,000. Including the turbo bonuses, this amount would increase to 275,500 euros.

Industrial companies as well as corporations and large medium-sized companies are currently relying on the strategy of voluntary retirement with severance pay, explains Christian Summa, restructuring specialist at the outplacement consultancy “Von Rundstedt”, to the “FAZ”. Small and medium-sized companies often do not have the necessary financial resources to go the same way.

Downsizing through volunteer programs

Thyssen-Krupp is relying on another strategy: The industrial group wants to cut at least 3,000 jobs in the steel division alone in the coming years. The management team is also to be halved from almost 800 to around 400 employees, according to the “FAZ”. The majority of them left the group through a so-called volunteer program. The employees were also offered the option of switching to an external transfer company within three months of the start of the program. There they receive professional support for a professional reorientation and that with continued payment of 85 percent of their previous salary. The employees can stay with the transfer company for a maximum of two years. Anyone who leaves society earlier receives a severance payment.

Christian Summa observes: “Many companies offer their employees early retirement schemes and pension bridges as part of volunteer programs.” However: “We see that fewer and fewer companies can afford this because they would lose valuable know-how with employees who are close to retirement.” Summa warns that severance packages must therefore be properly designed and tailored to the needs of employees. “Experience shows: An attractive severance payment alone does not take away the fear of starting over. The volunteer program also has to bear this name rightly. “



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