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Compensation after termination: when and how much money are due

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In the second year of the pandemic, there is uncertainty on the labor market. In January, just under eight percent of German employees at the Ifo Institute for Economic Research were on short-time work. In the pandemic, companies get into trouble and receive state aid. Even in the service sector, it is forecast that there will be layoffs. And whoever loses their job is first faced with the question: What will happen next?

This is exactly what Jonathan Haager *, IT project manager from Berlin, experienced. Until 2017 he headed a team with six employees in a large company. He did this successfully, as the feedback from his superiors showed. For the time being, Haager accepted overtime. One day the mood turned. Decision-makers were under noticeable pressure. “There were problems, there was a sale in the room,” says Haager. He asked his boss several times for talks – in vain. Soon two close colleagues quit. When Haager failed due to illness, he was given notice with an offer of severance pay. “No appreciation of my performance, no dialogue – just like that.”

“When talking to the boss, a stranger was sitting in the room”

Haager sought advice from a lawyer specializing in labor law. He advised him to turn down the offer of severance pay. It was far below what would have been appropriate in this labor law situation, found his lawyer. Because Haager was close to burnout, he sought treatment. With his lawyer he worked out a detailed strategy for dealing with the company. There was a trial. Hague won. In the meantime he had been on sick leave for several months. “I started to develop staying power because I wanted to defend myself against the injustice of the company.”

When he finally returned to his job, the boss asked him to speak to him. “A stranger was sitting there,” he recalls. “It took less than ten minutes. My boss said, ‘We don’t want you to come back.’ “The company had already been sold by that time. Hague’s attorney got in touch with the company’s new house attorney. She even apologized for the bad, first severance offer from her predecessor. “A little later I received a new, much better severance offer.” Haager accepted.

Separation talk and negotiation about severance pay: That is important now

What can employees do if they are given notice? When and for whom is severance payable? First of all: Even in the pandemic, in which many no longer perceive their job as safe, employers are not allowed to simply terminate employees with reference to Corona. Being well informed now helps. Because anyone who has received a notice of termination should be prepared. Especially when he was caught off guard.

“Such a separation talk is emotionally very stressful for most people,” says Dagmar Walker, lawyer for labor law and consultant for dismissal management. “It is important to remain calm and to listen carefully to the reason for the separation from the company. Ask what alternatives besides dismissal the company has examined, because dismissal is always the last resort. ”Is there already an offer? “Have the company’s resignation offer explained to you in detail and handed over to you in writing. Do not make a substantive statement too quickly. Let your conversation partner know that you will reflect on the offer in peace, seek advice and then provide feedback. “

The key is not to be rushed into anything, says Walker. “Ask for sufficient time to think it over. Depending on the circumstances, it could be a week or two. During this time, a person you trust comes into play. This can be someone from the works council who accompanies the conversation in the company and then also acts as a witness. Before the appointment, it must be clear: This is about a separation interview. “

The termination is in the room? When the employer pays a severance payment

There are three reasons for a severance payment in the event of a termination: the severance payment in the termination agreement, the severance payment in the event of operational dismissal and the severance payment as part of a dismissal protection process. We’ll explain to you in a moment what that means in detail. Because the more background knowledge employees have about their options, the better their chance of a severance payment.

Losing one’s job often results in financial hardship. A severance payment alleviates this hard impact. It compensates those who have been terminated for the loss, but it is an exception: According to statistics from 2009, 83 percent of employees terminated in Germany received no severance pay. There is no fundamental right to them. However, it can still be demanded – because there are hardly any cases of termination like the other.

Severance payment: what it looks like and when it is available

The first question that employees should ask themselves after they have been given notice is the company: What is the employer’s situation? Can he give notice of termination for reasons? And what is your own situation? Do I enjoy being around the house or am I ready to reorient myself professionally? Sometimes the dismissal comes when there is already a crisis. Then a discussion with the works council provides information.

“Sometimes collective bargaining regulations come into play, from which a claim to severance payment arises,” says Antje Burmester, specialist lawyer for labor law and mediator. Most often there is a severance payment because the employer wants to quickly agree on a fixed amount with the employee. That is the so-called termination agreement. “This saves companies the hassle of legal disputes and avoids the risk of having to reinstate someone if the termination is not effective and having to pay extra.”

That makes a social plan

The main framework for layoffs is changes in companies: plants are closed, departments restructured, profits collapse. If more than 5 percent of a workforce is affected by job cuts, the HR staff and works council develop a social plan together. It also regulates the conditions for severance payments after redundancies for operational reasons. Employees should ask the works council for an interview.

“Large companies often start volunteer programs,” explains Nikolai Laßmann from Forba Partnership Berlin. The business graduate and lawyer advises and trains works councils in companies as experts. “Companies try to look like this: who will disembark without dismissal?” For example, they offer termination agreements for which seniority and age, but also maintenance obligations, play a role.

“Severance pay sums are falling sharply” – and this is how they are calculated

In 2016, labor market experts from the Hans Böckler Foundation, who anonymously evaluated social plans for German employers, stated that in addition to the income and age of an employee, indicators such as severe disability, industry, company size, an assertive works council and the company’s economic situation determine the severance payment . But it is precisely this that is currently a critical factor, says Nikolai Laßmann. “In the last 12 months the liquidity for the payment of severance payments in many German companies has deteriorated massively. This means that severance payments are going down sharply – at least when it comes to company offers. ”The prospects for the future are probably too uncertain.

There are formulas for calculating the severance payment itself. “In practice, the gross annual salary is mostly divided by 12 in order to determine the gross monthly salary,” says Dagmar Walker. “Vacation pay, annual performance, royalties, all of this is regularly taken into account. This is nowhere anchored in law. ”

The calculation ranges from 0.75 to 2.5 salaries per year of employment. “A good severance payment adequately reflects the employer’s legal risk of being able to part with an employee,” says Walker. “If the employer has little or no chance of legally dismissing the contract, a factor of at least 0.75 must be used. A good severance payment is also within the framework of what an employer has paid in comparable cases in the past. Managers who cannot be terminated are bought out in some industries for a factor of 1.0, in other industries even a factor of 2.0 or more is offered. ”

Sign the termination agreement: this is important

The company should always keep the notice period. Often the last joint vote is mainly about the question of whether an employee has to stay until the last working day or whether he can leave early – and also about benefits due until the end of the day. “Without observing the notice period applicable to the employment relationship, there are disadvantages if unemployment benefits are to be claimed later,” says Antje Burmester. It would also be negotiable that one resigns before the termination date and, in return, the severance pay is increased by the gross salary saved as a result or a substantial proportion of it. “The employee also benefits from this ‘turbo regulation’: they no longer have to pay their share of the social security.”

Some employers also try to put a so-called sunset clause at the end of the termination agreement. With this they want to get rid of all claims from the employment relationship and to exclude the pursuit of further rights, for example to the payment of overtime or an agreed bonus. “Before signing, you should therefore carefully check whether all claims from the employment relationship have been taken into account,” says Antje Burmester.

Paid leave? Career coaching? That can also provide a severance payment

A severance payment can also be more than a sum of money. “Money alone does not create a new job,” says Dagmar Walker. “Other aspects are just as important, such as paid time off during the period of notice, assumption of costs for new placement, career coaching and much more. The entire endowment of the exit package and not just the severance payment counts. ”

Jonathan Haager * also confirms this. “The situation was delicate and hurtful for me,” he says looking back. “No job is worth suffering.” He found his lawyer to be saving. “I therefore advise others to support. Know your worth and persevere. Swallowing an injustice is not acceptable. ”

* The name has been changed.

Termination and severance pay: the most important facts

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