Accept the severance pay or sue? The decision guide

Accept the severance pay or sue? That's the decision

You've received a dismissal, or a severance offer is on the table. Now you face the most important question: accept it and move on, or get more through an unfair dismissal claim (Kündigungsschutzklage)? There's no blanket answer, but there is a clear method for working it out.

Important to know upfront: there is no general legal right to severance pay (Abfindung). The often-quoted rule of thumb, 0.5 gross monthly salaries per year of employment, isn't a law but a reference value from settlement practice at the labour courts. You can work out your reference figure with the severance calculator. Whether you end up with more depends on the leverage a claim creates.

When you should accept the severance pay

Accepting often makes sense when:

• The offer is clearly above the rule of thumb, for example from a social plan or voluntary redundancy programme.
• The dismissal is legally sound: correct social selection criteria, a clean process, no formal errors, no special protection against dismissal that applies.
• You already have a concrete new job lined up and want quick clarity.
• Months of proceedings don't fit your current situation.

Even then: don't sign without a review. A termination agreement (Aufhebungsvertrag) or settlement agreement can contain hidden pitfalls, from a benefit suspension period (Sperrzeit) for unemployment benefit to far-reaching waiver clauses.

When an unfair dismissal claim gets you more

The real leverage is the employer's litigation risk. Once you sue, the employer has to factor in the possibility of losing the case, with the consequence of having to keep employing you and pay back wages for the interim period. That is exactly the risk they will want to buy their way out of.

That's why most unfair dismissal proceedings in practice end not in a judgment but in a court settlement: the employment relationship ends in exchange for a severance payment, often above the initial offer. A specific amount is not guaranteed though; it depends on the individual case. The more vulnerable the dismissal, the greater your leverage:

• errors in the social selection criteria for operational dismissals,
• missing or flawed works council (Betriebsrat) consultation,
• formal errors (written form, power of attorney, authority to dismiss),
• applicable protection against dismissal under the KSchG or special protection against dismissal.

The 3-week deadline (§ 4 KSchG) forces a quick decision

The decision cannot wait: you must file an unfair dismissal claim within 3 weeks of receiving the written notice at the labour court (§ 4 KSchG). If you miss this deadline, the dismissal is deemed effective from the outset under § 7 KSchG, and with it, the leverage for a higher severance payment is also gone.

Practical consequence: if you only start weighing your options shortly before the deadline, you lose negotiating room. Check early whether a claim makes sense: the deadline runs from the day the notice is received, not the date printed on the letter. Our deadline calculator shows how many days you have left.

Litigation risk and costs, and how we take them off your hands

There's an honest downside to mention: the cost risk. Before the labour court, each side bears its own legal costs at first instance, even the winning side (§ 12a ArbGG). So there is no claim for cost reimbursement against the employer here. On top of that comes the general litigation risk: a judgment can also turn out unfavourably (in a settlement, the usual outcome, this risk is largely eliminated).

This is exactly where our model comes in: through our litigation funding, we take on the cost risk of the proceedings. Team Abfindung acts as litigation funder here, not as your law firm; legal representation is handled by our partner law firm. For you, it stays success-based, with no upfront cost risk.

Decision checklist: accept or sue?

Lean towards accepting if most of these apply to you:

• The offer is noticeably above the rule of thumb.
• The dismissal looks legally sound and formally clean.
• You have a new job lined up and want to close things out quickly.
• The benefit suspension period, reference letter and release from work are cleanly settled.

Lean towards suing if this applies:

• There's no offer, or only one at the level of the rule of thumb.
• The dismissal has weak points (social selection criteria, consultation, form, dismissal protection).
• You're not under time pressure from a new job.
• You want to make the most of the financial outcome, with the litigation funding carrying the cost risk.

Not sure which column your case falls into? That's exactly what we review at no upfront cost, paid only on success, before the 3-week deadline runs out.