Dismissal for personal reasons: rights & severance pay

What is a dismissal for personal reasons?

A dismissal for personal reasons is an ordinary dismissal that your employer bases on grounds lying in your person (§ 1 (2) KSchG). This covers cases where you can no longer permanently perform the contractually owed work, or only to a limited extent: due to a long or frequent illness, because your driving licence was withdrawn as a professional driver, because your work permit is expiring, or because your capacity to perform has permanently declined significantly.

The decisive point: you are not accused of any misconduct. No fault on your part is required, and it is not about punishing you either. Dismissal for personal reasons is one of three types of dismissal recognised by the Protection Against Dismissal Act: alongside it there is conduct-related dismissal (an accusation of controllable misconduct) and dismissal for operational reasons (loss of the position due to business reasons, more on that under dismissal for operational reasons and severance pay). Getting the classification right matters, because each type of dismissal has its own requirements, and employers often blur the categories, which makes the dismissal open to challenge.

The strict requirements this page is about only apply, however, if the Protection Against Dismissal Act applies at all. That is the case if your employment has lasted longer than 6 months and the business generally employs more than 10 employees. In smaller businesses, your employer does not need to pass the review described below, but you are not entirely without protection there either. What applies instead is explained under Protection against dismissal in small businesses. Special rules also apply where there is special protection against dismissal, for example during pregnancy or parental leave.

The good news up front: dismissals for personal reasons are among the most error-prone dismissals there are. Your employer must pass a four-stage review developed by the case law of the Federal Labour Court, and in practice many dismissals fail at least one stage. That is exactly your chance: to keep your job, or to end the employment on significantly better terms.

The four stages: when is a dismissal for personal reasons valid?

If the Protection Against Dismissal Act applies, a dismissal for personal reasons is only socially justified if it passes the four-stage review that the Federal Labour Court has developed in its settled case law. If your employer fails even one stage, the dismissal is generally invalid.

1) Negative prognosis

At the time of the dismissal, there must be justified grounds to expect that you will not be able to perform the owed work, or not fully, in future either. What counts is the outlook: past absences or limitations alone are not enough, they are only an indication. With illness, for example, this means: if recovery can be expected within a foreseeable time, the negative prognosis is missing, and the dismissal is on shaky ground. The burden of presenting the facts initially lies with the employer, who must base the prognosis on objective facts.

2) Significant impairment of operational interests

The expected absences or limitations must significantly impair your employer's operational or economic interests. Typical arguments are disruptions to operations (for example constant reorganisation, burden on colleagues) or significant economic burdens (for example exceptionally high continued pay costs over years). Here too, your employer must present this concretely, blanket assertions are not enough.

3) No milder means (proportionality)

The dismissal must be the last resort. If there is a reasonable alternative that avoids the impairment, your employer must pursue it. The main options are:

• a role suited to your health limitations, that is, work that takes account of your health restrictions,
• a transfer to another vacant position, if necessary on amended terms (keyword dismissal with an offer of amended terms),
• reasonable retraining or further training that allows you to continue working.

In practice, this stage is one of the strongest points of attack: many employers do not check alternatives at all, or cannot prove that none existed.

4) Balancing of interests

Finally, the court weighs the interests of both sides in the individual case: your length of service, your age, maintenance obligations, the cause of the limitation (for example a workplace accident), and on the other side, the weight of the operational burden. Anyone who has worked for many years without complaint often has good arguments here. Only once the balance comes out in the employer's favour is the dismissal socially justified.

Regardless of the four stages, this also applies: where a works council exists, it must be consulted before every dismissal (§ 102 BetrVG). A dismissal without consultation is invalid, and errors in the consultation can also bring the dismissal down.

Check your negotiating position: Use our severance pay calculator to see in 2 minutes what severance pay is realistic as orientation in your case.

Dismissal due to illness: the most important sub-type

In practice, the by far most common dismissal for personal reasons is dismissal due to illness. Contrary to a common misconception, your employer may dismiss you during a period of incapacity for work, and even because of the illness itself, a doctor's note does not protect you from dismissal. The hurdles are especially high, though, and case law distinguishes several categories: frequent short-term illnesses, a long-lasting illness, permanent incapacity to work, and illness-related reduced performance. Each category has its own requirements for the prognosis and the impairment. You will find all details, categories and defence strategies in our detailed article on dismissal due to illness.

The BEM: the stumbling block for employers

The company reintegration process (BEM) under § 167 (2) SGB IX plays a central role: if you were unfit for work for a total of more than 6 weeks within 12 months, your employer must offer you a BEM. This procedure jointly clarifies how your incapacity for work can be overcome, further incapacity prevented, and your job preserved.

An omitted BEM does not, under case law, automatically make the dismissal invalid. However, it significantly increases the burden on your employer: they must then comprehensively demonstrate that even a BEM would not have revealed any milder means (for example a role suited to your health limitations). Employers often fail to do this in court. So check first: were you properly offered and given a BEM? If not, that is often one of the strongest levers against the dismissal, and therefore also for negotiating a severance payment.

Long-term sick and now dismissed: Calculate in 2 minutes what severance pay is realistic as orientation for your case.

Other typical cases of dismissal for personal reasons

Besides illness, there are other situations in which employers dismiss for personal reasons. The four-stage review always applies here too, and here too many dismissals fail on proportionality:

• Loss of driving licence: for professional drivers, couriers, or field staff whose job requires driving, withdrawal of the licence can be a personal ground for dismissal. But your employer must check whether a bridging solution is possible, for example a temporary transfer to another role, unpaid leave, or simply waiting it out if the suspension is short. The decisive factors are the duration of the withdrawal and the concrete employment options in the business.
• Missing work permit: if a residence permit including a work permit expires and no extension is foreseeable, continued employment can become legally impossible. Here too, the prognosis matters: if the extension is only a matter of time, dismissal is often disproportionate.
• Longer prison sentence: if an employee has to serve a multi-year prison sentence, this can justify a dismissal for personal reasons, because they can permanently no longer perform the work. With short prison terms or open custody, the balancing often looks different. The details are highly dependent on the individual case.
• Sustained drop in performance: significantly and permanently below-average performance can be relevant for personal reasons if it is based on declining capability (not on a lack of willingness, which would be a matter for conduct-related dismissal). The requirements for proof are high: your employer must present the underperformance concretely, a mere "too slow" is not enough.

What all these cases have in common: your employer bears the burden of presenting and proving the facts on which the dismissal is based. Where prognoses, reasonableness, or alternatives come into play, the outcome depends heavily on the individual case, and precisely this uncertainty is your capital in negotiations.

No warning notice required: the difference from conduct-related dismissal

One point surprises many people affected: before a dismissal for personal reasons, your employer generally does not need to issue a warning notice. That is the key difference from conduct-related dismissal. A warning notice (Abmahnung) has a warning function: it is meant to prompt you to change controllable misconduct. With personal grounds, this warning falls flat, because an illness, a withdrawn driving licence, or an expiring work permit cannot be switched off by good will.

This has two implications for you. First: you generally cannot deduce a formal defect from the absence of a warning notice in the case of a dismissal for personal reasons. Second, and more importantly: check exactly what your employer is actually basing the dismissal on. If, in truth, they accuse you of behaviour (for example late sick notes or lack of effort), the stricter rules of conduct-related dismissal apply, and there a prior warning notice is generally required. This distinction is a frequent weak point: if your employer chooses the wrong category, or blurs the grounds, the dismissal is often open to challenge.

Other protective mechanisms take the place of the warning notice in a dismissal for personal reasons: the negative prognosis, the search for a milder means, and in the case of illness, the BEM. So your employer does not need to warn you, but they must check and prove considerably more before they may dismiss you.

The 3-week deadline for filing a claim: your most important deadline

No matter how flawed the dismissal is: you can generally only fight it within 3 weeks of receiving the written dismissal (§ 4 KSchG). Your unfair dismissal claim must reach the labour court within this deadline. If the deadline passes, the dismissal is generally treated under § 7 KSchG as valid from the outset, even if the negative prognosis was missing, the BEM was omitted, or the works council was not consulted.

The deadline starts when you receive the dismissal, not the date stated in the letter. Our deadline calculator for unfair dismissal claims shows you exactly how many days you have left. And be aware of the second clock running in parallel: the notice period, until whose expiry your salary continues to run. Both deadlines hinge on the same date of receipt, so note it down as precisely as possible.

Important to know: filing an unfair dismissal claim does not mean you want to go back to the business at all costs. In practice it is above all the vehicle for negotiating the terms of ending the employment: severance pay, end date, reference letter, release from work, and payment in lieu of holiday. Without a timely claim, you lose this lever entirely.

The clock is already running: Find out now in 2 minutes what severance pay is realistically on the table as orientation in your case.

Severance pay after dismissal for personal reasons: your chances

There is generally no automatic statutory entitlement to severance pay upon dismissal in the case of a dismissal for personal reasons either. Nevertheless, many proceedings end with a severance payment, and the reason lies in how error-prone this type of dismissal is: negative prognosis, significant impairment, milder means, BEM, works council consultation, a dismissal can fail at any of these points. If your employer loses the case, they must continue to employ you and generally pay the wages missed in the meantime. Employers often buy off this risk through a settlement: the employment ends by mutual agreement, and a severance payment is made in return.

As orientation for the amount, the rule of thumb is: 0.5 gross monthly salaries per year of employment. This is not a statutory entitlement but a negotiating anchor that is, among other things, guided by § 1a KSchG. The weaker the dismissal, the more is often achievable, the stronger it is, the more likely the result falls below this. What influences the amount in detail is explained under Severance pay: amount.

Worked example: Sabine fights her dismissal due to illness

Example: Sabine, 12 years with the company, €3,800 gross per month. After two longer illnesses, she receives a dismissal for personal reasons due to illness. She was never offered a BEM, and her employer never checked whether a role suited to her health limitations was available. Sabine files an unfair dismissal claim in time. At the conciliation hearing, it becomes clear that the dismissal is barely tenable due to the missing BEM and the unchecked alternatives. Result of the settlement: the employment ends at the expiry of the ordinary notice period (at 12 years of service: 5 months to the end of the month), and a severance payment is made based on the rule of thumb.

These figures are an example, not a promise, but they show the mechanics: salary until the regular expiry of the notice period plus a negotiated severance payment. You can see how the result changes with length of service, for example, under Severance pay after 10 years. And keep tax in mind: the one-fifth rule (Fünftelregelung) may apply to severance payments, more on that under Severance pay and tax.

A word on the termination agreement (Aufhebungsvertrag): some employers offer a mutually agreed ending directly instead of a dismissal. That can make sense, but it carries pitfalls, especially regarding unemployment benefit. Do not sign anything before the terms and the social security consequences have been checked, more on that under Termination agreement and severance pay.

What could be realistic in your case: Work it out in 2 minutes with our severance pay calculator.

Benefit suspension period for unemployment benefit: usually none for dismissal for personal reasons

A common worry after a dismissal: will I even get unemployment benefit, or does a benefit suspension period (Sperrzeit) threaten? With a dismissal for personal reasons, the situation is comparatively favourable. A benefit suspension period for giving up employment requires, under § 159 (1) sentence 2 no. 1 SGB III, among other things, that you ended the employment yourself, or caused the dismissal through behaviour in breach of your employment contract. That is exactly what is missing with personal grounds: an illness or declining capability is not behaviour in breach of contract. A dismissal for personal reasons therefore generally does not trigger a benefit suspension period.

Two caveats belong to an honest answer, though. First, the employment agency always examines the individual case: if the "personal reasons" label actually conceals an accusation of behaviour (for example a self-inflicted loss of licence due to drink driving), the assessment can turn out differently. Second, a termination agreement has its own rules: if you end your employment by mutual agreement without good reason, you risk a benefit suspension period of generally 12 weeks. You will find all details, exceptions and options for structuring this under Benefit suspension period for unemployment benefit.

Regardless of the benefit suspension question, this always applies: register as a jobseeker under § 38 SGB III at the latest 3 months before the employment ends, or within 3 days of learning of the end date if the notice is shorter. This applies even if you file a claim against the dismissal. You can read how a severance payment affects unemployment benefit under Severance pay and unemployment benefit.

What you should do now

If you have received a dismissal for personal reasons, the right order of steps matters. You will find the detailed guide under Received a dismissal: what to do? Here is the short version for your case:

1. Do not sign anything. No termination agreement, no acknowledgement of receipt with additions, no waiver of your right to claim. Signatures made under pressure are hard to reverse.
2. Note the date of receipt. The 3-week deadline for filing a claim and the notice period both start running from receipt of the written dismissal. Keep the letter and the envelope.
3. Gather your documents. Employment contract, payslips, and if illness is the reason: evidence of absences and above all everything relating to the BEM (was it offered, when, with what outcome?). Also note whether there are vacant positions or alternatives in the business that your employer should have checked.
4. Register as a jobseeker. Within the deadlines under § 38 SGB III, so you do not lose out on unemployment benefit.
5. Have the dismissal checked. Whether the prognosis, proportionality, BEM, and works council consultation are correct can usually be assessed quickly. This determines your strategy: keep your job, or negotiate an ending on good terms.
6. Keep to the 3-week deadline. Your unfair dismissal claim must reach the labour court within 3 weeks of receipt. Without a claim, you have no negotiating lever.

How can we help you?

You have received a dismissal for personal reasons and want to know whether it holds up, and what severance pay is realistic? That is exactly what we are here for: together with lawyers specialising in employment law, we check your case, from the prognosis through the BEM to the works council consultation, and negotiate the best possible outcome for you.

We bear the risk: purely success-based, with no upfront cost. Start with an initial assessment using our severance pay calculator, it only takes 2 minutes.