Social plan severance pay: how much are you entitled to?

What is a social plan?

When a company restructures, closes a plant, or cuts a large number of jobs, works constitution law refers to this as a business change (Betriebsänderung). There is a dedicated instrument for its consequences: the social plan (Sozialplan).

A social plan is a works agreement between the employer and the works council (Betriebsrat) that regulates the compensation or easing of the economic disadvantages that employees suffer as a result of the business change (§ 112 BetrVG). The basis for this is § 111 BetrVG: in companies with generally more than 20 employees entitled to vote, the employer must inform the works council about planned business changes with significant disadvantages and consult with it. Business changes include, among other things, restricting or shutting down the business or significant parts of it, relocation, mergers, and fundamental changes to the organisation.

Important: a social plan requires a works council to exist. In workplaces without a works council, there is no social plan, and individual routes remain, such as an unfair dismissal claim.

Reconciliation of interests vs. social plan

When a business change takes place, the employer and works council negotiate two things that shouldn't be confused with one another:

• Reconciliation of interests (Interessenausgleich): this governs whether, when, and how the business change happens. It cannot be forced through: the employer must attempt to reach agreement with the works council (via the conciliation board if necessary), but cannot be compelled to agree to a specific content.
• Social plan (Sozialplan): this governs the financial compensation for the disadvantages. Unlike the reconciliation of interests, it can be forced through the conciliation board (Einigungsstelle) (§ 112 para. 4 BetrVG). If no agreement is reached, the conciliation board sets the social plan bindingly.

The distinction matters for you as an employee: the social plan is the instrument from which your severance pay follows.

How is social plan severance pay calculated?

There is no statutory calculation formula. The employer and works council (or the conciliation board) set it out in the social plan. In practice, two models have become established:

• Factor model: gross monthly salary × years of service × factor (often between 0.25 and 1.5). Example: €4,000 × 10 years × 0.75 = €30,000.
• Divisor/points model: (age × years of service × gross monthly salary) divided by a fixed divisor. This weights age more heavily.

Supplements are often added, for example for maintenance obligations (children), severe disability, or a higher age. At the same time, many social plans contain caps and base amounts. The conciliation board must weigh both the employees' disadvantages and the economic viability for the company (§ 112 para. 5 BetrVG). How much your severance pay comes to therefore depends on the specific social plan, and it is worth having the exact figures checked.

How much are you entitled to?

Unlike the classic severance pay after dismissal, for which there is usually no statutory claim, the situation is better with a social plan: the social plan is a works agreement and therefore takes effect directly and bindingly. If a social plan exists for your workplace and you fall within its scope, you have a direct, enforceable claim to the severance pay set out there.

But understood correctly: "how much are you entitled to" is not answered by a law with a fixed sum, but by the formula in your specific social plan. There is no general severance claim that applies to everyone; the claim is exactly as high as your workplace's social plan provides. That's why the first step is always to get hold of the social plan and plug in your personal figures.

Social plan, unfair dismissal claim, and your own negotiation

There's a widespread misconception: "I have a social plan, so I'm not allowed to bring a claim." The opposite is true. The social plan severance pay generally exists independently of whether you bring an unfair dismissal claim: it is an enforced minimum benefit and does not lapse simply because you push back.

An unfair dismissal claim often allows you to secure something extra in a court settlement, especially if the dismissal is challengeable (flawed social selection, procedural errors, works council consultation). But keep two things in mind:

• The 3-week deadline for the unfair dismissal claim (§ 4 KSchG) runs independently of the social plan: if you miss it, the dismissal is deemed effective.
• Voluntary extra benefits beyond the social plan (for example "sprinter" or "turbo" bonuses for leaving quickly) are often tied by the employer to a waiver of your right to claim. Whether this is worthwhile is a calculation to be made case by case.

Disadvantage compensation under § 113 BetrVG

There's a second, often overlooked lever: disadvantage compensation (Nachteilsausgleich) under § 113 BetrVG. It applies if the employer carries out the business change,

• without even attempting a reconciliation of interests with the works council, or
• by departing from an agreed reconciliation of interests without compelling reason.

In that case, the employees dismissed as a result can claim severance pay as disadvantage compensation. Its scope follows § 10 KSchG: up to 12 months' pay, or up to 15 or 18 months' pay for older employees with long service. The claim is brought before the labour court.

Disadvantage compensation can exist alongside social plan benefits, though some arrangements provide for offsetting. Because it is closely tied to the dismissal, you should act as a precaution within the 3-week deadline for the unfair dismissal claim and have your case checked.

Team Abfindung is a litigation funder and works with lawyers specialising in employment law. We check what you are entitled to from the social plan, a claim, and disadvantage compensation, fund your case, and carry the risk, purely success-based, at no upfront cost.