Severance Pay in Germany: Who Gets It, How Much, and the Deadlines That Matter

Who gets severance pay in Germany?

Direct answer: Severance pay in Germany is not automatic. It typically comes from one of four routes: a negotiated exit, a court settlement after an unfair dismissal claim, an employer offer under Section 1a of the Protection Against Dismissal Act (KSchG), or a social plan (Sozialplan) in larger restructurings.

The key to all of them is leverage. If the Protection Against Dismissal Act (Kündigungsschutzgesetz, KSchG) applies to you, your employer needs a legally recognised ground to dismiss you, and German labour courts check this strictly. That litigation risk is what employers pay severance to avoid. The KSchG generally applies when your company has more than 10 employees and you have been employed for more than 6 months (the qualifying period, Wartezeit).

A direct statutory entitlement exists in one common case: with a termination for operational reasons (betriebsbedingte Kündigung), your employer can offer severance of 0.5 monthly earnings per year of service in the dismissal letter itself, on the condition that you do not file a claim (Section 1a KSchG). Even then, that offer is a floor to evaluate, not necessarily the best achievable outcome.

Special dismissal protection applies to some groups, for example during pregnancy and parental leave, for works council members, and for employees with a recognised severe disability. Dismissals in these cases are often invalid, which strengthens your position further. Our page on dismissal protection has more detail.

How much severance pay? The 0.5 monthly salaries convention

Direct answer: The common convention in Germany is 0.5 gross monthly salaries per year of service. It mirrors the statutory formula of Section 1a KSchG (0.5 monthly earnings per year of employment) and is the reference point in most negotiations and court settlements.

0.5 x years of service x gross monthly salary

Example: 6 years of service (Betriebszugehörigkeit) at €5,000 gross per month gives a baseline of €15,000. Important: this is not a legal entitlement in most cases, and it is not a ceiling either. Depending on how weak the dismissal is, how long you have been with the company, and how much litigation risk the employer faces, negotiated results are often higher. Where a labour court itself sets severance after dissolving an employment relationship, the law caps it at 12 to 18 monthly earnings depending on age and length of service (Section 10 KSchG).

The 3-week deadline: your single most important lever

Direct answer: After receiving a written dismissal, you have 3 weeks to file an unfair dismissal claim (Kündigungsschutzklage) with the labour court (Section 4 KSchG). Miss it, and the dismissal is generally deemed legally valid, even if it was flawed.

This deadline is why acting fast matters more than anything else in a German dismissal case. The unfair dismissal claim is the instrument that creates settlement pressure: most claims do not end in reinstatement but in a negotiated severance payment. Once the 3 weeks have passed, that pressure disappears and with it, in most cases, the severance. The deadline runs from the day the written notice reaches you (Zugang), not from your last day of work.

If you are unsure whether your deadline is still open, check now rather than later: the free check calculates your personal deadline from your dismissal date.

Severance vs. termination agreement (Aufhebungsvertrag)

Direct answer: A termination agreement (Aufhebungsvertrag) ends your employment by mutual consent, usually in exchange for a severance payment. Do not sign one on the spot: it is binding once signed, and it can cost you unemployment benefits.

The biggest trap is the benefit suspension period (Sperrzeit): because you are seen as having agreed to end your job, the employment agency can suspend your unemployment benefit (ALG I) for up to 12 weeks (Section 159 SGB III). Whether a Sperrzeit applies depends on the circumstances and the wording of the agreement, for example whether a dismissal for operational reasons was genuinely imminent and the severance stays within the usual range. This is exactly the kind of detail a specialist should check before you sign.

There is no statutory right to think it over and no cooling-off period. A common employer tactic is time pressure ("sign today"). You are allowed to take the document home and have it reviewed. More on termination agreements and the benefit suspension period on our service pages.

Tax on severance pay: the one-fifth rule (Fünftelregelung)

Direct answer: Severance pay in Germany is subject to income tax, but genuine severance payments are free of social security contributions (no pension, health, nursing or unemployment insurance deductions). The one-fifth rule (Fünftelregelung, Section 34 EStG) can soften the progressive tax impact by treating the payment as if it were spread over five years.

Important change since 2025: employers no longer apply the one-fifth rule directly in payroll (this was abolished as of January 2025). Your severance is first taxed in full via payroll, and you claim the one-fifth rule through your income tax return (Steuererklärung), typically resulting in a refund. Filing a return in the year you receive a severance payment is therefore usually worthwhile. The rule helps most when the severance is large relative to your yearly income; a tax advisor can quantify your case.

How Team Abfindung works, and what it costs

Team Abfindung is not a law firm but a litigation funder: specialised employment lawyers of our partner law firm MK Law review and negotiate your case, we carry the costs and the risk. The process works in English, from the first check to the negotiation.

• Purely success-based: if we succeed, we receive 29% of the severance payment (incl. VAT), capped at €6,000.
• If we do not succeed, you pay nothing. We cover lawyer and court costs.
• With legal expenses insurance, you pay €0 with us: your insurer covers the costs.

The full model, with a worked example, is on our pricing page; who we are is on the about page. You can also browse all services or start directly:

Severance pay in Germany: frequently asked questions