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The last step: Anyone who has to leave a company should know their rights
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Robijn Page / Westend61 / imago images
Commerzbank, Thyssenkrupp, Hennes & Mauritz - they have all announced that they will be cutting jobs.
And these are just the better-known names: Many companies are currently offering programs to let employees go.
Because in most cases employees cannot simply be shown outside the door.
With severance payments and early retirement programs, the companies want to sweeten their employees' farewell, encourage them to voluntarily resign - and thus reduce staff in a socially acceptable manner and protect themselves from lengthy and expensive legal disputes.
Most employees first ask themselves a lot of questions: How do I know whether a termination is worthwhile for me?
Am I always entitled to a severance payment if my job is cut - and how much should it be?
Should I always accept the severance payment offer?
A specialist lawyer for labor law, a tax advisor and the German Accident Insurance give tips on how employees should behave in the event of a problem.
Am I entitled to a severance payment?
No, there is no general entitlement to severance pay after termination.
But there are of course exceptions to this rule: If the employee and employer agree on severance pay in the event of termination when signing the employment contract, it will also be due.
There are also redundancies for operational reasons, for which a severance payment is required by law.
So although employees are not entitled to severance pay per se, in practice some companies choose to offer their employees a severance payment.
In return, the employee declares his or her willingness to forego an action for protection against dismissal.
The employer, in turn, benefits from this: a termination agreement promises legal security.
If, on the other hand, an employee files an action for protection against dismissal before the labor court, it can be expensive for the other party: If the court comes to the conclusion that the dismissal is ineffective, the employer must pay the full remuneration since the end of the notice period and continue the employee employ - if he wants to.
How this so-called late acceptance wage is calculated can be read, among other things, in the judgment of the Trier Labor Court (ArbG Trier) of December 3, 2010 (Az 3 Ca 507/10).
According to this judgment, the employer had to pay the wages plus interest at a rate of five percentage points above the base rate - a variable interest rate that is used to calculate default interest.
In the specific case, that was 3305.40 euros.
By the way: If after reading the judgment you think that lawyers are basically uttering dry sentences, we can recommend the judgment of the Detmold Labor Court of August 23, 2007 (3 Ca 842/07).
In the rather piquant matter (masturbation on duty) the court insisted on writing the entire judgment in rhyme form - worth reading!
But back to the actual topic.
A severance payment offer has other advantages for employers: You can part with certain employees without social selection.
The social selection states the following: Assuming that the employer only wants to fire a few of a group of comparable employees, then he must take certain criteria into account when making his selection.
Such selection criteria, which are laid down in the Dismissal Protection Act, can be, for example, the age of the employee or maintenance obligations.
However, if an employee agrees to a severance payment offer, the employer can terminate the contract without considering these criteria.
In this way, he can also part with employees who would be difficult to terminate due to their higher age or long service with the company, for example.
What is the average severance payment?
The amount of the severance payment depends on various factors.
»It is always important to keep the statutory standard severance pay in the back of your mind.
Although this only comes into effect in court in exceptional cases, it forms the lower limit in legal practice when evaluating a severance payment offer.
It is 0.5 gross monthly salaries per year of service, ”says Völpel.
Most of the time, the severance pay ranges between half a month and a full month's gross salary per year of employment.
If you cancel during the year, you usually round up from six months to the whole year.
However, there is more to it than that.
Employers who urgently want to part with employees are often willing to pay more.
But that also depends on the individual case and the negotiating skills of the respective lawyer or employee.
The age of the employee may play a role in determining the severance payment.
Because older employees will have a harder time finding a new employer quickly.
With a higher severance payment requirement, the employer wants to make it easier for them to decide whether to agree to the termination agreement.
In addition, the gross monthly salary is not the same as the gross monthly salary.
Some employers only use the actual salary as a basis, while others also use variable salary components such as a company pension or company car as a basis for calculation.
But even these are not all factors that can influence the amount of the severance payment offer:
"The industry, the size of the company and the employer's economic situation are often decisive," explains Völpel.
"In addition, and above all, the respective chances of success of a possible dismissal protection lawsuit will have to be included." If the employer suspects that the labor court will doubt the legality of the dismissal, the chances of a high severance payment would be better.
Because - this is also important to know - employees cannot sue for severance pay as such before the labor court.
You can only bring an action for protection against dismissal, in which the legality of the dismissal is to be checked by the court.
Real assets are rarely involved, as is the case with the 4,700 Nokia employees from Beijing.
When the factory they worked at was bought by Microsoft in 2014, the company offered them a Nokia Lumia 630 if they would voluntarily take their hats off.
Do other regulations apply to managers?
No - as long as they did not have a position as an organ, such as the managing director of a GmbH, says Matthis Völpel, lawyer for labor law.
Although there are other regulations for executive employees with regard to protection against dismissal, in practice this hardly matters.
I have received a severance payment offer: How should I behave?
Here the lawyer advises not to rush anything in the first place.
»Unfortunately there are always bosses who try to take the employee off guard.
According to the motto: Sign right now or we will withdraw the offer and you will get off worse. "
Workers shouldn't let this put them under pressure.
Contracts made this way can be challenged, but workers save a lot of time and hassle if they don't sign immediately, says Völpel.
Should I now accept a severance payment offer?
It is quite possible that a severance payment offer in the current situation is an indication that the employer is not doing too well economically.
If the employee agrees to the severance payment offer - usually coupled with a termination agreement - the employment relationship is terminated and the employee and employer will henceforth go their separate ways.
This is usually positive for employers.
However, it is questionable whether it is worthwhile for all employees to immediately agree to the first severance offer.
Because the further economic development is difficult to estimate.
Völpel notes, however, »that corona-related layoffs are threatened at the moment and in the foreseeable future.
Whoever accesses it first may receive a higher severance payment compared to subsequent employees from the same company «.
However - as is so often the case - the individual case decides.
Because employees who take legal action against the dismissal in court could possibly negotiate an even higher severance payment than colleagues who immediately agreed to the severance payment offer.
On the other hand, waiting too long could be risky.
Namely, if the employee is employed in an industry that generally has no bright future prospects: "In the event of bankruptcy, the employee could in the worst case possibly lose his job without any severance payments," warns Völpel.
In addition: If both sides agree on a termination agreement, there is no notice period.
This is an advantage if the employee already has the next job offer in his pocket.
Because then he can immediately start working with the next employer.
Speaking of the next employer: Employees are well advised not only to agree with their employer on the amount of the severance pay, but also on other details, such as a job reference, which could be helpful for their future career.
Should I negotiate the severance offer myself?
In companies that have a works council, employees theoretically have the option of including this in the negotiation of the severance payment.
However, it is generally not possible to say whether this makes sense in every situation.
However, many call in a specialized lawyer, who often gets more out of it than you do yourself. The costs for this are borne by the employee - or by his or her legal expenses insurance.
For the sake of completeness, however, it should be noted that lawyers also make mistakes in severance negotiations.
A few years ago the case of Gerlinde W. caused a sensation.
She was fired by her employer, Dienes GmbH & Co. KG, but quickly agreed on a severance payment with him.
A lawyer commissioned by her should record the agreement of both sides in writing.
The problem: he exchanged plaintiff and defendant in his pleading.
As a result, Gerlinde W. not only received no severance payments, but should now pay her former employer a severance payment - more than 17,000 euros.
The managing director of Dienes, Mr Bernd Supe-Dienes, said he wanted the lawyer to clear up his mistake with his insurance company and insisted on the payment of the sum.
However, he did not have much success with it: The company ultimately had to pay the entire severance payment to the former employee - and not the other way around.
What happens to the company car, job ticket and other pecuniary benefits?
How the company car, job ticket and other discounts are dealt with can also be negotiated individually by the two contracting parties.
In this context, Völpel points out that »the employer basically has a right to surrender work equipment.
Since the employer pays for the company car and also regularly (at least partially) for the job ticket, these are usually issued at the end of the notice period «.
He therefore advises clarifying these points as part of the agreement in order to avoid later ambiguities or even disputes.
Is there always a termination agreement with the severance payment offer?
This is not always the case either, although the combination of termination agreement and severance pay is relatively common.
However, employers and employees also have other options for separating by mutual agreement.
"You can conclude a settlement agreement and agree on a severance payment within this framework," explains Völpel.
This will bring the employment relationship that has already ended in a legally secure form.
A settlement agreement - which, by the way, is also called a settlement agreement - is not a termination, the employment relationship has already been terminated for other reasons.
With the settlement agreement, only the modalities of the contract termination are recorded.
In addition, employers and employees can reach a court settlement.
"This is the safest form of termination, especially against the background of a possible blocking period by the Federal Employment Agency that must always be observed (especially in the case of settlement and termination agreements) with regard to the often subsequent receipt of unemployment benefit I," explains Völpel.
According to the highest court rulings of the Federal Labor Court (judgment of October 17, 2007, B 11a AL 51/06 R), a blocking period in a settlement is out of the question.
Background: The employee has no way of knowing how the process in the labor court will end.
If he therefore decides on an offer that gives him a financial cushion and at the same time shortens the legal dispute, this is understandable and is therefore usually not interpreted negatively.
Do I have to pay tax on the severance payment?
Yes, employees have to pay income tax on the severance payment.
However, there are no social contributions, i.e. the amounts for health, long-term care, pension and unemployment insurance.
However, employees can save money on taxation if they apply the so-called fifth rule.
The principle of the fifth rule can be summarized as follows: The compensation is not treated by the tax office as a high one-off payment.
Rather, the authority determines income tax as if the taxpayer had received the severance payment for five consecutive years.
In this way, the tax burden for the severance payment can be reduced.
Tax advisor Thomas Bauerfeind points out that the fifth rule is most effective if there is little or no other income in the tax year in question.
"This can be achieved if the taxpayer pushes the severance payment into the next year or uses tax-reducing expenses in such a way that hardly any taxable income remains."
Caution is advised here.
It has indeed happened before that the boss and employees have agreed to pay out the severance pay in the following year, but in the end things turned out very differently.
In a procedure before the Federal Labor Court (BAG), on which the judgment was issued on June 23, 2016 (8 AZR 757/14), the time of the severance payment was negotiated.
Because that should not be paid until the following January, while the employment relationship ended in December.
However, the employer did not adhere to it and paid the severance payment in December.
The result: the employee had to pay significantly higher taxes - and he wanted to get that back from his boss.
As a result, he filed a lawsuit for damages, which was rejected.
The reasoning of the court: Debtors are allowed to settle their debt before the due date.
Just like the former boss did.
In this case, too, the following applies: Every agreement must be included in the termination agreement.
Because with the correct formulation, it can be ruled out that the severance payment is paid out too early.
In this context, Bauerfeind gives the tip that the one-fifth rule can only take full effect if the severance payment is to be paid out as a single sum in one calendar year and is not already split over several years by the ex-employer.
Another requirement: The severance payment must be a compensation payment for the loss of the job.
What effects does the severance payment have on unemployment benefit I?
If the employee and employer agree on a termination agreement including severance pay, there is a risk of a blocking period for unemployment benefit I (ALG I).
Exception: The employee can prove that an important reason led to his signing the termination agreement.
One such important reason is, for example, that the employer would have been dismissed for operational reasons anyway.
However, if the employment agency comes to the conclusion that the employee is responsible for the fact that he has lost the job, things look different.
In this case, the ALG-I entitlement is suspended, i.e. a blocking period.
In concrete terms: the employee has to wait twelve weeks before receiving ALG I.
»This always comes to light when there is a termination agreement or self-resignation, as then in the eyes of the Federal Agency the unemployment (at least partially) was caused by itself.
The same is true if the notice period is not met, ”says labor law expert Völpel.
However, the severance payment is not offset against unemployment benefit I via the direct route.
Because a needs test does not take place with this service - unlike with ALG II (Hartz IV).
Severance pay, early retirement or partial retirement: What is worthwhile for me?
The employment relationship ends with the signature of the termination agreement.
This can be risky, especially for older workers.
For former employees who are a few years before retirement do not have it easy on the labor market.
One possible way out: partial retirement or early retirement.
If both parties agree to partial retirement instead of a termination agreement, the employment relationship will continue.
It is often advisable to split the partial retirement according to the scheme of active and passive phases, i.e. as a so-called block model.
In the active phase, the employee continues to work as usual, but receives less money.
Usually only half of the usual income, which the employer increases in part.
According to the Deutsche Rentenversicherung, the employer must "pay an additional amount of at least 20 percent of the partial retirement remuneration".
But that's not all: the employer also pays additional contributions to the statutory pension insurance.
"In contrast to the severance payment, which is not subject to contributions and therefore does not establish any pension entitlements in the statutory pension insurance, contributions to the pension insurance will continue to be paid in," states the Deutsche Rentenversicherung.
The advantage for the employee: he continues to pay only half of his contribution.
As a result, the employee in the pension insurance is treated as if he had not reduced his working hours by half, but only by ten to zero percent.
With a severance payment, these advantages do not apply.
If the employee receives ALG I following his employment relationship, the employment agency will continue to pay into the statutory pension insurance.
The calculation basis is only 80 percent of the previous wage - which means that the later pension will be lower.
The Deutsche Rentenversicherung points out, however, that former employees could voluntarily pay a certain amount into the statutory pension insurance after a severance payment.
However, the persons concerned should clarify individually whether this procedure is fundamentally worthwhile and "seek personal advice on the effects on pension and tax law".
What are the advantages of early retirement?
There is still the option of early retirement.
Colloquially, it means that employees retire early and accept reductions in their pension.
Early retirement is possible for employees from the age of 63 who can prove at least 35 years of contributions to the statutory pension insurance.
The size of the pension loss depends on the year of birth of the new pensioner.
"Who is 63 years old this year, has a pension reduction (discount) of 10.8 percent", so the German pension insurance.
This type of early retirement must be distinguished from "real" early retirement, in which early retirement benefits are paid.
Entitlement to early retirement benefits can arise as follows: The employer and employee agree that the employee will leave the company and not sign a new employment contract.
In return, the employer undertakes to pay the former employee early retirement benefit - up to the earliest possible start of retirement.
The advantage for the employee: "Those who receive this early retirement benefit are still subject to health, long-term care and pension insurance," according to the German pension insurance.
"The contributions to health, long-term care and pension insurance are paid half by the former employee and the employer." So even though the former employee no longer works, he still gains entitlements in the statutory pension insurance.
Since the early retirement benefit is usually not as high as the previous income, deductions in the pension must also be expected with this model.
However, there is a solution for this too.
The deductions can be offset by special payments.
