Severance Payments: German Severance Amounts Calculator - Calculate Now
Table of Contents (Tutorial)
What types of severance pay are there?
How do I calculate the severance pay options?
How do I get my severance pay?
What should I look out for when I receive severance pay?
What severance pay am I personally entitled to?
What do I do after the severance payment?
What legal options do I have if the severance pay is not right from my point of view?
What career options do I have after severance pay?
Are there users who already have experience with this?
Calculating severance pay correctly - definition, calculation methods and legal options
Severance pay is a one-time monetary payment from the employer to which the potential employee is entitled after termination of his or her employment.
For the termination itself, a variety of conditions must be met. Initially, there is no fundamental entitlement to payment of severance pay within the Federal Republic of Germany.
There are also different types of severance pay to consider. The following article is therefore intended to provide information on all types of severance pay, detailed calculation models, legal options for receiving severance pay and the professional career after receiving severance pay.
What types of severance pay are there?
The legislator distinguishes between three different types of severance pay: individually agreed severance pay according to §1a of the German Dismissal Protection Act (Kündigungsschutzgesetz, or KSChG for short), severance pay according to §10 of the German Dismissal Protection Act ( KSchG ), severance pay according to a social plan and so-called compensation for disadvantages.
An individual severance payment is a severance payment according to §1a KSchG. For this type of severance pay, no contract is required and therefore no court settlement as well as no termination agreement and also no settlement agreement.
In order to receive an individual severance payment, the potential employee must have worked in the company for at least 6 months and the company must have at least 10 employees. In addition, the employer must have previously given notice of termination in due time.
The termination must also be based on urgent operational requirements - the employee must then allow a subsequent period for taking legal action to elapse.
Severance pay in accordance with Section 10 of the German Unfair Dismissals Act (KSchG ) is a legally stipulated severance payment that must be paid to the employee following termination on time for operational reasons.
In contrast to individually agreed severance pay, the employee refers here to §10 KschG, which specifies the exact amount of severance pay to which he or she is entitled. The severance payment according to §10 KschG is based here on the length of the existing employment relationship, the age of the employee and the amount of the last net earnings.
A social compensation plan is mainly used in the case of mass redundancies. The respective social plan is agreed here between the employer and any works council. The aim of a social compensation plan is to compensate for the economic disadvantages caused by redundancies.
In addition to purely monetary severance payments, this can also include subsidies or relocation assistance. The legal principles for social plan compensation are derived from Section 112 (5) of the Works Constitution Act (or BetrVG for short).
Last but not least, compensation for disadvantages is a special form of social compensation plan. This has its legal basis in §113 BetrVG.
This is always used if a severance payment has been agreed in accordance with the social compensation plan, but the employer does not fully comply with this agreement or does not comply at all. In this case, the employee then actually has a claim for payment against the employer.
How do I calculate the severance payment depending on the type of severance payment?
The individual severance payment is calculated according to the following calculation method:
Amount of individual severance payment = 0.5 x last gross monthly salary x length of service.
Employee was employed for 10 years in a company with 50 employees and last received 4,000 euros gross salary per month. His severance pay in this case example would therefore be exactly 20,000 euros (4,000 euros gross salary x 0.5 x 10 years).
The calculation of the severance payment according to §10 KSChG is based on the following model:
A severance payment under §10 may not exceed an amount equal to 12 months ' salary, but takes into account the individual's age and other aspects of the termination as well as characteristics of the company.
Exceptions: For example, if the employee has worked for the company for more than 15 years and is more than 50 years old, 15 months' salary must be set as severance pay.
If the employee is more than 55 years old and has worked for the company for more than 20 years, up to 18 months ' salary can be paid as severance pay. However, corresponding regulations do not apply insofar as the person applying to the court (employee) has already reached retirement age.
A 55-year-old employee with 20 years' service is dismissed for operational reasons. He last earned a gross monthly salary of 5,000 euros in the company. His severance payment in this case would be 90,000 euros (5,000 euros gross salary x 18 months x 20 years).
The social plan severance payment is calculated according to similar criteria as the individual severance payment as well as the severance payment according to §10 KSchG. This type of severance payment also depends on the following key data:
- the age of the employee
- the length of service
- the position of the employee
- the degree of disability of the employee
- potential maintenance obligations of the employee towards children of ex-spouses
- the company-internal severance payment formula according to the works council
- a judicial points procedure
The calculation of the disadvantage compensation is realized according to the social plan compensation â€" however, an individual factor is added.
According to the social compensation plan, all employees in the company who were employed there for more than 10 years and most recently received a gross salary of 3,000 euros per month were awarded a severance payment of 15,000 euros. However, some employees are hit particularly hard by the dismissal because they are severely disabled.
Disadvantage compensation = social plan severance pay x 1.5 (individual factor) = 22,500 euros
The practical online severance calculator now makes it easy to calculate the amount depending on the type of severance payment. All you have to do is enter the relevant key data in the free and non-binding severance calculator, select the severance type and start the calculation. With the help of this useful tool, you can quickly get a preliminary overview of the monetary dimensions of the expected severance payment.
How do I get my severance pay?
Although there is no fundamental right to payment of a severance package, the potential employee can sue for it under certain conditions or obtain it in another way - for example, by reaching an out-of-court settlement with the employer.
In the following, we will show you in detail how you, as a potential employee, can receive your severance payment.
Step 1: Meet the requirements
In order to receive a severance payment, the following requirements must first be met:
- Employment relationship has existed for at least 6 months (without interruption)
- a notice of termination must have been given by the employer (this must be of a business-related nature)
- Employee must allow a three-week period for filing an action for protection against dismissal to elapse
- by filing an action for protection against dismissal on the part of the employee (this action must raise the dismissal as unlawful)
- if there are grounds for termination without notice on the part of the employee (for example, defamatory allegations on the part of the employer, unreasonableness of the work, etc.)
Step 2: Sue or negotiate
In order to initiate a severance payment, the first step is to talk to the employer. During this discussion, both sides can agree on the amount of an individual severance payment.
If this approach is unsuccessful and the employer has already given notice, the only option is to go to the labor court - in the form of an action for protection against dismissal. This offers two outcomes:
- Court declares termination null and void and employment relationship continues to exist
- Court declares termination lawful and requires employer to make severance payment
Step 3: Collect severance pay
If the claim against the former employer is successful and a settlement could be reached either out of court or in court, the former employer is obligated to pay the severance pay.
This is treated as a wage or salary payment and has been fully taxable since 2006 - however, the severance payment is exempt from social security contributions.
You can also negotiate the payment date of your severance pay with your employer. It may be possible to organize the payment date in a tax-optimized way for you. You can specify exactly when the severance payment will actually be paid out in the severance agreement.
What else should I look out for in terms of severance pay?
Anyone who decides to claim a severance payment (i.e. accepts it) automatically forfeits any subsequent right to take legal action against dismissal - if this is nevertheless carried out, the employee cannot continue his or her old employment relationship, but will receive a severance payment.
Furthermore, care should be taken to ensure that the date of payment is precisely fixed. This is because the time at which the severance payment is received can also be organized in a tax-optimized manner for the employee.
If, for example, the severance payment is paid out in the year of dismissal itself, an unfavorable tax burden on the severance payment paid out can be expected under certain circumstances, as this greatly increases the employee's original income.
By termination or settlement agreement, employees can, for example, postpone the payment date to a later calendar year. In this way, the employee is already considered to be registered as unemployed by then and only has to pay tax on the severance pay received at a significantly lower rate.
If a new job is in prospect during the period of an action for protection against dismissal or severance payment, its premature acceptance should definitely be considered. In the eyes of the judge, this can be interpreted to mean that the potential employee has no actual interest in rescinding the termination or receiving a severance payment as compensation for disadvantages - nor does the judge see the need to stipulate this here, since the employee already has a new job in prospect.
What severance pay am I personally entitled to?
In order to find out whether you, as a potential employee, are entitled to a severance payment in an individual amount, the conditions must first be examined (see above). If these apply, the calculation of the expected severance payment can be made as follows:
Severance payment = last monthly gross salary x 0.5 x number of years of service.
The former formula applies up to a maximum of 12 months' salary. Furthermore, according to §10 KSchG: If you are over 50 years old and have been with the company for at least 15 years, you can claim a maximum of 15 monthly salaries, or a maximum of 18 monthly salaries if you are over 55 years old and have been with the company for 20 years.
In order to significantly influence the amount of severance pay to which you are personally entitled, you should also implement the following things:
- Usenegotiation skills with your supervisor (severance payments are usually individual and depend heavily on successful negotiation).
- Uselegal advice from a lawyer (this will clarify the amount of severance pay to be expected and how to positively influence it)
- An action for protection against dismissal can, under certain circumstances, bring about the actual amount of severance pay to which the employee is entitled.
- Use of dismissal protection factors (e.g. special dismissal protection for pregnant women, severely disabled persons, trainees and employees on parental leave or works council members)
- other factors (position in the company: Executives often receive significantly more severance pay, individual maintenance obligations, individual opportunities on the labor market, economic situation, size of the company and strength of the industry).
What do I do after the severance payment?
If the severance payment has been declared legal by the legislator and the former employee has been ordered to pay, he or she must also fulfill the payment obligation. Since the severance payment and the former termination have already resulted in a termination of the employment relationship, you are then no longer a member of the company in question.
After the severance payment, you as a potential employee will have to register as a job seeker accordingly or you can go your separate ways - for example, in the form of early retirement or setting up your own business. Consequently, you no longer have to fulfill any obligations to your old employer.
If, in addition, the employment relationship has been terminated by court order in the course of an extraordinary termination, the entitlement to unemployment benefits is suspended until the deadline for the ordinary termination - in other words: from the date of the termination you have no entitlement to unemployment benefits until the end of the statutory notice period.
Of course, you are free to start looking for a job in the regular way after receiving a severance payment or to accept a job offer you have already found. Many employees who receive severance pay often use the large amount of money and the time available at short notice for an extended vacation or time off.
Possibilities for subsequent claims in terms of severance pay
If no agreement can be reached with the employer on the subject of individual severance pay, the route can and should be via the labor court in the context of an action for protection against dismissal.
For this, it is necessary that you first seek legal assistance from a specialist attorney for employment law. He or she will inform you about all further steps regarding the action for protection against dismissal and the severance payment.
If the former employer does not comply with the agreed severance payment (either as part of a court settlement or out-of-court settlement), this can and should also be reported to the competent labor court. In individual cases, a compensation payment can even be demanded from the former employer in this way.
This is particularly possible if the former employer has concluded a termination agreement with you and the severance payment specified therein is not sufficiently met or not met at all. In this case, you can either withdraw from the termination agreement or sue for the severance payment to which you are entitled in court.
Career opportunities after severance pay
After you have received a severance payment, all career paths are still open to you. Depending on what age you are as a potential employee, the following paths can be taken by you after a severance payment:
- You look for a new job in the same field or retrain for another job
- You take a longer sabbatical
- You take the plunge into self-employment or entrepreneurship
- You are taking early retirement or retiring
Since your former employer must keep a severance payment obtained out of court or through an action for unfair dismissal secret - after all, information about it falls under the Data Protection Act - a severance payment does not present you with any obstacles in the further course of your career.
You can therefore easily take up an equivalent or similar job in the same industry or in another industry without having to fear that the severance payment you have made will have a negative impact on your chances of success.
Likewise, the time after termination can be used to reorient yourself professionally and to pursue new avenues. Here, of course, a potential course of study, further education or additional training can also be considered.
In any case, a severance payment should not be viewed as a career setback. Life goes on and despite a severance payment or an action for protection against dismissal, all avenues are still open to you!
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