Severance Pay

When the employment contract is terminated, the employee can demand (under certain conditions) for a severance pay/ gratuity (Abfindung) from his employer. This should provide him with a financial compensation for the loss of the workplace.

If an employer pronounces a lawful termination, he does not have to pay any compensation unless it was previously agreed in the employment contract that in case of a regular termination of the employment relationship a severance pay has to be provided.

The amount of the compensation ultimately depends on the individual case. The rule settlement is half a month’s salary per year of work.

If one of the following situations is not applicable, the employee can nevertheless negotiate a severance payment:

  • The employer and the works council provide for a severance payment in the event of termination.
  • The employee makes a request to terminate the employment contract against payment of compensation and the Labor Court gives this order. The employee must justify the application.

The riskier is the move of the employer, as many possibilities has the employee to receive the severance pay.