S as in Severance Pay

When do I qualify for severance pay?

Severance pay (Abfindung) is money paid to an employee as compensation for the loss of a job. It is often agreed upon in a termination agreement or court settlement.

Am I entitled to severance pay in the event of a termination of my contract?

Unlike in the labor law of many other countries, in Germany a termination by the employer does not automatically entitle the employee to a payment. In German labor law, the focus is always on the continuation of the employment relationship. However, employers and employees often agree to terminate the employment relationship in return for a lump sum if it is unclear whether the termination by the employer was lawful and this would have to be determined by a lengthy legal dispute.

What sum can I expect?

The amount paid out can be negotiated freely, but it is usually based on the last salary and the duration of the employment relationship. As a rule of thumb it is half a month’s salary per year of employment. The severance pay is taxable income, yet social security contributions are not due.


Please note: This is a very general overview on german labor law. If you need help in your particular case, please do not hestitate to contact me or book your appointment. I’m happy to help.