Many companies promise that they want to make their staff reductions “socially acceptable”. But what does that mean in concrete terms? We explain the basic rules.
Before we start optimizing our taxes, there is another question that is particularly interesting for employees whose companies are currently facing staff cuts: How much severance pay can they actually expect for their long-term loyalty to the company?
The Dismissal Protection Act provides for up to 15 monthly salaries as severance pay if dismissed employees are over 50 years old and have been with the company for 15 years. From the age of 55 and 20 years of service, they can receive up to 18 gross monthly salaries. In principle, however, there is only a legal entitlement to severance pay in exceptional cases, for example if it has been agreed in a social plan or collective agreement.
This also applies to dismissals for operational reasons: Here, you are entitled to compensation if the employer offers at least half a month’s salary per year of employment in the notice of termination in return for the employee not filing a lawsuit against the dismissal.
In practice, however, companies often offer financial compensation even without a legal obligation to do so. In this way, they want to avoid lengthy proceedings before the employment court and at least cushion the impact of job loss to some extent.
The amount of this compensation payment is generally freely negotiable. As a rule of thumb, employees can accept amounts between half and a full gross monthly salary per year of service as a basis for negotiation. Those who have performed particularly well over the years or have knowledge and insight into the company and its business that could also be sought after by competitors can perhaps get even more with the right arguments.
Source: Stern
