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Severance pay
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A one-off payment from the employer when you are dismissed. Not a legal obligation in Germany and often negotiated. Rule of thumb: 0.5 gross monthly salaries per year of service.
A severance payment (Abfindung) is a one-off payment from the employer to the employee when the employment ends. In Germany there is no statutory entitlement – severance payments are negotiated.
Rule of thumb: 0.5 gross monthly salaries per year of employment. With 10 years and €4,000 gross: €20,000. In practice the amount can vary greatly depending on your negotiating position and the size of the company.
Tax: severance payments are taxed under the "one-fifth rule" (Fünftelregelung) – the tax burden is reduced by calculating the severance as if spread over 5 years (even if it is paid at once).
Did you know? In Germany there is NO general legal right to severance pay on dismissal – except for redundancy dismissals where you waive your right to sue. Rule of thumb: 0.5 gross monthly salaries per year of service.
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