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Key takeaways
- You usually get severance pay of between half and one gross monthly salary per year of employment.
- You can expect severance pay if you worked for the employer for at least 6 months, the company has more than 10 full-time equivalent employees, and you are terminated for operational reasons.
- Companies offer severance pay to avoid wrongful termination lawsuits.
This is how you do it
- Start looking for a new job if you expect a dismissal soon.
- Get employment legal insurance to cover the legal costs. Legal insurance has waiting periods of 3 to 6 months. So, the sooner you take it, the better.
- Never accept or sign a termination agreement immediately.
- Seek legal advice if you believe it’s a wrongful termination or the severance pay is too low.
Table of Contents
How much severance payment do you get in Germany?
You can expect the severance payment to be between half and one gross monthly salary per year of employment. You, as an employee, usually receive a severance payment if the employment relationship ends with a termination agreement.
The employers pay the severance pay as an incentive to end the employment relationship by mutual agreement without going to the labor court (Arbeitsgericht) or end such a court case with a settlement.
NOTE: You must file for the wrongful termination suit within three weeks after receiving the termination letter. If you don’t file the suit, it automatically means you accepted the termination.
When are you not entitled to severance pay in Germany?
You might not receive severance pay in the following situations:
- Your employer terminates you because of wrongful behavior. For example, you insulted your boss, hit a fellow colleague, etc.
- You quit the job for personal reasons.
What factors does the severance pay depend on?
The amount of severance pay depends on four factors:
- Your last gross monthly salary
- Industry and region
- Duration of employment
- Your negotiation skills
Salary and duration of employment
The higher the gross monthly salary and the duration of employment, the higher the severance pay. You can expect an even higher severance pay in the following cases.
- You believe your termination is unfair.
- You have special protection against dismissal. For example, you are on maternity or parental leave, you are a member of the workers’ council, etc.
The time you were not working usually also counts as periods of employment. This applies to parental leave and sick leave for which you received sick pay.
Moreover, the partial year is often rounded to a full year if you worked more than six months in that year.
Also consider the holiday and Christmas bonuses, as well as any other financial bonuses, while calculating the severance pay amount.
Region
Employees in different German federal states receive different severance pay. Employees in the West, on average, received more severance pay than those in the East. Let’s look at the severance payment factor to get a fair picture.
Severance payment factor = (Severance payment) / (Gross monthly salary * Full years of employment).
The average severance payment factor is between 0.5 and 1.0, but can also be higher. This depends on the individual case.
How should you behave when expecting or receiving a termination?
A termination is only valid if given in writing. Termination on WhatsApp, emails, messages, or calls is not legally binding.
Here is how you should act when you are expecting a termination.
- Get Employment legal protection insurance if you don’t have one.
- Start looking for jobs. But don’t tell your employer or colleagues.
- Prepare yourself mentally and financially.
Here is how you should act when receiving the dismissal news.
- You should always state clearly that you want to continue working for your employer.
- Never sign any document or agree to the termination or severance package immediately.
- Check if you have special protection against dismissal.
- You are on maternity or parental leave.
- You are a member of the workers’ council.
- You are severely disabled.
- Consult a lawyer specializing in labor law to clarify your doubts.
You should accept the termination agreement only after you have consulted a lawyer and found the termination and the severance package fair.
We have partnered with several English-speaking lawyers who can support you with different legal situations. Some of the lawyers offer free initial consultation. You can book a call with the lawyers here.
English-speaking lawyers in Germany
- Find English-speaking lawyers in Germany.
- We have partnered with several lawyers with expertise in different legal areas.
- Get a free initial assessment of your situation.
- Book a call to get personalized legal advice.
NOTE: In the labor law, the losing party doesn’t pay the legal costs of the winning party in the initial court proceeding. This means that irrespective of you winning or losing the case, you must pay the lawyer’s and court’s fees.
If you have legal insurance, it’ll cover the legal costs.
In our comparison and test, we found that KS-Auxilia*—Jurprivat, Arag*—Aktiv-Premium, and WGV—Optimal PBV are the best legal insurance plans.
Unfortunately, no legal insurance provider in Germany offers services in English. Insurance agents like Feather* and Getsafe* offer basic English support. However, when you need legal advice, you must contact the insurance company, which only offers advice in German.
Feather and Getsafe sell Roland’s legal insurance plans.
KS/Auxilia Legal Insurance
- Rated best legal insurance by the top rating agencies in Germany
- 15€ Amazon coupon
- Free legal consultation
- Offers comprehensive legal coverage
WGV Legal Insurance
- Rated best legal insurance by the top rating agencies in Germany
- Free legal consultation
- Offers comprehensive legal coverage
Arag Legal Insurance
- Rated best legal insurance by the top rating agencies in Germany
- The biggest legal insurance provider in Germany
- Free legal consultation
- Offers comprehensive legal coverage
Feather Legal Insurance
- Legal insurance policy starting from €13.51 per month
- Free legal consultation
- English customer support
- An insurance agent that sells Roland’s legal insurance policy
NOTE: Top rating agencies in Germany rated Arag—Aktiv-Premium, WGV—Optimal PBV, and KS / Auxilia—Jurprivat as the best legal insurance plans in Germany (as of Jan 2026).
What does accepting the severance pay mean?
Companies offer money (severance pay) in exchange for a waiver of action. This means you waive your right to sue the company against the termination. Also, you might lose other rights that might be regulated by German labor law (e.g., regulations regarding a non-compete, bonus claims for the termination period, and other claims if the contract includes an exclusion clause).
What taxes do you pay on severance pay in Germany?
Severance payments are exempt from social security contributions ( Section 14 of the Social Code Book IV ). However, they are part of your taxable income, and you pay tax according to your personal tax rate.
One exception to the “social security contribution” rule is if you are voluntarily insured in statutory health insurance after leaving the job, a statutory health insurance premium is levied on your severance pay.
You’ll be voluntarily insured if
- you do not have a new job after leaving your old company
- and your entitlement to unemployment benefits is suspended.
How do you save taxes on your severance pay?
1. Apply for a so-called fifth rule (Fünftelregelung)
This rule calculates the tax on the severance pay as if you received it over five years. The fifth rule reduces your tax in the following way.
By considering one-fifth of the severance pay instead of the whole, your (fictional) taxable income in a year is reduced, thus lowering your personal tax rate. You pay taxes on the full amount, but at a reduced personal tax rate.
How much is the personal tax rate in Germany based on your income? ->
2. Contribute full or part of the severance payment to the statutory pension scheme
You can save taxes by voluntarily contributing part or all of your severance pay to the state pension scheme if you are 50 or older.
This saves you taxes as half of the contribution (i.e., the employer’s part) is tax-free ( Section 3 No. 28 EStG ). You can contact the state pension provider to check how to do it.
Cheatsheet to Save Taxes – Free Download
- Download the cheatsheet summarizing all the expenses you can deduct from the taxes.
- Maximize your tax savings by claiming expenses you don’t need proof of.
- Moved due to work, bought a new chair, repaired your rental apartment, etc. Claim all these expenses to save tax.
Benefits of paying a severance package for employers
Terminating the employment relationship via a mutual agreement is usually the best for both the employer and the employee.
If an employee decides to appeal the dismissal in labor court, the termination cost for the employer may increase for the following reasons.
- If the responsible labor court rules that the termination was wrongful, the severance pay will be higher.
- Suppose the proceedings before the labor court drag on, and the employer loses the case. The employer must pay the entire wage from the end of the notice period until the labor court’s final decision. Moreover, the employee was not working for the employer during this period. Additionally, the employer will also incur legal and court costs.
More topics
- Best legal insurance in Germany
- Employment legal insurance in Germany
- How high are the lawyer’s fees and legal costs in Germany?
- How do you claim legal insurance benefits?
- Legal aid in Germany
- English-speaking lawyers in Germany
- How to register in Germany?
- Is it worth moving to Germany?
- Dos and Don’ts of living in Germany
