Germany

In Germany, specific notice periods are required during the termination of employment, as mandated by German labor law. These periods are outlined in the German Civil Code (Bürgerliches Gesetzbuch - BGB) and can be further refined by collective bargaining agreements.

Statutory Notice Periods

The German Civil Code (§ 622 BGB) stipulates the minimum notice periods based on the employee's length of service with the company:

• Up to 2 years: 4 weeks notice period, effective at the end of the calendar month (or 15th of the month if more favorable to the employee).
• Over 2 years: 1 month notice period, taking effect at the end of the month.
• Over 5 years: 2 months notice period, taking effect at the end of the month.
• Over 8 years: 3 months notice period, taking effect at the end of the month.
• Over 10 years: 4 months notice period, taking effect at the end of the month.
• Over 12 years: 5 months notice period, taking effect at the end of the month.
• Over 15 years: 6 months notice period, taking effect at the end of the month.
• Over 20 years: 7 months notice period, taking effect at the end of the month.

It's important to note that the notice period always rounds up to the end of the month or the 15th of the month, whichever is more beneficial to the employee.

Contractual Notice Periods

An employment contract can specify a longer notice period for either the employer or the employee, superseding the statutory minimums. However, these extended periods cannot be shorter than the statutory minimums.

Notice Period Start Date

The notice period typically begins one day after the employer receives the written notice of termination from the employee. For example, if an employee submits a letter of resignation on May 1st and the employer receives it on May 2nd, the notice period starts on May 3rd.

In Germany, severance pay, also known as Abfindung, is not a legal entitlement for most employees. However, it is a common practice to offer severance payments when terminating employment, especially after a dismissal initiated by the employer.

When is Severance Pay Offered?

Severance pay is often offered in the following scenarios:

• Operational Dismissals: Companies undergoing restructuring, downsizing, or relocation often offer severance to ease the transition for dismissed employees. A social plan (Sozialplan) may be negotiated with the works council to formally outline severance terms in these situations.

• Negotiated Settlements: To avoid lengthy legal disputes following a dismissal, employers and employees often reach an out-of-court settlement, which usually includes a severance package.

• Mutual Termination Agreements: When both parties agree to end the employment relationship, severance may be a part of the negotiated terms.

Calculating Severance Pay

There's no fixed rule for severance calculations in Germany. However, the common practice is:

• The "Half-a-Month" Rule of Thumb: Severance often follows a formula of half a month's gross salary for each year of employment.

• Factors Influencing the Amount: The amount of severance pay can be influenced by the employee's age, length of service, company size, circumstances of the dismissal, and the strength of the employee's legal claim in a dismissal dispute.

Legal Basis for Severance Claims

While not a general entitlement, certain cases may lead to legal grounds for severance:

• Breach of the Protection Against Dismissal Act: If a court finds a dismissal was socially unjustified, it may order severance as compensation.

• Severance under a Social Plan or Collective Bargaining Agreement: Severance terms may be mandatory if these agreements exist within the company.

Important Notes

• Severance pay may be taxable in Germany.
• Severance agreements may impact eligibility for unemployment benefits.

Termination of employment in Germany can occur in several ways. The first is through ordinary termination, where an employer ends the employment relationship by giving proper notice. This requires a socially justified reason under the German Protection Against Dismissal Act.

The second type is extraordinary termination, also known as termination for cause or summary dismissal. This allows both the employer and employee to end the employment relationship immediately and without notice if there's a serious breach of contractual obligations.

The third type is a mutual termination agreement, where the employer and employee mutually agree to end the employment relationship.

Types of Termination

Ordinary Termination

An employer terminates the employment relationship by giving proper notice, adhering to the statutory notice period or a longer period specified in the employment contract. General dismissal protection under the German Protection Against Dismissal Act applies, requiring a socially justified reason for the termination.

Extraordinary Termination

Also known as termination for cause or summary dismissal. Both the employer and employee can end the employment relationship immediately and without notice if there's a serious breach of contractual obligations. Strict conditions apply, and prior warnings may be necessary in some cases.

Mutual Termination Agreement

The employer and employee mutually agree to terminate the employment relationship. Conditions are negotiated as part of the agreement.

Reasons for Ordinary Termination

Under the German Protection Against Dismissal Act, an ordinary termination by the employer must be socially justified. This includes operational reasons such as economic hardship, restructuring, outsourcing, etc. Conduct-based reasons like poor performance, repeated breaches of duty, disruptive behavior can also be grounds for termination. Personal reasons such as long-term illness, inability to perform duties, loss of essential qualifications can also lead to termination.

Works Council Involvement

If a works council exists, the employer must consult them before issuing an ordinary termination. The works council has the right to object to the dismissal, but its opinion is not binding.

Formalities of Termination

Termination must be in writing and include the reason. If the Protection Against Dismissal Act applies, the dismissal letter must state that employees have a three-week window to file a lawsuit against the dismissal.

Challenging a Dismissal

Employees have three weeks from receiving the notice of termination to file a lawsuit against an unfair dismissal at the labor court. If the dismissal is ruled invalid, the employment relationship continues.