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End of Employment in Germany

General Guidelines

The German Employment Protection Act (Kündigungsschutzgesetz) monitors employment terminations and protects employees by ensuring dismissals are justified. Due to the high level of protection against dismissal, it is reasonably common for employment to be ended by a separation agreement.

There are two types of dismissal in Germany: ordinary and extraordinary. 

Ordinary dismissal requires that the company observe the statutory minimum notice period, which varies according to the employment's length, or contractual notice period if this is longer. Extraordinary dismissal allows the employer to immediately end the employment contract and is used in situations such as gross misconduct.

All terminations require the following:

  • Works Council Hearing, if it exists
  • Clear and unambiguous reason for dismissal
  • Written dismissal notice signed by the employer (wet ink! Scan, copy, telefax not sufficient)
  • Notice period observed

During the notice period, the employee gets paid their full salary and continues to work. If the employer has reasonable grounds to terminate the employment immediately, payment in lieu of notice can be applied - although the practice is not common in Germany.

The employer can also release the employee from the duty to work during the notice period with continued remuneration taking into account any remaining holiday entitlements.

Employees must receive their final pay within the regular payroll run. Any additional payments must be paid in line with the work contract, such as any withstanding annual leave.

Four weeks before the end of employment, the employer is responsible for notifying the health insurance company about the termination. After the employee is automatically de-registered through the payroll system, the employer must inform the registry office.

Unfair Dismissal in Germany

Employee protection

Companies with ten employees or less are not covered under dismissal protection, meaning it doesn't need to be justified. However, it should not be discriminatory or violate public policies.

There are unfair dismissal protections for employees employed for longer than six months in companies with more than ten employees and the employer must have a socially justified reason for the dismissal. A justifying reason can be 

  1. Behaviour (e.g. theft or fraud)
  2. Personal reasons (e.g. long-term illness) 
  3. Business reasons (employer's decision to restructure the business, which reduces the number of positions). 

In the case of terminations based on behaviour, the employee must generally receive at least one prior warning for the dismissal to be valid.

The burden of proof for the legitimacy of the dismissal falls on the employer and employees can challenge a termination before the court. To be effective, the employee must file the complaint within three weeks of receiving the notice of termination. If the case cannot be settled, the court can only rule that the termination is either effective or not. If the termination is deemed effective, the employment ends after the notice period and the employee does not receive any severance. However, if the termination is not ruled effective, the employer must reinstate the employee in the previous position and offer them a back pay starting from the end of the notice period.

Employees who are on parental leave, disabled or pregnant can not be let go without government approval.

Redundancy Pay & Entitlement in Germany

Collective redundancy

If a company intends to dismiss many employees in one month, they must obtain prior government approval. Moreover, if the company has more than 20 employees, the works council must be involved. The employer must inform the works council of the intention to reduce the employed staff well in advance and consult with them about the intended actions. During the consultation, they negotiate a reconciliation of interests and a social plan, agreeing on the compensation aspects. If the employer fails to comply, the employees have a statutory claim for compensation of any economic disadvantages against the employer.

In most cases, redundancy payments are half a month's wage for each year of employment with the company. But it can also be higher or lower as it is up to negotiations between the employer and the works council.

Redundancy pay

There's no statutory right of an employee to receive a redundancy payment. However, most termination cases are settled through a negotiated compensation.

Resignation Procedure in Germany

To resign from their jobs, employees must first write a letter notifying their employer containing:

  • The address of the employee
  • The company's address
  • The current date
  • The date when employment ends
  • The name of both employee and employer and their signatures

Other End of Employment Guidelines

Notice period

During the probation period, the employee is entitled to two weeks of notice of termination. Employers must notify employees past their probation period at least four weeks before termination with a written notice.

The notice period increases according to the employment length, as follows:

  • Two years - 1 month's notice, effective at the end of the month.
  • Five years - 2 months' notice, effective at the end of the month.
  • Eight years - 3 months' notice, effective at the end of the month.
  • Ten years - 4 months' notice, effective at the end of the month.
  • Twelve years - 5 months' notice, effective at the end of the month.
  • Fifteen years - 6 months' notice, effective at the end of the month.
  • Twenty+ years - 7 months' notice, effective at the end of the month.

If the employer and employee have agreed to a more extended notice period on the employment contract or Collective Bargaining Agreements, the more favourable period must be respected. Any agreements on a shorter period than the statutory minimum are not valid. Most employment contracts give employees a three month notice period

Severance

A severance payment is not mandatory if a justified reason and proper notice are given for the termination. However, the employer should provide a severance payment for terminations caused by operational changes if they have agreed to it in a social plan with the works council. There are no rules for the amount of severance. Typically, a half month of the employee's regular wage for every year they were in the company applies. However, the amounts can be up to 2 months of the salary for every employment year.

Even though severance payments are not mandatory, it is common that employers and employees agree on one.

Only for executive employees, the law provides a possibility to terminate the employment by court order against mandatory severance payment set by the court. In this case, the payment is capped at 12 months' salary, rising to 15 months' for employees aged 50 or older who have 15 years of continuous service to the company, and 18 months' salary for employees aged 55 with 20 years continuous service.

Unemployment funds

Both employers and employees contribute monthly to the employee's Social Security unemployment funds. The benefits received by the employee vary according to their last month of earnings.

  • An unemployed individual with one child or more receives 67% of their previous salary
  • An unemployed individual with no children receives 60% of their last salary
  • People under the age of 50 receive the benefits for a maximum of 12 months
  • People aged 50 or over receive payment for a maximum of 24 months

If the unemployed person, aged between 15 and 65, does not manage to find work in time for the benefit to be over, they must apply for unemployment II.

This page was last updated on 
22 September, 2022,
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