Termination / Severance in Germany
In Germany the termination of a contract can be complicated and there are many factors to consider.
A minimum notice period of 2 weeks must be provided in the event of a standard dismissal. This notice period is extended with the length of employment as detailed below.
During probationary period (maximum duration of six months): two weeks’ notice.
- After or without probationary period: four weeks’ notice, effective at the 15th or the end of a month.
- After two years’ service: one month’s notice, effective at the end of a month.
- After five years’ service: two months’ notice, effective at the end of a month.
- After eight years’ service: three months’ notice, effective at the end of a month.
- After ten years’ service: four months’ notice, effective at the end of a month.
- After 12 years’ service: five months’ notice, effective at the end of a month.
- After 15 years’ service: six months’ notice, effective at the end of a month.
- After 20 years’ service: seven months’ notice, effective at the end of a month.
Full salary is payable during the notice period, as well as the opportunity to work. If there is reasonable cause, an employee can be placed on garden leave. In Germany, payment in lieu of dismissal is not permitted.
If there is a mutual agreement between employer and employee is it possible to waive the notice period. However, in this situation the employees unemployment benefits will be negatively affected.
A termination with justified cause can have immediate effect and terminate the employment relationship immediately. However, it can be difficult for the employer to prove a termination is justified. Any termination must comply with the Dismissal Protection Act.
Employees have the right to claim unfair dismissal. Whether the dismissal is deemed valid or not, there is no statutory obligation to pay severance in the case of an individual dismissal. However, if an employee was made redundant or in the instance of collective dismissals, the individual circumstances will have an impact on the obligation to pay severance.
As such, in Germany, employers and employees typically agree on a severance payment. These severances are often in the range of half a month’s salary per year of employment. The amount of the severance payment can vary depending on the strength of the reason for termination.
It is not unusual in Germany for employment contracts or Work Agreements and Collective Bargaining Agreements (CBAs) to provide for more favorable termination periods.