What you should and shouldn’t do if you have been dismissed in Germany

Losing your job is never easy. Especially in an unfamiliar legal system with documents in “legalese”. Small comfort: in Germany, you are in one of the most employee-friendly countries, at least when it comes to protection from unfair dismissal. Odds are that you might receive a very decent severance package. 

However, the first days after your dismissal are critical and it is important to know your rights. You should also be aware of the “must-do” action items (and things to avoid) after dismissal, and when to contact an expert like AbfindungsHero. 

Facing a dismissal? Contact AbfindungsHero for advice

Redundancies in German manufacturing

Business in Germany is not exactly booming. Especially in manufacturing, times are rough. Volkswagen is looking at closing factories, production in mechanical engineering is plummeting, and chemical companies are experiencing losses. 

The situation is already affecting the labour market. Car and manufacturing players have started to lay off employees en masse for the first time in years. Also, tech players like SAP and scaleups like Deliveryhero have started to cut jobs - with more to come. 

Losing your job is never easy, but it is especially hard for expats. An unfamiliar legal system, technical language in contracts and other legal documents (often challenging even for native speakers), combined with limited access to competent advice all can create a very difficult experience for foreign workers.

Strong protection from unfair dismissal

However, the good news is that you are in one of the more employee-friendly countries when it comes to protection from unfair dismissal. Under German law, if the employer terminates a permanent employment relationship (i.e. not a fixed-term contract), the employee benefits from strong “general” and “special” protections against (unfair) dismissal:

“General” protection - applies to most employees 

General protection applies to all employees falling under the Dismissal Protection Act (“Kündigungsschutzgesetz”), if: 

• Your employer has more than 10 employees; and 
• You have worked for your employer for six months without interruption

Obviously, this is true for most employees in Germany who have completed their six-month probation period. In this case, you can only be fired for three clearly defined reasons for termination: 

• Operational: For example, when your employer is undergoing a major restructuring / downsizing. Strict rules for “social selection” as to who gets fired apply in this situation.
• Personal: For example, if an employee is constantly on sick leave.
• Behavioural: Could be related to theft, harassment or other types of serious misbehaviour.

These requirements raise the bar significantly for a “fair” dismissal. A lot of dismissals in Germany do not meet any of the three reasons and are therefore considered “unfair” in court, making the termination void.

“Special” protection

Special protection applies to employees who need stronger protection, e.g., handicapped or pregnant employees, employees on parental leave, and members of the works council. For these employees, much stricter requirements apply for a termination to be considered valid. 

For the sake of comprehensiveness, it should be noted that there are also termination without notice, which require “important” reasons for terminations. Requirements are even stricter, and successful cases are therefore rare.

Severance pay is mostly a matter of negotiation

Germany does not have statutory severance payments. In theory, employees are only legally entitled to severance pay under (rare) social plans agreed with works councils. In practice, however, severance payments are common, usually as part of a termination agreement. 

This is especially the case when the grounds for termination are (or would be) questionable and the employee challenges the termination in court. In these cases, employers and employees often prefer to settle and agree to a severance package to avoid lengthy court proceedings about the effectiveness of a termination. Severance payments typically range from 0,5 to 1,2 times (the so-called “factor”) the employee's monthly wage for each year of service.

For example: An employee has been working for her Berlin-based employer for 6,5 years. She now earns a monthly salary of 15.000 euros, including bonuses and other benefits. After being dismissed, she challenges this in court. During the first court hearing, it becomes clear that the termination was “unfair”. Therefore the parties negotiate a settlement in court and agree on a factor of 1,2 for seven years of service, leading to a total severance pay of 126.000 euros (15.000 euros multiplied by seven, multiplied by 1,2). 

Calculate your fair severance pay now

Furthermore, statutory notice periods apply, further adding to the total payout if the employee is released from duties during the notice period (Freistellung). Consequently, the amounts that are paid out vary greatly. They not only depend on the level of “unfairness” of the dismissal, the factor, duration of service and last salary, but also on the region, and previous practices of the employer. 

Of course, the size of the “war chest” for dismissals matters, too. Large restructuring programmes at blue chip corporations are almost always well funded (SAP had 3 to 4 million euros set aside for its latest restructuring programme). So what may initially feel like a serious blow can create major opportunities. However, it is crucial to take action in the first few days after a termination.

Things to do immediately after a termination

If you have been terminated, you should do the following as soon as possible: 

Cross-check the termination letter

A termination letter must fulfil certain formal requirements. For instance, it must be on paper (hence “letter”) and signed in “wet ink” (no DocuSign, scanned signature, or similar). Furthermore, signatures must be from the right people (managers with full power of attorney - very important). An invalid termination letter has no legal consequences, meaning it does not end your employment. And mistakes happen surprisingly often. For employees, there is actually a lot of money in what might look like small, formal mistakes.

Check for further requirements for termination

Depending on your individual case, there may be additional requirements for a valid termination. For instance, if there is a works council, it must be notified before the dismissal. Even stricter rules apply in the case of “special protection” (as outlined above), and severance packages tend to be significantly higher.

Notify immigration

If you are living in Germany on a residence permit and you receive notice of dismissal, you have to inform the immigration authorities (Ausländerbehörde) immediately. Your residence permit is likely linked to your employment contract. 

However, immigration authorities must grant you a period of three months to look for a new job (up to six months if you have held your Blue Card for more than two years). Deadline extensions are possible - and often granted, if well-founded. Details matter a lot here, so this should be discussed with an expert. The partner lawyers at AbfindungsHero can help you with this. 

Inform your local jobcenter

In theory, you must report to the Employment Agency as a "job-seeker" no later than three days after receiving a termination notice. If you report late or not at all, you risk having your unemployment benefits cut. Even if you have a new job already, informing the authorities is the prudent (although sometimes painful) thing to do.

Decide if you want to challenge the termination

With a few years of service, a good salary, and at least some good arguments that your termination is “unfair”, you may stand a chance of receiving a decent severance package. However, to get that, you may have to sue your employer.

In Germany, this is by no means considered aggressive (even if HR folks sometimes tell you that). Rather, it is a pretty standard move when employment is terminated. Labour courts have fast proceedings, and the implicit goal is to find a mutual solution - quickly. 

Review an existing severance package offer

If a severance package has been offered to you already, for instance in your termination agreement, discuss with an expert if the amount is “fair” for your individual case - or if you would be entitled to a much higher package and should decline the first offer.

Consider options to minimise taxes on severance pay

It’s worth noting that your severance package will be subject to taxation, so you should consider how you might be able to prevent your payout from being reduced too much. The partner lawyers at AbfindungsHero can help you with this. 

Things to avoid after a termination

If you have received notice of termination, avoid doing the following: 

Signing “some paperwork” from your employer

Sometimes HR urges expats to sign “some paperwork” when they receive a termination letter - which might turn out to be a termination agreement. If you sign a termination agreement, your employment ends immediately, and you waive your right to make additional claims against your employer. It even affects your unemployment benefits (creating a “blocking period” with the jobcenter). 

This could be a very expensive signature. So, even if you are being put under a lot of pressure, you do not have to sign anything - and you should not do so without having an expert look over the agreement first. 

Missing the three-week deadline to talk to a lawyer 

You must file an action for protection against unfair dismissal within three weeks. This is a hard stop! Once the deadline has expired, you can no longer file any action for protection against unfair dismissal. This means you might not get a fair severance payment.

Forgetting (and not backing up) your other claims

You probably won’t be able to take your untaken holidays, so you might want compensation for these days, in addition to your severance payment. The same could be true for your open bonus payments for the year, and short- mid- and long-term incentive plans. Also, do not forget about your stock options. We recommend to briefly review the terms of your ESOPs / VSOPs, vesting, and the good leaver / bad leaver provisions with your lawyer.

Last, but not least, you might still have outstanding overtime compensation and travel costs that you have not yet been compensated for. We recommend discussing all these “other” claims with your lawyer in detail. It is very important that your lawyer is aware of these when negotiating a settlement, because you might lose some or all of these claims if you agree on a “catch-all” settlement provision.

Therefore, before you lose access to company databases or programmes, you should (as far as permitted) back up important documents for those “other” claims that you may have (e.g. stock option plans, travel expense records, overtime lists / timekeeping, as well as your bonus target achievements), so that you could provide these documents in court if necessary, even after you have left the company. But be careful: this “backup” must be in line with company policy. Otherwise, worst case, such an approach could represent a new - and often valid - reason for termination.

If there is still time

If you are reading this and have not been terminated recently, but are concerned about possible future lay offs, there are a few things that you can already do to improve your legal situation in case of a later termination. For instance, taking out legal protection insurance is a no-brainer, just as is starting to look for a new job, updating your profile on LinkedIn and considering your options to improve your tax situation in case of a severance payment.

How AbfindungsHero can help you

Not all expats in Germany are fully aware of the rules for “unfair” dismissal. On abfindungshero.de, you can find that information. They have created an online library on employment questions, calculators and other online tools to support expats facing employment-related issues. 

Even more important: If you are facing a termination in Germany, AbfindungsHero helps expats find a lawyer. AbfindungsHero has a pool of experienced, English-speaking labour lawyers. Many offer free initial consultations, regardless of whether you have legal expense insurance (Rechtsschutzversicherung).