Interview on severance pay: Golden handshake or sold short?

Bosch needs to save money. Also on personnel. To achieve a long-term effect, the technology group is digging deep into its pockets. For the year 2025 alone, Bosch had set aside around 2.7 billion euros, for example for severance pay for employees leaving the company voluntarily.

Bosch is one of many companies in Germany that are cutting jobs. The industry is particularly hard hit. Last year, more than 120,000 jobs were cut, reports the auditing and consulting firm EY. And experts fear further cuts.

Hardly any industry or activity is unaffected. According to a survey by the industry association Bitkom, 14 percent of all companies in Germany expect to lay off IT specialists in the current year.

Those who leave voluntarily can do so with a golden handshake. But why "golden"? Because the conditions for leaving – the severance pay – can be financially lucrative. Furthermore, if a company has decided to part ways with an employee, that employee no longer has a future in the company anyway. Because severance pay is a matter of negotiation, employees have a significant influence on the amount.

Volkan Ulukaya knows what is essential to pay attention to regarding severance pay. He is a lawyer and specialist lawyer for labor law at the Düsseldorf business law firm Buchalik Brömmekamp Rechtsanwälte (BBR).

Is there a legal claim to severance pay?

This only exists in cases where there is a social plan for job cuts. This regulates severance pay and its amount, for example. Only in the case of an existing social plan can employees sue for their claim to severance pay. More often, however, employers offer severance pay as part of a termination agreement to avoid a lengthy dispute.

What is a termination agreement?

A termination agreement is negotiated so that no termination notice needs to be issued. And because there is no termination notice, no unfair dismissal claim can be filed. The termination agreement is a mutual agreement between employer and employee.

What should not be missing from it?

Of course, the amount of severance pay, i.e., the conditions under which the employee should terminate the employment relationship. Also important is a clause that clarifies that the termination agreement was concluded at the employer's request. And that the notice period stipulated by collective agreement or employment contract is not shortened until the termination of the employment relationship. Both can lead to a waiting period for unemployment benefits. In principle, all mutual claims can be settled in the termination agreement, such as outstanding holiday entitlements, for example, within the framework of a so-called release clause.

In which cases is severance pay, and in which is an unfair dismissal claim the appropriate option?

This depends on the employee's objective. Anyone who absolutely does not want to work for this company anymore is well advised to negotiate severance pay. Then you only have to agree on the amount. If an employee wants to keep their job, an unfair dismissal claim is the better option. This path is not unlikely, for example in public service.

In the case of an unfair dismissal claim, the focus from a legal perspective is always on the continuation of the employment relationship. It is clarified whether the termination was issued effectively, i.e., whether the reasons stated by the employer, for example, support the termination. With a termination agreement, there is hardly any risk: the employer has to pay what was contractually agreed.

How high is severance pay?

Employees can generally demand anything. There are no limits. The only question is whether the employer will go along with it, i.e., agree to it. Severance pay is freely negotiable. As a guideline for both sides, the rule of thumb is: half a gross salary multiplied by years of employment. If the risk in the case of an unfair dismissal claim is 50:50, employees can demand at least this standard severance pay.

In which cases more?

For individuals with special protection against dismissal, such as works council members, pregnant women, or severely disabled persons, they can certainly argue for severance pay above the standard amount. Or if the employer has issued a termination and it is clear that it is legally unfounded. In this case, employees could demand severance pay above the standard rate in court – and would likely receive it.

Are there alternatives to severance pay?

The legislator provides tax benefits for severance pay. This strongly suggests that severance pay is the officially recommended solution for ending employment relationships without legal disputes. However, it may also be advisable for employees to request an extension of the notice period instead of severance pay, for example, to transition to a new employment or to retire. This is also not uncommon. Otherwise, if severance pay is not an option for employees, negotiations can be held, for example, over bonus claims, periods of release, or other entitlements.

Is legal advice always advisable for a severance pay offer?

Yes, to receive the appropriate amount of severance pay, because specialist lawyers can assess the litigation risk. If the employer bears the litigation risk, this must be taken into account in the amount of severance pay, otherwise the employee would be selling themselves short. From the employer's perspective, it is exactly the opposite: there may be a legitimate reason to terminate the employee. Then the employee would receive nothing. When weighing their interests, both parties should always assume how the case would likely turn out in court. Usually, only lawyers can assess this with legal certainty.

(wpl)