Severance is a one-off payment from the employer to compensate for the loss of a job. In Germany it is generally not legally mandatory but arises through mutual termination agreements, court settlements after dismissal-protection claims, or social plans during reorganisations.
Amounts often follow the rule of thumb of half a gross monthly salary per year of employment; in practice, variations are common. Factors include age, tenure, market value, bargaining position and industry. Social plans can provide standardised calculation models that apply to entire workforces.
For tax purposes severance is treated as extraordinary income; the so-called fifth-rule (Fünftelregelung) softens the tax burden. Severance can affect social benefits such as unemployment insurance – for example through a waiting period after a mutual termination agreement.
Early advice helps preserve bargaining position and tax optimisation. Lunigi then supports affected candidates with curated job emails – no portal clicking required.