In Germany, employment termination is subject to strict legal requirements, especially if the German Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz, or KSchG) applies. This law offers employees significant protection against unjust termination, but only under certain conditions. Understanding these rules—and the differences between various termination options—is essential for employees and employers alike.
1. When Does the Kündigungsschutzgesetz (KSchG) Apply?
The KSchG is only applicable if:
- The employment relationship has lasted for more than six months continuously, and
- The employer regularly employs more than ten full-time employees in the establishment (excluding trainees).
If these conditions are not met, an employer may terminate employment with fewer restrictions. However, even then, basic rights under general civil law and anti-discrimination regulations still apply.
2. Types of Termination
a) Ordinary Termination
This is a dismissal with notice. The notice period depends on the length of service and is regulated either by statute (§ 622 BGB) or by the employment contract. Employers must provide a valid reason if the KSchG applies. These reasons typically fall into three categories:
- Operational reasons (e.g., job cuts)
- Conduct-related reasons (e.g., breach of contract)
- Personal reasons (e.g., long-term illness with no recovery in sight)
b) Extraordinary Termination
This is a dismissal without notice, only permissible in exceptional cases of severe misconduct, such as theft, fraud, or violence. The employer must act within two weeks of becoming aware of the incident and must provide clear evidence. Courts interpret this type of dismissal very strictly.
3. Legal Action: The Kündigungsschutzklage
Employees who believe their dismissal was unlawful can file a dismissal protection claim (Kündigungsschutzklage) with the labor court. This claim must be filed within three weeks from the date the written termination notice is received. If this deadline is missed, the dismissal is legally effective—even if it was unlawful.
In many cases, the legal dispute results in a settlement, which may include the payment of a severance.
4. Severance Payments: No Legal Right, but Common in Practice
Contrary to popular belief, there is no automatic legal right to severance pay under German law. Severance is typically the result of:
- A mutual agreement (e.g., in a court settlement)
- A social compensation plan in larger layoffs
- A clause in the termination letter under § 1a KSchG
In all other cases, severance is negotiated, not guaranteed. This is why involving a labor lawyer can significantly improve the outcome. Lawyers not only assess the strength of your case but also negotiate better terms, often achieving much higher severance sums than what is initially offered.
5. Alternatives to Dismissal: The Severance and Settlement Agreements
German law distinguishes between:
a) Aufhebungsvertrag (Severance Agreement)
A mutual agreement to terminate the employment relationship, usually in exchange for financial compensation or other benefits. It requires the employee’s signature and can be signed without court involvement.
Key risks include:
- No protection under KSchG (as it’s not a dismissal)
- Loss of unemployment benefits: If the employee is considered to have “contributed to their own unemployment,” the Job Center may impose a 12-week waiting period (Sperrzeit) for unemployment benefits.
b) Abwicklungsvertrag (Settlement Agreement)
This is signed after a dismissal and simply regulates the consequences of the termination (e.g., severance, reference, release from duties). It does not cause the termination itself and does not lead to a Sperrzeit.
6. What Is Typically Regulated in a Severance Agreement?
A standard Aufhebungsvertrag typically includes:
- Termination date
- Severance amount
- Release from work duties (Freistellung)
- Vacation and overtime compensation
- Job reference (Arbeitszeugnis)
- Confidentiality and non-disparagement clauses
- Return of company property
- Waiver of further claims
Important: Once signed, the agreement is binding. There is no “cooling-off period.” That’s why consulting a lawyer beforehand is strongly recommended. Many employees sign disadvantageous agreements out of pressure or misinformation.
7. Free Legal Hotline – English Speaking Support
To avoid costly mistakes, you can contact the free labor law hotline offered by Abfindung4u. The service is available nationwide, and English-speaking support is provided. Whether you’re facing termination or have been offered a severance agreement, a quick phone call can clarify your rights and next steps—without any cost or obligation.
