The debate over high earner dismissal protection is intensifying as policymakers consider changes that could take effect from 2027. The discussion over reforming dismissal protection law has gained noticeable momentum in recent months. Employer associations have long called for limiting dismissal protection claims for higher‑paid workers to relieve companies and make staffing more flexible. Employee representatives warn against a rollback of protective rights. What is behind these plans, and what would they mean concretely for you if you are a manager or high earner facing a dismissal? We summarize what is known so far and how you can position yourself.
High Earner Dismissal Protection: Possible Changes from 2027
Under the current Dismissal Protection Act (KSchG), protection applies regardless of income – the decisive factors are company size and length of service. Anyone employed for more than six months in a business with over ten employees normally enjoys dismissal protection. The law contains no income threshold. Reform advocates want to change exactly that: they argue that high earners – for example managers with an annual salary clearly above €100,000 – are less in need of protection because they find new positions more easily and have sufficient financial reserves.
Moreover, dismissal protection for this group is often merely a formality: in practice employers and managers frequently agree on a severance payment instead of pursuing lengthy dismissal protection lawsuits. A reform could create greater legal certainty here and simultaneously relieve the labor courts, which each year deal with a high volume of dismissal protection cases. The economic situation in many sectors – from automotive to mechanical engineering – has further fueled the debate, because companies wish to act more quickly during restructurings.
If high earner dismissal protection were curtailed, the strongest bargaining chip for negotiating a severance would disappear for many managers.
Planned changes from 2027: what is known so far
No concrete bill has been published yet, but the political debate has taken clear shape. The idea under discussion is to abolish or limit dismissal protection for employees whose annual salary exceeds a certain threshold. Figures such as €100,000, €150,000 or €200,000 gross per year are mentioned in political circles – however, these are speculative numbers, not official proposals. Another possibility is a sliding scale: the higher the salary, the weaker the protection, for instance through longer notice periods or a higher hurdle for filing a dismissal protection claim.
An alternative suggestion is that high earners would enjoy dismissal protection only if they have been employed for a certain number of years. Alternatively, dismissal protection could be replaced by a legally fixed severance scheme – similar to the model of § 1a KSchG, but with higher amounts. It is important to stress that all of this is still merely plans and considerations. No draft bill has been released, and much could change before 2027. Nevertheless, potentially affected employees should familiarize themselves with the possible scenarios early on.
Proponents of high earner dismissal protection argue that it provides a necessary safety net for skilled specialists whose total compensation, including bonuses and allowances, reaches high levels.
Who would be affected: income thresholds and exceptions
The debate mainly targets managers, executives and specialists with high incomes. However, the group could also include specialists who reach a high annual salary through bonuses, supplements or long tenure. What will be decisive is how the legislator defines income – whether only the base salary counts or the total gross income including special payments. Also open is the question whether managerial employees within the meaning of the Works Constitution Act would be exempt. This group already has a special status, as they often fall outside the scope of the KSchG.
For employees who are just below the threshold, the reform could turn into a kind of “dismissal protection trap”: accepting a pay rise today might suddenly leave them without dismissal protection. Conversely, companies might try to shape salaries deliberately so that employees cross the threshold and become easier to dismiss. Such structuring would be an abuse of law and would not hold up in court, but employees should still keep an eye on their compensation structure and seek legal advice if needed.
Dismissal protection lawsuit or severance: what changes for high earners
So far, a dismissal protection lawsuit has been a proven tool for high earners to obtain a severance payment. In many cases the parties reach a settlement before the labor court, agreeing to terminate the employment relationship in exchange for a severance – the amount usually depends on length of service, age and income, with a common rule of thumb of half a month’s gross salary per year of employment. This practice could change if dismissal protection for high earners is removed: without the possibility to contest the validity of the dismissal, the employee would lose his strongest negotiating leverage.
Instead, high earners would have to rely on other safeguards, such as contractual severance clauses or special agreements in the employment contract. The planned reform could therefore lead to severance payments for managers that are rarer and lower – at least if the employer does not voluntarily offer a generous solution. For employees this means: if you receive a dismissal today, you should carefully examine the option of a dismissal protection lawsuit, because the timing of the reform could be the last chance to benefit from the existing rules. However, even without dismissal protection there are ways to negotiate a severance, for example via a termination agreement or a social plan.
How to prepare as a manager for the new legal situation
If you are a manager or high earner who could potentially be affected by a dismissal, you should start taking precautions now. First, review your employment contract: are there already severance provisions or notice periods that go beyond the statutory minimum? Many managers have individual contracts with long notice periods or a fixed severance guarantee – such clauses remain valid even after a reform. If you do not have such a provision, it may be worthwhile to negotiate a severance clause during salary talks, even though employers often resist.
You should also keep an eye on your financial situation: a possible loss of dismissal protection does not automatically mean you will lose your job immediately, but you should have sufficient reserves to bridge a transition period. Likewise, you should begin looking for a new position early, as the labor market for managers is demanding. Lastly, it is advisable to seek legal counsel: an independent lawyer specializing in employment law can assess your individual situation and help you protect your rights – irrespective of whether the reform actually materializes.
Alternatives to dismissal protection: contractual arrangements and termination agreements
If dismissal protection for high earners falls away, alternative designs gain importance. One option is a termination agreement: employer and employee agree mutually to end the employment relationship, usually in exchange for a severance payment. The advantage lies in predictability for both sides – however, you should never sign a termination agreement hastily, as it can trigger waiting periods for unemployment benefits. Always have the terms reviewed by a lawyer.
Another option is contractual severance clauses that are already fixed in the employment contract. These can, for example, provide a graduated severance depending on length of service or guarantee a minimum severance in case of operational dismissal. Such clauses are common in practice and offer important protection for high earners if the statutory protection disappears. A so‑called “change of control” clause can also be relevant when the company is taken over and you lose your job as a result. All these arrangements should be worked out with a lawyer specializing in employment law who knows the legal pitfalls.
Conclusion: what the reform means for your career planning
The planned reform of dismissal protection for high earners is not yet enacted, but it is a clear signal: the era in which high earners could rely solely on statutory dismissal protection may soon be over. For affected employees this means taking responsibility for their own security – through smart contract design, financial reserves and proactive career planning. If you still receive a dismissal today, you should make use of the possibility of a dismissal protection lawsuit and a severance negotiation, because the legal situation could become considerably stricter from 2027 onward.
At the same time, not every change has to be a disadvantage for employees. A reform can also bring greater clarity and avoid protracted court proceedings – provided it is linked to fair severance rules. What matters is that you inform yourself early and seek advice – from an independent employment lawyer who represents your interests. RechtStark as a litigation funder can help you bear the cost risk of a dispute if you decide to pursue litigation. But the most important thing is: do not be caught off guard. The debate over dismissal protection for high earners will continue in the coming years – and those who prepare will have the better odds.
If you would like to learn more about your rights in case of a dismissal, also read our articles Severance for executives and Accept or reject a severance – both show how you can strengthen your position in negotiations.
Note: This article is for general information purposes only and does not replace individual legal advice. For a free initial assessment of whether litigation funding may be an option for your case, you can contact RechtStark.