To secure a high severance, employees need to understand the levers they can pull. Current reports on severance at BMW, Porsche & Mercedes show clearly: in large corporations, payments are often significantly higher than in smaller companies. However, this is not automatic – going into negotiations unprepared means leaving money on the table. This article shows which factors determine the amount and how you can strengthen your negotiating position.
Why large corporations often pay higher severance
Large companies like the mentioned automakers have significantly greater financial leeway than the mid‑size sector. Moreover, they have a strong interest in settling dismissal processes quickly and discreetly. A public labor court proceeding harms employer branding and can unsettle the works council, workforce, and shareholders. Therefore, HR departments in corporations are often willing to pay above the industry standard to buy legal certainty and peace.
Moreover, many large companies have social plans or interest agreements that set minimum standards for severance. These collective agreements are negotiated between the works council and management – and they often set a higher floor than the statutory rule of thumb (0.5 months’ salary per year of service). Knowing these regulations allows you to use them as a bargaining basis.
The role of company size and social plan negotiations
Company size is a central factor. The Dismissal Protection Act (KSchG) applies in full from 20 employees onward, and from 50 employees the employer must negotiate a social plan in case of mass layoffs. In corporations with thousands of employees, these procedures are routine. The social plans negotiated there often include gradations: the longer the tenure and the higher the age, the higher the factor (e.g., 0.75 to 1.5 months’ salary per year of service).
Important: A social plan binds the employer only within the framework of an operational change (e.g., plant closure, larger staff reductions). For individual dismissals it does not apply automatically. Nevertheless, its existence signals that the employer is accustomed to settlement solutions and has budgeted for them.
Why § 1a KSchG is not automatic for a high severance
Many employees believe that § 1a KSchG guarantees them a severance payment. This is a dangerous misconception. The provision states merely: if the employer offers a severance in the termination letter (0.5 months’ salary per year of service) and the employee waives a dismissal protection claim, then the claim arises. However, the employer must not make this offer. If he refuses or offers less, § 1a KSchG does not apply.
Those who aim for a high severance should not rely on this minimum standard, but instead use the three‑week claim period (starting from receipt of the termination) to build pressure.
How to secure a high severance: leverage through dismissal protection claims
The dismissal protection claim is the strongest lever. It forces the employer to justify the dismissal in court. If operational, behavioral, or personal grounds are lacking – or if there are formal errors in the termination letter (missing works council hearing, faulty social selection) – the litigation risk for the employer rises sharply. This is where bargaining power comes in: the employer pays not out of generosity, but to avoid the risk of losing the case (back‑pay for acceptance delay, reinstatement).
Experienced lawyers bundle all claims – overtime, vacation pay, continued salary during illness – into a single settlement amount. This bundling strategy often substantially increases the total severance without having to litigate each item separately. For more, read our article Why many severance payments are too low – and what good lawyers do differently.
Incorporating additional claims into the severance
A common mistake: employees focus only on the “classic” severance and forget open salary components. Outstanding overtime, unused vacation, variable pay components (bonus, commission) or damages claims (e.g., in cases of bullying) can be factored into the settlement. The advantage: the employer pays a lump sum gross that can be taxed as severance under the one‑fifth rule, instead of many small items that would be fully taxed.
Important: The contractual agreement on attorneys’ fees should make clear that these incorporated additional claims are also covered by the success‑based fee. Otherwise a gap arises that could become costly in a dispute.
Tax pitfalls with high severance
High severance payments often push recipients into the top tax bracket. The one‑fifth rule (§ 34 EStG) alleviates this: the severance is spread over five years for tax purposes, breaking the progression. The requirement is that it constitutes a “compensation for lost earnings” – in other words, a genuine severance for losing the job. Not eligible are: salary arrears, bonuses for past periods, or damages for infringement of personality rights.
A clean allocation in the settlement text (“severance in the amount of X euros, of which Y euros for outstanding salary components”) is essential. Seek tax advice before signing. Our guide One‑fifth rule severance tax: saving taxes made simple provides a first overview.
When going to labor court is worthwhile
Not every dismissal warrants a claim. With short tenure, low pay, and an obvious operational reason (e.g., a full department closure with a social plan), the litigation risk for the employee is high – and the expected severance low. In such cases a swift settlement under § 1a KSchG or the social plan may be more sensible.
Conversely, with long tenure, high salary, formal errors in the dismissal, missing social selection, or suspicion of a pretextual operational reason, pursuing a claim almost always pays off – even if it ends in a settlement. The mere act of filing signals: “I am defending myself.” This fundamentally shifts the bargaining dynamics.
Conclusion: preparation decides the amount
Ultimately, the ability to secure a high severance depends on preparation – it is not a gift.
Thus, to secure a high severance, workers should act quickly and seek professional advice.
Note: This article is for general information only and does not substitute legal advice in individual cases. For a free initial assessment of whether litigation financing is an option for your case, you can contact RechtStark.
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.