Employees are discussing the termination protection reform 177500, which could make dismissals easier for high earners.
What the termination protection reform 177500 means for employees
The legislative proposal provides that the general protection against dismissal under the Dismissal Protection Act (KSchG) will no longer apply to employees whose regular gross annual salary exceeds the threshold of 177,500 euros. Previously, this protection applied to all employees in companies with more than ten staff members, regardless of income. The new threshold aligns with the contribution assessment ceiling of the statutory pension insurance and is to be adjusted annually.
For affected managers, specialists, and high earners this means: Employers will in future no longer need a socially justified reason to terminate the employment relationship. A regular notice termination suffices, provided the notice period is observed. The special protection against arbitrary or socially unjustified dismissals thus falls away completely. This reform shifts the burden of proof and litigation risk clearly to the employee side.
Why the income threshold is problematic
Critics warn that the reform creates a two‑class system in dismissal protection. Those who are just above the threshold lose protection, even though their economic dependence on the job often remains high. Moreover, gross annual salary is variable – bonuses, stock options, or other variable pay components can cause the threshold to be exceeded in one year but not the next. This uncertainty makes planning difficult for both sides.
Another point: The threshold does not only affect traditional managers. Experienced IT specialists, doctors in managerial positions, or sales managers with high commissions can quickly move into the bracket above 177,500 euros. Consequently, the group of potentially unprotected employees expands considerably. This threshold therefore affects a broader group than often assumed.
Impact on severance negotiations
The removal of dismissal protection weakens the bargaining position considerably. Without the threat of a dismissal protection claim before the labor court, the most important leverage to secure an appropriate severance is missing. Under the termination protection reform 177500, the usual leverage of a dismissal protection claim is gone. Employers can now more readily push for an amicable separation with a low severance, as their litigation risk decreases.
Nevertheless: Even without general dismissal protection, special dismissal protection (e.g. for pregnancy, severe disability, or works council membership) and the general principle of equal treatment still apply. Moreover, a dismissal can still be formally ineffective – for example due to errors in the dismissal letter, lack of consultation with the works council, or failure to observe the written form requirement. These points of attack should be examined in every negotiation.
Experience shows that employers often still pay a severance even when dismissal protection does not apply, in order to buy legal certainty and avoid protracted disputes. The amount then depends more on individual bargaining power than on the classic rule of thumb (0.5 to 1 gross monthly salary per year of employment). See also our article Why many severance payments are too low and what good lawyers do differently.
Typical pitfalls when calculating annual earnings
- Variable compensation: Bonuses, commissions, and royalties count toward gross annual earnings if they are paid “regularly”. A one‑off special bonus can push the threshold over the limit.
- Benefits in kind: Company cars, stock options, or housing subsidies are included at their monetary value.
- Part‑time and parental leave: When working hours are reduced, the salary is fictitiously increased to a full‑time equivalent – this can artificially raise the threshold.
- Year‑end: The decisive factor is the earnings at the time of dismissal. A salary increase shortly before termination can cost the protection.
Employees should document their compensation components precisely and, if in doubt, clarify early on whether the threshold is actually exceeded. A tax advisor or an employment lawyer can provide clarity here. This threshold makes a careful examination of the compensation components indispensable.
Recommendations for affected employees
- Have the dismissal reviewed: Even without general dismissal protection, it is worthwhile to have a lawyer review the dismissal within the three‑week filing period. Formal errors or violations of special rights often make the dismissal contestable. Our guide “Dismissal received – what now?” gives an initial orientation.
- Signal willingness to negotiate: Do not reject a first offer outright; instead, have it examined with legal counsel. Often the severance can be considerably increased through skillful negotiation.
- Secure reference and release: In addition to the severance, a qualified job reference and a mutually agreed release with continued payment of wages are important negotiation goals.
- Avoid blocking period for unemployment benefits: A termination agreement without a valid reason can trigger a blocking period of up to twelve weeks for unemployment benefits. Pay attention to formulations that document the “valid reason” (e.g. an impending operational dismissal).
- Check legal expenses insurance: Many policies also cover dismissal protection proceedings even without general dismissal protection – provided the lawsuit has a prospect of success (e.g. due to formal errors).
How RechtStark assists in this situation
RechtStark supports affected employees as a litigation funder: We review free of charge and without obligation whether a dismissal protection lawsuit is worthwhile in the high‑earner segment and whether litigation funding is an option – also against the backdrop of the termination protection reform 177500. The legal representation itself is always provided by an independent lawyer specializing in employment law. In our article Dismissal protection reform: What the new threshold of 177,500 euros means for employees we have already elaborated the legal details. Furthermore, it is worth looking at the legal‑socio‑political analysis of the planned reform to grasp the bigger picture.
If you have received a dismissal or would like to have a termination agreement reviewed, please contact us promptly. The three‑week filing period under § 4 KSchG starts upon receipt of the dismissal – do not miss it. This threshold requires swift and strategic action.
Conclusion: Do not give up without a fight
This threshold shifts the balance of power in favor of employers, but it does not abolish all protective mechanisms. Those who know their rights, exploit formal errors by the other side, and negotiate professionally can still obtain fair severances and good terms even above the income limit. The key lies in a prompt response, a thorough examination of the dismissal requirements, and legal counsel from the outset. This reform therefore demands careful strategy.
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.