💡 Key Points
Severance payments in termination agreements are legally unlimited and depend on salary, length of service, age, and negotiating position. Skillful negotiation and tax planning can increase the amount. The offered severance is not always optimal, so legal advice can be crucial.
As the employment law firm Allenstein Legal in Berlin, we advise employees daily on the maximum amount of their severance pay in termination agreements. In this article, we explain which factors influence the amount of your severance pay and how you can get the maximum.
1. Is there a legally defined maximum amount for severance payments?
The good news first: There is no legal upper limit for severance payments. The amount of your severance pay is a matter of negotiation and can theoretically be unlimited. In practice, however, certain benchmarks have been established that serve as guidance.
Case example: A managing director with 15 years of service and an annual salary of €120,000 was able to achieve a severance payment of €180,000 (1.5 monthly salaries per year) through skillful negotiation.
2. Which factors determine the maximum severance amount?
The maximum severance amount is influenced by various factors:
- Length of service (the longer, the higher)
- Amount of current salary
- Age and prospects in the job market
- Negotiating position and protection against dismissal
- Economic situation of the company
- Urgency of termination for the employer
3. How can you negotiate a higher severance payment?
To achieve maximum severance pay, we recommend the following strategies:
-
Know your negotiating position:
- Is there special protection against dismissal?
- How urgently does the employer want the separation?
- What alternatives do you have?
Use negotiating room:
- Offer flexible termination dates
- Include additional benefits (company car, bonuses, etc.)
- Negotiate bridging payments
4. Which tax aspects must you consider with high severance payments?
With high severance payments, tax considerations play an important role:
- The one-fifth rule under § 34 EStG can reduce the tax burden
- Review distribution over two calendar years
- Use tax allowances
- Consider possible connections with retirement provision
Case example: With a severance payment of €100,000, a tax saving of €15,000 was achieved through skillful distribution over two calendar years.
5. When should you reject an offered severance payment?
The highest possible severance pay is not always the best solution. You should consider rejection if:
- Your position is particularly protected
- The grounds for dismissal are not sound
- You would have good chances in unfair dismissal proceedings
- The offered amount is significantly below the usual range
- Your job prospects are currently poor
6. Conclusion
The maximum amount of your severance pay depends on many factors and is always a matter of negotiation. As a rule of thumb: The better your negotiating position and the more important a quick settlement is to the employer, the higher your severance pay can be. We at the law firm Allenstein Legal in Berlin recommend that you always seek legal advice before negotiating a termination agreement. Only in this way can you be sure that you get the maximum for yourself and do not overlook any important aspects.
7. FAQ
No, the amount is a matter of negotiation and depends on salary, length of service, and protection against dismissal.
Length of service, salary, age, prospects in the job market, and urgency for the employer.
Through skillful negotiation, flexible termination dates, additional benefits, and tax optimization.
When the position is protected, the dismissal is questionable, or the amount is significantly too low.