An Abfindung (severance pay) is a one-off payment from the employer on termination of employment. There is no general legal right to it. It arises through agreement (for example a termination agreement or a social plan) or in specific statutory situations such as § 1a KSchG, a court settlement, or a dissolution request under §§ 9, 10 KSchG.
At a glance
- No general statutory entitlement: an Abfindung must be agreed or provided for by law
- Typical routes: termination agreement (Aufhebungsvertrag), a social plan (Sozialplan), § 1a KSchG, a court settlement, or a dissolution request
- § 1a KSchG: if the employer offers a severance in a redundancy dismissal, the entitlement arises when the employee does not file an unfair-dismissal claim
- Negotiation rule of thumb: 0.5 gross monthly salaries per year of service (not a law, only a benchmark)
- Tax: since 2025 the employer no longer applies the one-fifth rule (Fünftelregelung) in payroll; the relief is granted only through the income tax return
- A severance payment on its own does not trigger an automatic blocking period (Sperrzeit) for unemployment benefits
How an Abfindung arises
- Termination agreement (Aufhebungsvertrag) or Abwicklungsvertrag: employer and employee agree to end the relationship and set the severance freely
- Social plan (Sozialplan): in a business change, the works council can negotiate a plan providing severance for affected staff
- § 1a KSchG: the employer offers a severance in the redundancy dismissal, and the claim arises if the deadline to sue passes without an unfair-dismissal claim; the amount is then 0.5 gross monthly salaries per year of service (periods over six months count as a full year)
- Court settlement: in an unfair-dismissal case the parties often agree on a severance to end the proceedings
- Dissolution request: if the dismissal is invalid but continuing the relationship is unreasonable, the court can dissolve it against a severance
FAQ
Do I have a right to an Abfindung?
Not automatically. A right exists only if it follows from a contract, a Sozialplan, § 1a KSchG, a court settlement, or a court-ordered dissolution. In practice severance is often paid because both sides want to avoid the litigation risk of an unfair-dismissal claim, not because the law requires it.
How large is a severance usually?
The common rule of thumb is 0.5 gross monthly salaries per year of service. This is not a statutory figure but a benchmark from negotiation practice, and it also matches the standard amount under § 1a KSchG. Depending on bargaining position, litigation risk, and the employer's interest in a quick separation, the actual amount can be well below or above this.
How is an Abfindung taxed?
An Abfindung is taxable employment income but exempt from social security contributions. For the reduced taxation under the one-fifth rule (Fünftelregelung), a change applies from 2025: the employer no longer applies it directly in payroll. The employee obtains the relief only through the income tax return, so more wage tax is withheld first and part is refunded later.
Does a severance reduce unemployment benefits?
A severance alone does not trigger a Sperrzeit (blocking period). A Sperrzeit rather threatens where the employee co-causes the ending, for example through a termination agreement without good cause. If a proper notice period is not observed, the unemployment benefit claim can also be partly suspended.
Last updated: August 2026
This article provides general information and is not a substitute for legal advice in individual cases.
