severance pay

noun · Abfindung

Severance pay is the Abfindung, and the first fact about it is negative: German law knows no general statutory severance entitlement on dismissal. Most Abfindungen are negotiated, in the settlement after a Kündigungsschutzklage or in an Aufhebungsvertrag; the statutory routes are § 1a KSchG, the Sozialplan and the court-ordered dissolution of §§ 9, 10 KSchG, each with its own conditions.

Which translation, when

der Mythosthe starting point: there is no general statutory claim to an Abfindung when an employment relationship is terminated; the bulk of severance payments arise from bargaining, the court settlement after a dismissal-protection claim and the Aufhebungsvertrag first among the vehicles, and the familiar half a gross monthly salary per year of service is a negotiating custom, not a guarantee.

die gesetzlichen Wegethe routes: § 1a KSchG gives a claim where the employer dismisses for operational reasons, states in the notice letter that the dismissal is operational and that an Abfindung follows if no claim is filed, and the employee lets the three-week period for the Kündigungsschutzklage pass, at half a monthly earnings figure per year of service; the Sozialplan of § 112 BetrVG carries severance schemes in works-council establishments undergoing a Betriebsänderung, with the Nachteilsausgleich of § 113 BetrVG behind it; and the court can dissolve the relationship against payment, §§ 9, 10 KSchG.

die Kappen der Auflösungthe ceilings: dissolution under § 9 KSchG happens only on application and only where continuation is unreasonable, it is not the automatic sequel of an invalid dismissal; § 10 KSchG caps the court-set Abfindung at twelve monthly earnings, fifteen where the employee has turned fifty with fifteen years of service, eighteen where fifty-five with twenty; figures of the statute, not of the market, which routinely settles elsewhere.

Why

Severance pay translates as Abfindung, and the word-pair is the easy part; the hard part is the assumption English drafting carries with it. In many common-law and international settings a severance entitlement reads as the normal statutory consequence of dismissal, and machine output happily writes die gesetzliche Abfindung into German prose. German law starts from the opposite point: there is no general statutory claim to severance on termination. Where dismissal protection applies, the sanction of an unjustified dismissal is invalidity and continued employment, not money, the Kündigungsschutz entry holds that contrast, and the Abfindung enters mostly through bargaining, the settlement after a Kündigungsschutzklage and the Aufhebungsvertrag being the standard vehicles, with half a gross monthly salary per year of service as a customary anchor rather than a rule. The statutory routes are three and narrow. § 1a KSchG turns an operational dismissal into a priced offer: if the notice letter states the operational ground and announces the Abfindung, and the employee lets the three-week claim period pass, the claim arises at half a monthly earnings figure per year of service. The Sozialplan of § 112 BetrVG carries collectively negotiated severance schemes where an establishment with a works council undergoes a Betriebsänderung, the Nachteilsausgleich of § 113 BetrVG standing behind a breach. And §§ 9, 10 KSchG let the court dissolve a relationship that has become unreasonable to continue, on application only, against an Abfindung capped at twelve monthly earnings, fifteen from age fifty with fifteen years of service, eighteen from fifty-five with twenty. A translation that keeps these routes apart, and resists the phrase gesetzliche Abfindung outside them, tells the German reader the truth the English term quietly overstates. The tax treatment of severance moves with the tax statutes and stays out of this entry.

Typical mistakes

There is no general statutory severance claim on dismissal, so die gesetzliche Abfindung outside § 1a KSchG, Sozialplan and §§ 9, 10 KSchG promises what the law does not give.
The half-salary-per-year figure is a negotiating custom, fixed by statute only inside § 1a KSchG, so presenting it as a general entitlement misstates its standing.
Dissolution against severance under §§ 9, 10 KSchG needs an application and unreasonableness, so it is not the automatic sequel of winning a dismissal case.

What matters

Drafting or translating a settlement or termination package: the rendering should say Abfindung, name the route it travels, § 1a KSchG, Sozialplan or court dissolution, and avoid gesetzliche Abfindung wherever the payment in truth rests on bargaining.

Authority

§ 1a KSchG
§§ 9, 10 KSchG
§ 112 BetrVG

What the machine misses

The machine writes Abfindung for severance pay correctly, and then imports the English assumption around it, as if a statutory severance entitlement attached to every dismissal; German law knows no general claim, the routes are § 1a KSchG, the Sozialplan and the court-ordered dissolution of §§ 9, 10 KSchG, and a text promising die gesetzliche Abfindung outside them promises what the statute does not give.

See what the machine does with this clause →

Examples

severance pay	Abfindung
a severance payment of half a monthly salary per year of service	eine Abfindung von einem halben Monatsverdienst je Beschäftigungsjahr
the court dissolved the employment relationship against payment of severance	das Gericht löste das Arbeitsverhältnis gegen Zahlung einer Abfindung auf
under the social plan	nach dem Sozialplan

More notes on these sections

compensation Entschädigung

redundancy betriebsbedingte Kündigung