Negotiating a Severance Package in Germany: What You Need to Know

If you’re facing job termination or your contract is coming to an end in Germany, you might be wondering how to navigate the process of negotiating a severance package. While severance pay is not always legally required in Germany, many employers offer it as part of a termination agreement. Knowing how to negotiate can make a huge difference in securing a better outcome for yourself.

In this post, I’ll walk you through everything you need to know about negotiating a severance package in Germany and share practical tips on how to approach your employer, what to negotiate for, and how to maximize the benefits.

If you haven't received a formal termination yet but suspect it’s coming or your contract may not be renewed, I highly recommend reading my blog post titled About to Lose Your Job? Act Now!. If you did receive a formal termination letter already here is Your 10-Step Checklist: What to Do When You’re Fired in Germany.

1. Understanding Severance in Germany: What You Need to Know

In Germany, severance pay is typically not required by law, but it is commonly offered in certain situations. The amount of severance pay is usually calculated based on a general rule of half a month’s salary for every year of service.

Here’s when severance is often offered:

• Company restructuring or layoffs

• Termination by mutual agreement

• When the employer offers severance in exchange for waiving legal action or accepting the termination

However, you can still negotiate severance even if it’s not automatically offered.

Pro Tip: The key to success is approaching the negotiation from a position of knowledge and preparation. Know your rights, but also be realistic and flexible.

2. Set Your Emotions Aside and Stick to the Facts

Facing job termination can be an emotional experience, especially if it comes as a surprise. You might feel hurt, shocked, or even angry. However, to maximize your chances of success during the negotiation, it’s crucial to set those emotions aside and focus on the facts.

Staying calm and composed allows you to approach the conversation with a clear head. Hostility will work against you, so it’s in your best interest to keep the discussion professional and focused on solutions. While it’s normal to feel emotional, negotiating from a place of clarity and reason will help you secure a better deal.

Pro Tip: Take a step back before your meeting. Breathe, reflect, and prepare. Going in with a plan will help you stay focused and clear-headed.

3. Prepare Before the Negotiation

Before starting any negotiation, preparation is essential. You need to understand your position and what your employer might be willing to offer.

Here are steps to prepare:

• Know your rights: Review your employment contract and German labor law. Be sure of your notice period, entitlements, and any special terms.

• Assess your situation: Why is your position being terminated? Are you being laid off, or is your contract simply not being renewed? This will help you frame your negotiation.

• Understand what your employer values: If you’re still on good terms with your employer, they may be willing to offer more in exchange for a smooth transition.

Pro Tip: If you’re unsure about your legal standing or need help preparing for negotiations, I offer a free one-hour session to help you organize your thoughts and map out a negotiation plan. Book your session here.

4. What to Ask for in a Severance Package

A severance package isn’t just about financial compensation. There are other benefits you can negotiate to make your transition easier.

Here are some points you might want to include in your severance negotiation:

• Financial compensation: Ask for a severance payment, but remember that it is often calculated as half a month’s salary for each year you’ve worked with the company. You may be able to negotiate more depending on the circumstances.

  Pro Tip: It’s best not to refer to this compensation as “severance” in official documentation. Instead, call it a “bonus.” This makes a big difference when your unemployment benefits (Arbeitslosengeld) are calculated, as bonuses are considered part of your earnings. This could be a condition you ask your employer for, especially if they will ask you to sign a mutual agreement—which is often the case when they offer a severance package.

• Extended employment period: In some cases, it will make sense to ask your employer to extend your employment for a few extra months instead of offering a lump-sum severance payment. Money-wise, this is essentially the same as you would receive your salary, which is what a severance payment typically reflects. The added benefit is that you remain employed longer and can avoid the immediate transition to unemployment. Plus, imagine being employed for an extra 3 months but not having to work—you can even travel since you won’t yet be unemployed. This trick works well, providing both financial stability and personal freedom.

• Unused benefits: Check if your employer has any unused learning and development budget or other employee benefits that could be used for courses, career coaching, or certifications before you leave. These benefits can be valuable assets for your next career move.

• Career coaching: You can request your employer to cover the cost of career coaching to help you transition smoothly into a new role. Many employers are open to offering this as part of the severance package. For employers, it’s often easier to approve a service like career coaching rather than offering additional financial compensation. It may also be cheaper for them and easier to justify, which makes this option more appealing during negotiations.

  Pro Tip: Make it easy for your employer by having a concrete plan and offer ready. Do your homework—find a coach you want to work with, get a price offer, and present it during negotiations to make it a simple approval process for your employer.

• Referral letters and LinkedIn recommendations: In addition to severance, you can negotiate for a referral letter from your employer and a recommendation on LinkedIn. This can be extremely helpful for your job search. Make sure to ask for a high-quality, state-of-the-art referral letter and request that your employer posts the recommendation on LinkedIn as soon as possible. This way, your professional network will be aware of your skills and qualifications, which can speed up the job search process.

5. How to Approach Your Employer

When it comes to actually negotiating your severance package, the way you approach your employer is key. The goal is to keep the conversation professional and positive, while still standing firm on your needs.

Here’s how to approach the conversation:

• Schedule a formal meeting: Don’t bring it up casually. Ask for a formal meeting to discuss your termination and potential severance.

• Be calm and professional: Remember, this is a business negotiation. Stay calm, focused, and clear about your requests. Being pleasant and cooperative can often help you secure a better outcome.

• Present your plan: Come prepared with specific requests and justify them logically. For example, explain why extended employment or career coaching will help you transition faster and benefit both you and the company.

Pro Tip: Try to remain flexible during the negotiation. If they can’t offer one thing, see if they can offer something else. Stay focused on getting a result that works for you.

6. Don’t Sign Anything Right Away

One of the most important tips is to never sign anything immediately. Give yourself time to review the agreement, and, if possible, have a lawyer or coach review it with you.

Here’s why:

• Legal implications: Severance agreements often include clauses that can affect your future benefits or legal standing. It’s crucial to fully understand the implications before signing.

• Room for adjustment: After reviewing the offer, you may spot areas where you can negotiate further. Having a second set of eyes on the agreement can help catch these opportunities.

Pro Tip: I offer a free one-hour session where we can discuss your severance agreement and explore additional points you may have missed. Don’t hesitate to reach out.

7. Stay Positive and Focused

Facing job termination can be tough, but it’s also an opportunity to move forward into something new. Negotiating your severance package effectively will help you make the most of your transition and ensure you’re in a better position for what’s next.

Remember, you’re not just negotiating money—you’re negotiating your future opportunities. Use this as a chance to secure what you need for the next step in your career.

Pro Tip: Maintaining a positive and professional relationship with your employer during the negotiation process can help ensure the best possible outcome. It’s easier to negotiate with someone who is willing to work with you.

Conclusion: Take Charge of Your Severance Negotiation

Negotiating a severance package in Germany may not be something you expected, but with preparation and a clear strategy, you can take control of the situation and come out ahead. By focusing not just on financial compensation, but on other benefits like career coaching, extended employment, and unused benefits, you can set yourself up for a smoother transition into your next opportunity.

Need help preparing for your severance negotiation? Book a free call with me, and let’s create a strategy that works for you. Not ready to book a call, but have a question? Write me a message.

Until our next breakthrough!