Severance pay & golden handshakes

The reimbursement for a dismissal could involve transitional statutory compensation, fair compensation, the result of negotiations or a golden handshake.

Transitional compensation

In principle, anyone who is 18 or over and who has been employed for two years or longer has the right to transitional compensation as soon as the employer terminates the employment agreement. Its size depends on the salary and the duration of the employment and a maximum sum applies.

Compensation

In (exceptional) circumstances, the employee also has a right to an additional reimbursement upon dismissal, the so-called fair compensation. This is due, for example, if the employer has behaved in a seriously reprehensible way or has deliberately poisoned the employment relationship.

If the parties make a settlement agreement and terminate the employment agreement with mutual approval, they can agree to what they like. The right to the transitional compensation and the fair compensation lapses after the termination agreement has been concluded. Usually the employee will negotiate a reimbursement for the dismissal that is equal to or higher than the legally prescribed reimbursement for the transition.

Employment agreement & golden handshake

Finally, the parties may agree in the employment agreement at the start of the employment the parties agree on an (additional) reimbursement for redundancy. This contractual reimbursement for redundancy is also known as a golden handshake. In agreements with members of the board of directors and top employees it is particularly common to negotiate a high sum for the transitional compensation in a contract.

If you have any questions about transitional compensation, we invite you to contact us.

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