Employment Law2026-10-05

Will I lose my protection against unfair dismissal as a high earner in 2027 — and what will my severance be worth then?

From 2027 the coalition wants to make it easier to buy out top earners with a severance payment. What this means in practice for your protection against dismissal and the size of your severance.

You are well paid. Perhaps you have no staff responsibilities. Even so, you have heard that something is set to change for higher earners when it comes to protection against dismissal. The concern is well founded. It does not, however, quite capture the heart of what is actually planned. I have already explained the basics of a severance entitlement following a dismissal in a separate article: Severance on dismissal. This article deals with the special situation that is set to affect high earners from 2027. I will show you what is really shifting, from when, and what it means for a possible severance payment.

In brief

You will not lose your protection against dismissal as such. A dismissal will still have to be socially justified in future, otherwise it is invalid. Following the coalition’s decision of 02.07.2026, it is the legal consequence of a successful unfair dismissal claim that is set to change. For income above a certain threshold, your employer would then be able to “buy you out” of the business with a severance payment. To do so, it would no longer need to put forward any reasons. At present, this applies only to senior managers with the authority to hire and dismiss, and to certain top earners in the financial sector. The whole thing is planned for 01.01.2027. Exactly how it will be framed remains open.

How I can help you

Assessing whether and when you would be affected by the planned new rules
Reviewing your current dismissal under the law applicable until then
Calculating a realistic severance range under § 10 KSchG for your case
Representing you in an unfair dismissal claim while the existing law still applies
Monitoring the legislative process and advising you in good time as soon as a draft bill is available

What applies today — and what is set to change in 2027

Under § 1 of the Protection Against Dismissal Act (KSchG), a dismissal is invalid if it is not socially justified. It is socially justified only if it is based on grounds relating to your person or your conduct, or is supported by pressing operational requirements. The planned reform changes nothing about this. In 2027, too, the employer must be able to justify a dismissal on the merits — regardless of how much you earn.

The real lever lies in § 9 KSchG. The labour court can find that your dismissal was invalid. In that case, instead of your continued employment, the employment relationship can also be dissolved against payment of a severance. If you, as the employee, apply for the dissolution, the bar is comparatively low: it need only be unreasonable to expect you to continue the employment relationship. If your employer applies for the dissolution, it must at present put forward reasons. Those reasons must show that further cooperation serving the aims of the business cannot be expected. In practice this bar is high. The courts do not treat it as a mere formality.

It is precisely this bar that already falls away today in two exceptional cases. Under § 14 (2) KSchG, the employer’s application for dissolution requires no justification. This applies to senior managers with the authority to hire and dismiss. Under § 25a (5a) of the Banking Act (KWG), the same applies to risk takers at significant institutions in the financial sector. The condition is that their annual fixed remuneration exceeds three times the income threshold for state pension contributions (Beitragsbemessungsgrenze). In both cases the protection against dismissal remains intact in principle. But after losing an unfair dismissal claim the employer can buy you out rather than keep you on.

According to the agreement of 02.07.2026, the coalition wants to extend this model from 01.01.2027. It would then affect all employees whose income exceeds 1.75 times the income threshold for state pension contributions — on current figures, roughly 177,000 to 180,000 euros gross per year. The decisive difference from the existing exceptions: it would no longer turn on your position or staff responsibilities, but solely on your income. A highly paid professional with no management duties whatsoever would thus be just as affected as a manager. Exactly how the threshold will be defined has not yet been settled on the current state of affairs. It is open, for example, whether variable remuneration such as bonuses will count. A draft bill is expected in 2026/2027.

What this means for an existing or impending dismissal

For a dismissal you receive in 2026, the law as it stands today applies. The reform is not due to take effect until 01.01.2027. As a rule it does not operate retroactively on dismissals already given. As long as no enacted law is in place, the high justification bar under § 9 KSchG continues to apply to the employer. That holds true even if you earn well above the future threshold.

In practical terms: the three-week deadline for bringing an unfair dismissal claim continues to run unchanged. Missing it would be a mistake quite independently of the reform debate — and one that cannot later be cured. Only an unfair dismissal claim that has been won, or at least brought, opens up the route to dissolution against severance under § 9 KSchG at all. Without a claim, this mechanism simply does not exist.

What the severance is worth when the threshold applies

Even if the employer could in future buy you out without any justification, the amount of the severance remains tied to § 10 KSchG. The statute sets a maximum figure, not a fixed one:

Standard case: up to twelve months’ earnings
From age 50 and at least 15 years’ service: up to 15 months’ earnings
From age 55 and at least 20 years’ service: up to 18 months’ earnings

These higher figures fall away if, at the time of dissolution, you have already reached the standard retirement age. What counts is the point in time set by the court under § 9 (2) KSchG. Under § 10 (3) KSchG, a month’s earnings means what is due to you for your regular working hours. The relevant month here is the one in which the employment relationship ends. This includes cash and benefits in kind — for instance, basic salary and a company car as a non-cash benefit. For irregular, one-off elements such as an annual bonus, this has to be assessed case by case. The wording of the statute looks to regular remuneration, not to everything that happened to accrue in the year in question.

Important for high earners: the upper limit under § 10 KSchG is not being raised by the planned reform. What changes is not the amount of the severance, but your negotiating position beforehand. Until now you could use continued employment as leverage in settlement talks where the dismissal was invalid. That leverage disappears once the employer can buy you out without any justification in any event.

A typical case

A senior developer at a medium-sized industrial company, on a salary of 190,000 euros a year and with no authority whatsoever to hire or dismiss, receives a redundancy dismissal. The court finds that the social selection process was flawed. The dismissal is therefore invalid; in principle she would have to be kept on. Under the law as it stands, the employer would have to put forward concrete reasons for a breakdown in cooperation if it still did not want her back — and it frequently fails to do so. Under the rules planned for 2027, the picture would be different if her salary lies above the threshold then in force. Despite being classed as an ordinary employee with no management role, she would then be in the same boat as senior managers already are today: the employer could push through the application for dissolution without any justification at all. The severance would follow the same calculation under § 10 KSchG. She simply would no longer have any choice about accepting it.

Common mistakes

Assuming protection against dismissal will disappear entirely in 2027. It remains in place — all that is affected is the legal consequence of a successful claim.
Treating an ongoing unfair dismissal claim as hopeless because of the reform debate. The law as it stands today continues to apply until a statute actually takes effect.
Missing the three-week deadline because you are counting on a severance anyway — without a timely claim there is no dissolution mechanism.
Confusing dissolution against severance under § 9 KSchG with a termination agreement (Aufhebungsvertrag). Both lead to a severance, but they have different requirements and different consequences for unemployment insurance.
Taking the maximum figure under § 10 KSchG to be a guaranteed amount rather than an upper limit.

Frequently asked questions

Do the new rules also apply to a dismissal I have already received?

Not as things currently stand. The reform is due to take effect on 01.01.2027. As a rule it does not operate retroactively on dismissals already given, unless the legislature adopts a different transitional provision.

Does my bonus count towards the income threshold of 1.75 times the contribution assessment ceiling?

This has not yet been settled. The existing model in § 25a (5a) KWG looks to annual fixed remuneration, not to variable elements. Whether the planned new rules follow that pattern will only become clear from the draft bill.

Does this affect me even without a management position?

Yes. That is the key difference from today’s exception for senior managers under § 14 (2) KSchG. The planned threshold turns solely on the level of income, not on staff responsibilities or seniority.

Do I risk a benefit suspension period on my unemployment benefit if my employer buys me out in this way?

The suspension period (Sperrzeit) under § 159 SGB III requires that you brought about your own unemployment. The position is different where the court, on the employer’s application, orders a dissolution — and does so following an invalid dismissal that the employer itself declared. That differs from a termination agreement you have signed yourself. The precise classification depends on the individual case and should be clarified before the proceedings conclude.

Is it still worth my while bringing an unfair dismissal claim at all now?

Yes. As long as the law as it stands today applies, your negotiating position with a high income is if anything stronger than it would be after the planned reform. Anyone who hesitates now may be giving away an important piece of leverage. That leverage is set to disappear from 2027.

Your next step

Have you received a dismissal as a high earner, or do you fear how your employer will react to a claim? Then it is well worth taking a realistic look at the likely severance figure using the rule-of-thumb formula. That way you know what is actually being negotiated: Calculate severance amount.

This article provides general information and is no substitute for legal advice in an individual case. Last updated: 2026-10-05.

Christian Czirnich, Rechtsanwalt (attorney at law), Kirchseeon near Munich

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