Employment Law2026-11-12

My employer is cutting jobs 'through natural wastage' — what is my settlement agreement really worth?

If you leave voluntarily, the offer on your desk is not a thank-you — it exists because your waiver has a price. Here is how to work out what your signature saves your employer, and what you can ask for in return.

The headcount targets are fixed, but officially no one is being dismissed. Instead, a settlement agreement is sitting on your desk, with a figure and a deadline to respond, and you are expected to decide quickly. You have no way of telling whether the amount is generous or thin. That can be worked out — not with a rule of thumb, but by asking one question: what does your employer save by getting your signature?

In short

Your settlement agreement is worth exactly what the alternative route would cost your employer. Without your signature, the only option left is a redundancy dismissal — with everything they would have to prove along the way. When a company cuts jobs “through natural wastage”, it is usually taking deliberate care to avoid that route. In a court case it is the employer who must set out the urgent operational requirements and a defensible social selection. Voluntary leavers keep them — seemingly — below the relevant thresholds. As long as no dismissal has been issued, no statutory deadline is running against you. The deadline in the offer was set by the employer, not by the law.

How I can help

I calculate for you what an unfair-dismissal case would actually cost your employer in your situation — that, not a rule of thumb, is the basis for your negotiation.
I review the reconciliation of interests, the social plan and the terms of the programme, and check whether your offer falls short of them.
Before you sign, I check the draft for the points that can cost you your unemployment benefit.
I negotiate the items that often bring more than the settlement sum itself: the termination date, garden leave, variable pay, your reference, and repayment clauses.
I will also tell you when the offer is a good one and there is nothing to be gained by negotiating.
I set out the costs with you in the initial consultation under the RVG (statutory lawyers’ fees), and I check at the same time whether a legal-expenses insurer will cover them.

Why your employer is choosing not to dismiss you

A redundancy dismissal is socially unjustified if it is not warranted by urgent operational requirements (§ 1 Abs. 2 KSchG). Those requirements must stand in the way of continued employment in that business. It is the employer who has to prove the facts that warrant the dismissal (§ 1 Abs. 2 Satz 4 KSchG). On top of that, in making the selection they must give adequate weight to length of service, age, maintenance obligations and severe disability (§ 1 Abs. 3 KSchG). This applies once your employment has lasted more than six months (§ 1 Abs. 1 KSchG), and the business must be above the small-business threshold.

Handing out settlement offers instead shifts the risk: you waive your rights voluntarily, and the employer has nothing to prove. Then there are the thresholds they would rather stay below. Mass redundancies must be notified to the Federal Employment Agency in advance once certain numbers are exceeded within 30 calendar days — more than 5 where more than 20 and fewer than 60 people are employed, 10 per cent or more than 25 where at least 60 and fewer than 500 are employed, and at least 30 where at least 500 are employed (§ 17 Abs. 1 KSchG). The key provision is sentence 2: other terminations brought about by the employer count the same as dismissals. It is similar with the social plan: where the operational change consists solely of a reduction in staff, a social plan can only be enforced above the figures in § 112a Abs. 1 BetrVG. There, departures under settlement agreements that the employer has brought about for reasons connected with the operational change also count as dismissals.

In short: “voluntary” does not automatically mean “does not count”. If your departure was brought about by the employer, it may count towards those figures. And whether it counts is one of the levers over the amount.

The calculation: what the figure can be measured against

Do not start from the figure offered — start from the alternative scenario.

First, time. Without your signature, a dismissal would have to be issued, and then the notice period under § 622 Abs. 2 BGB applies — stepped from one month after two years up to seven months after 20 years, in each case to the end of a calendar month. Those months are paid. A settlement agreement that ends things earlier is buying away your salary; that belongs in the calculation.

Second, litigation risk. If you win the unfair-dismissal case, the employment relationship continues. For the work you did not perform you can claim the agreed remuneration, because the employer was in default of acceptance (§ 615 BGB). Set off against that, however, are expenses you saved, earnings from elsewhere and earnings you maliciously failed to obtain. The longer a case drags on and the weaker the evidence for the operational grounds, the more expensive this risk becomes for the other side. That is precisely the risk you are buying off them with your signature.

Third, the benchmark figure. The widely quoted half a month’s pay per year of service appears in § 1a Abs. 2 KSchG, with any period of more than six months rounded up to a full year. But this provision only applies to a redundancy dismissal. For it to apply, the employer has to point out in the dismissal that a settlement will be payable if the time limit for bringing a claim is allowed to lapse (§ 1a Abs. 1 KSchG). Under a wastage programme you have no such entitlement — the figure is a yardstick for negotiation, not a floor. The range runs from zero to well above it.

Fourth, the ancillary items, which are regularly underestimated: the termination date, garden leave with or without offsetting of remaining holiday, a pro-rata bonus and variable pay, a company car, share or option schemes, occupational pensions, repayment clauses for training, a post-contractual non-compete covenant, and a detailed reference with agreed wording. In many cases there is more to be had here than on the settlement figure itself, because these points do not show up as a visible charge against the HR department’s budget.

Three items that make the figure smaller than it looks

Disqualification period (Sperrzeit). If an unemployed person ends their own employment and thereby brings about their unemployment intentionally or through gross negligence, this is conduct contrary to the terms of insurance. Without good cause, the entitlement is then suspended for the duration of a disqualification period (§ 159 Abs. 1 SGB III). The disqualification period for giving up work is twelve weeks. It is only shortened where the conditions in § 159 Abs. 3 SGB III are met — for example to three weeks where the employment would have ended within six weeks in any event. The facts establishing good cause must be set out and proved by whoever has them within their own sphere. The decision rests with the Employment Agency. A form of words in the agreement is not binding on them, but a clean draft improves your position considerably.

Suspension on account of a termination payment. If you receive a settlement and the employment ends too early, your unemployment benefit is suspended (§ 158 Abs. 1, 2 SGB III). “Too early” here means: without observing a period equivalent to the employer’s ordinary notice period. The suspension runs until the day on which the employment would have ended had that period been observed, up to a maximum of one year. It is capped by a proportion of 60 per cent of the settlement. That proportion is reduced by 5 per cent for every five years of service and for every five years of age above 35; it is at least 25 per cent. The practical consequence: the termination date is not a formality. Observing the notice period protects the settlement.

Tax and liquidity. Compensation payments can be taxed at a preferential rate as extraordinary income under § 34 EStG. The tax is then five times the difference calculated under § 34 Abs. 1 EStG. On its current wording, § 39b Abs. 3 EStG no longer provides for this “one-fifth” method at the payroll-tax-deduction stage — so the relief generally only takes effect through the income-tax return. Do not budget on the gross figure, then, and have the tax side worked through by your tax adviser.

How I proceed for you

Secure the position. First I establish whether any deadline is actually running at all. The three-week time limit for an unfair-dismissal claim begins when the written dismissal is received (§ 4 Satz 1 KSchG). If there is no dismissal, you have time — and that changes the tone of the negotiation.
Gather the documents. The reconciliation of interests and social plan (§§ 111, 112 BetrVG), the programme terms, job postings, and organisation charts before and after the cuts.
Calculate the alternative scenario. Notice period, the risk under default-of-acceptance rules, how well the operational grounds and the social selection would hold up, and the thresholds under § 17 KSchG and § 112a BetrVG.
A counter-offer with reasons. Not simply “more”, but a figure with a calculation behind it, plus the ancillary points.
Lock down the wording. Termination date, garden leave, the wording of the reference, the settlement clause. A settlement agreement requires written form; the electronic form is excluded (§ 623 BGB).
If no agreement is reached: wait and respond to the dismissal — then within three weeks. Otherwise the dismissal is deemed valid from the outset (§ 7 KSchG).

How this typically plays out

An employee at a municipal utilities group, just under twelve years’ service, in a department due to shrink from nine posts to six. He is handed a settlement agreement with a lump sum and termination at the end of the month in six weeks’ time, with a reply due “by Friday”. On review it turns out that his statutory notice period would run well beyond the date offered, that two comparable colleagues with shorter service are staying, and that the social plan provides more favourable terms for his situation than the programme offer does. So the negotiation is not just about the amount, but about the termination date, paid garden leave and the pro-rata bonus. On top of that comes the question of whether his departure counts towards the thresholds. How it ends depends on the individual case; but the negotiation is at least conducted on a different footing than “by Friday”.

Common mistakes

Mistaking the in-house deadline for a statutory one. “By Friday” is negotiating pressure. Ask for an extension — in redundancy programmes it is often granted.
Being grateful. The offer comes because your waiver has a value. This is not a gesture, it is a transaction.
Looking only at the settlement sum and giving away the termination date, remaining holiday, bonus and reference.
Signing before the consequences for your unemployment benefit are clear. The disqualification period and the suspension period can eat up a substantial part of the gain.
Believing verbal assurances. Anything not in the written agreement does not exist — and the electronic form will not do here.
Not comparing the offer against the social plan. Programme offers are not always above what would be owed in any event.

If you already have the draft in front of you

Then this is the point at which the figure can still move — once you have signed, the negotiation is over. What the draft needs to contain, what matters about the termination date, and which clauses you should have struck, you will find on the page on the settlement agreement.

Frequently asked questions

Is a deadline running against me if I am only offered a settlement agreement?

Not a statutory one. The three-week time limit for an unfair-dismissal claim requires that a written dismissal has been received (§ 4 Satz 1 KSchG). The deadline in the offer comes from the employer and is negotiable. An offer can, however, be revoked or withdrawn if you fail to respond at all for too long.

It can. For the notification requirement, other terminations brought about by the employer count the same as dismissals (§ 17 Abs. 1 Satz 2 KSchG). For an enforceable social plan, a departure under a settlement agreement that the employer has brought about for reasons connected with the operational change also counts as a dismissal (§ 112a Abs. 1 Satz 2 BetrVG). What matters, then, is whether your departure was brought about by the employer — not what it is called.

Am I entitled to half a month’s pay per year?

Not as an entitlement in this situation. That figure appears in § 1a Abs. 2 KSchG. But the entitlement only arises on a redundancy dismissal in which the employer points out that a settlement will be payable if the time limit for bringing a claim is allowed to lapse (§ 1a Abs. 1 KSchG). Without a dismissal, the formula is only a benchmark: anything from zero to well above it is open to negotiation.

Can I still get out of a settlement agreement I have signed?

Employment law does not give the settlement agreement a general right of cancellation of the kind you have with a consumer contract. In exceptional cases, rescission may be available — for instance where there has been unlawful duress or fraudulent misrepresentation. Alongside that stands invalidity for breach of form: a dismissal and a termination agreement require written form, and the electronic form is excluded (§ 623 BGB). These are narrow routes — having the agreement reviewed before you sign is far more effective.

Your next step

If you have been given a figure and a deadline, there is exactly one piece of information you are missing: what your position is worth without your signature. That figure is something I work out with you before you decide. For it I need the draft, your employment contract, your most recent payslips and, if you have them, the reconciliation of interests and the social plan. You will find further topics and starting points under employment law. I act for clients nationwide; the initial consultation I hold with you by video or telephone, within whatever window of time you have left.

This article provides general information and is no substitute for legal advice in an individual case.

This article provides general information and is no substitute for legal advice in an individual case. Last updated: 2026-11-12.

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

Tell me what your settlement agreement says – I will take a look.

I read every message myself and usually reply on the next working day. What you write to me is covered by legal professional privilege from the first word, even if no engagement comes about. The initial assessment is free of charge.

See the usual order of magnitude of a severance payment at once. Calculate severance →