Germany’s notoriously expensive severance culture is drawing fresh scrutiny as companies restructure and politicians mull reforms. Yet a recent high-court decision is adding new hurdles for employers, especially when terminating staff with disabilities.
On 29 January 2026, the Federal Labour Court (Bundesarbeitsgericht, docket 2 AZR 128/25) ruled that a dismissal during the probationary period is void if the employer failed to consult the representative body for severely disabled employees. That consultation obligation now applies from the very first day of work — a tightening of previous practice.
The ruling lands as corporate layoffs accelerate. Gardena, the garden-tool manufacturer owned by Sweden’s Husqvarna Group, plans to eliminate roughly 250 production jobs by the end of 2028, blaming falling demand and increased automation. In such operational redundancies, employers must conduct a
Severance: Germany versus Switzerland — a 12-fold gap
A worker in Germany who loses a job through restructuring can expect an average severance package worth 31 months’ salary, according to recent data. In Switzerland the figure is just 2.5 months. The result: German payouts are twelve times higher than Swiss ones.
That gap reflects fundamental legal differences. Germany has no general statutory right to severance — payments typically arise from negotiated settlements or social plans. In practice, courts and employers often apply a rule of thumb: half a month’s gross salary per year of service. For managers, the benchmark rises to a full month per year.
Between 2024 and early 2026, DAX-listed companies alone are estimated to have spent €16 billion on severance payments. That hefty bill has caught policymakers’ attention. Officials from both the economics and finance ministries have signalled openness to loosening dismissal protection. A legislative package could arrive before the summer recess of 2026.
Three-week window and the Aufhebungsvertrag trap
Anyone challenging a dismissal must file a lawsuit within three weeks of receiving the written notice. Miss the deadline and the termination becomes legally unchallengeable. That tight timeline puts pressure on employees to act fast, especially when offered a mutual separation agreement — an Aufhebungsvertrag. Lawyers recommend a seven- to 14-day cooling-off period before signing, to weigh tax consequences and possible benefit suspension.
The number of unemployed managers jumped 14% in 2025 to about 49,000, underscoring how even senior staff are vulnerable in the current environment.
EU pay transparency stalls, bonus scheme dies
The EU Pay Transparency Directive, originally due for transposition into German law by 7 June 2026, is now unlikely to be implemented before 2027. While the public sector must already comply with the directive’s disclosure and transparency requirements, private companies are urged to align their compensation systems with EU goals — but face no immediate deadline.
Meanwhile, a proposed tax-free relief bonus of up to €1,000 for employees failed. The Bundesrat rejected the plan on 8 May 2026, as German states refused to shoulder the lost tax revenue.
On a related note, there is no general statutory entitlement to paid special leave for bereavement in Germany. Exceptions exist only where a collective agreement or company contract — such as the public-sector TVöD — specifically provides for it.
