What employees are entitled to: Lawyer on severance pay: "The most I negotiated was a million euros"

This article is adapted from the business magazine Capital and is available here for ten days.

What employees are entitled to: Lawyer on severance pay: "The most I negotiated was a million euros"

This article is adapted from the business magazine Capital and is available here for ten days. Afterwards it will only be available to read at www.capital.de. Like stern, Capital belongs to RTL Deutschland.

Mr. Bourzutschky, companies such as Bayer, BASF and the automotive supplier ZF are currently thinning out their workforces. In Germany, too, this affects thousands of employees, ordinary employees and managers. Has this wave of layoffs already reached you? The wave of layoffs is already slowly building up. Many companies initially did not fill positions, then gave up on temporary workers and are now resorting to layoffs as a final step. These preliminary stages that herald the wave of layoffs are all already underway and I am now expecting a larger wave.

The pharmaceutical company Bayer is cutting off hundreds of employees in Germany. Those who leave should receive 1.2 times their gross monthly salary times their years of service plus social allowances for children. If you go quickly, the company will pay you a sprinter's bonus with a factor of 1.5 of your monthly salary up to a maximum of 35 years of service - with a fictitious gross salary of 7,000 euros, this makes a maximum of 367,500 euros. From the perspective of the severance pay professional - is that generous or stingy? Bayer has already paid higher severance payments. In the last major wave of layoffs in 2019, Bayer offered up to 1.9 gross salaries as a sprinter bonus in order to part with employees. But the amount of the severance pay is of course also based on the economic situation and prospects. But in principle Bayer is doing what I advise all employers to do. It is better to settle generously than to invest a lot of money in a long legal dispute. And with a sprinter bonus you can simply say goodbye to many managers without major pressure or conflict.

Dr. Alexander Bourzutschky is a specialist lawyer for labor and social law and associate partner at the Rödl law firm

But what advice do you give employees in such a situation – take money or wait? It depends. In general, the better my termination is as an employer, the less willing I am to pay severance pay because I tell myself: If it holds up, then I don't have to pay anything. Conversely, if I know for sure that my termination will never last, then I have to spend more money if I still want to get rid of the employee.

You often represent managers to their employers, what's in it? The highest I once negotiated was a million euros. But that's quite an outlier. However, there are often higher six-figure amounts.

Which industry pays the best? And are there differences between corporations and family businesses? I have regularly seen very high severance payments at BMW. Regional family businesses are also sometimes very generous.

Is everyone who is terminated actually entitled to severance pay? I have to disappoint you. There is no legal right. In the law, this possibility is only indicated in one place, namely when the employee waives a claim for protection against dismissal. This is where the so-called rule of thumb comes from: half a month's salary per year of employment. The employer can offer this voluntarily if, in return, the employee waives the right to sue for his job. But it's voluntary and the amount anyway.

But many people base themselves on this half-month salary per year of employment as severance pay. For normal employees, this is the rule of thumb. Managers then end up in completely different spheres.

The collapse of René Benko's real estate and trading empire is currently shaking the republic. Thousands of employees at Kaufhof stores fear for their jobs. What chances does a Kaufhof employee have of receiving severance pay in the event of bankruptcy? I rarely give employees hope in insolvency cases that there will still be reserves left for severance pay somewhere. And if the entire group of companies is on the rocks, as is the case in the Benko case, where everything collapsed like a house of cards, there won't be many financial options left. Bankruptcy and severance pay is usually a very, very sad story.

The punching and stabbing of the various creditors is just beginning. The list is long, investors, the state - where does the employee fit in? The employee is entitled to so-called preferential satisfaction, which means he gets it faster than others. But the problem lies elsewhere. In insolvency proceedings, a quota is distributed, which means that you check how many claims there are and put them in relation to the money available. In the end you only get a fraction of what you should actually get. And that also applies to employees. However, the Federal Employment Agency pays so-called insolvency compensation for three months. This means that employees have at least short-term protection. Incidentally, the three months are also the notice period that the insolvency administrator must adhere to.

This special right of termination in the event of insolvency cannot be challenged? That makes little sense. Negotiations about social plans and reconciliation of interests are probably already taking place behind the scenes. This is what the works council, management and insolvency administrators negotiate. They put together an overall package and it is then very difficult for the individual to go beyond this package.

What if salaries haven't been paid for a while, meaning an employee has even higher outstanding payments. This all falls into the bankruptcy estate and is then only offset as a percentage. You can't get that back either.

A department store employee recently complained bitterly that all the managers had paid themselves bonuses, but that she and her colleagues were now looking stupid because there was no more money for severance pay. The insolvency administrator can actually do something about this. He is entitled to recover payments such as bonuses if the company was already over-indebted at that moment or the financial difficulties were apparent. This is then an insolvency challenge. The people who caused this are obliged to repay it. Anyone who did this with knowledge of the imbalance is actually committing a crime. With this club, the insolvency administrator can drive the mass upwards in order to perhaps even achieve a continuation or a less dramatic break-up and dissolution.

This not only applies to bonuses, but also possibly distributions to investors that are a bit too generous? Yes. All payments that were made at a time when they should no longer have been made, i.e. when there was impending insolvency.

And does anyone ever swing this club? Yes, that is part of the tools of an insolvency administrator. Its core task is to hold the financial mass together and increase it through challenges. And he also benefits from it himself, since his salary is calculated from the mass.

What happens if my employer is abroad. Can I also expect severance pay? Outside our European framework, the attitude is different. You ask yourself, why should they have to pay someone who they have terminated? In Austria there was a different approach. A severance payment had to be paid every time the employee was terminated if the employment relationship lasted longer than three years. However, as entrepreneurs, they no longer needed a reason for termination in this case. However, I doubt that the employee will drive better with it. Envelope on the table - and that's it. That's pretty brutal. I prefer our German system, where there are certain rules for ending an employment relationship.

Executives sometimes collect millions in severance payments, while normal employees struggle for every month's salary. Has the gap grown? The differences are already huge. Much larger packages are simply put together. If a board contract like this runs for a few more years, it will be paid out in full plus all conceivable pension entitlements. Some managers generate significant added value for the company, from which the company benefits even after they leave. If you negotiate skillfully, you can buy it at a high price. Some employers prefer to pay more if they know that their manager won't spill secrets or do dirty laundry.

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