Dismissal for operational reasons is one of the most common types of dismissal. A redundancy study from 2018 puts its share at 68%. However, it can be assumed that many of these dismissals do not meet all the conditions of a dismissal for operational reasons fulfill all the conditions of a redundancy.
Our article explains the criteria for dismissals for operational reasons. And it clarifies the question of whether you are entitled to severance pay.
When is a dismissal for operational reasons?
Many a dismissal comes in the guise of being for operational reasons. However, the legislator has made this type of dismissal subject to several conditions. If the employer violates even just one of these criteria, you have a good chance of contesting your dismissal.
The Federal Labor Court (BAG) has developed a three-stage test scheme for dismissal for operational reasons. Firstly, a business decision must have been made to eliminate jobs. Secondly, there must be no other employment opportunities for the employee. Thirdly, the employer must have carried out the social selection properly.
Dismissal for operational reasons is never due to the person being dismissed. The onus is on the employer to prove that the job will be permanently lost and that no retraining/training for further qualification can be offered. If all of these points apply, your dismissal is for operational reasons. And now the question arises as to whether you are entitled to severance pay.
Severance pay: Employer and employee must meet these requirements
Severance pay in the event of dismissal for operational reasons is not automatic. The legislator has formulated conditions for severance pay in Section 1a of the Dismissal Protection Act (KSchG):
- You must have been employed by your employer for more than 6 months
- Your employer employs more than 10 full-time employees
- Your termination is for urgent operational reasons
- You will receive your termination for operational reasons in writing
- Your employer offers a severance payment in the letter of dismissal. In return, you waive your right to sue for unfair dismissal
Please note: Section 1a of the Dismissal Protection Act (KschG) does not stipulate an automatic severance payment. The equation "dismissal for operational reasons = severance pay" cannot be derived from the law. The decisive factor is a corresponding passage in the dismissal agreement which offers the employee a severance payment if he waives his action for protection against dismissal.
Pay attention to the social plan
Social plan info: You have three school-age children, have been with the company for twelve years and are dismissed for operational reasons. Your single younger colleague, who has been with the company for three years, is allowed to stay. There is something wrong with the redundancy plan. But it is not always so easy to recognize the order of precedence. If in doubt, an experienced specialist lawyer for employment law can help.
Exception rationalization collective agreement
The following applies to most employment contracts: there is no automatic severance payment in the event of dismissal for operational reasons. However, there is one type of contract that stipulates a severance payment in a collective agreement. This is the rationalization collective agreement.
Severance payments in the event of dismissal for operational reasons are common practice
Although there is no general statutory entitlement to a severance payment in the event of redundancy for operational reasons for most employment contracts, it is common practice for such payments to be made - provided, of course, that all criteria are met. For you as the affected employee, it is now important to know whether there are general regulations on the amount of severance pay and what these look like.
The amount of severance pay according to the Dismissal Protection Act
Section 1a (2) of the KSchG stipulates the amount of severance pay in the event of dismissal for operational reasons. It amounts to half a gross monthly salary per year of service. Previously granted benefits in kind such as a company car or company housing increase this calculation basis. The period of employment is rounded up to a full year after six months.
There are special statutory regulations for older employees who have been with the company for a particularly long time. Anyone who is at least 50 and has worked at the terminating company for at least 15 years receives a severance payment of 15 months' earnings. Those who have reached the age of 55 and have been with the company for at least 20 years can look forward to a severance payment of 18 months' pay.
Caution tax
Severance payments in the event of dismissal for operational reasons are taxable. The one-off payment increases your gross annual salary. If it is a higher amount, you are likely to achieve a higher tax progression and must pay correspondingly higher taxes. However, it is possible to apply to the tax office for the so-called fifth rule. In this case, the income from the severance payment is divided over five tax years, with the effect that the respective tax burden remains lower.
No social security contributions from the severance payment
Contributions to pension, health, long-term care and unemployment insurance do not have to be paid from a severance payment. This is because it does not constitute remuneration for you, but compensation for the loss of your job.
Offsetting against unemployment benefit? Blocking period?
What is the effect of severance pay on unemployment benefit? - As a rule, the Federal Agency does not offset the severance payment against your unemployment benefit. You will receive the full amount of your benefits. However, there is one exception. If you reach an agreement with your employer on a severance payment due to operational redundancy and shorten your legally agreed notice period in return, your entitlement to unemployment benefit will be suspended for the duration of this reduction.
Another question that arises for employees who can expect a severance payment for operational reasons: Is there a qualifying period when receiving unemployment benefit? - The answer to this question is a clear no. A dismissal for operational reasons, as the name suggests, is made for reasons that are neither caused by the employee nor have anything to do with their conduct within the company. However, there is one exception. If the employer and employee agree on a termination agreement as part of the severance payment, the period of ineligibility for unemployment benefit is up to 12 weeks, depending on the shortened notice period.
Settlement negotiations benefit from support
Severance payments in the event of dismissal for operational reasons are based on statutory calculation principles. Nevertheless, it is possible for you as an employee to achieve a higher severance payment in individual negotiations with your employer. However, this requires factually convincing arguments - for example, the qualifications that you have brought to the company; your commitment; important projects that you have initiated; and, of course, your life circumstances. It is important to argue confidently at eye level and to play a bit of poker. It is often helpful to seek advice from a specialist employment lawyer during this process and to delegate the entire negotiation to them.
Conclusion
Dismissals for operational reasons usually result in legally agreed severance payments. As part of this process, it is important to check carefully whether everything is being handled in accordance with the law. Is the dismissal for operational reasons justified? Is the social plan being adhered to? Is the amount of severance pay correct? Would it be possible to negotiate a higher severance payment? - It is worth having these and other questions relating to redundancy pay clarified by an experienced specialist lawyer for employment law. Get the maximum compensation for your job loss.
