German Executives Warned: Miss a Legal Window and Severance Pay Could Slip Away

Managers in Germany who receive an unexpected dismissal have a narrow window of seven to 14 days to weigh their options before taking any formal steps, according to the professional association Die Führungskräfte (DFK). The body logged a record 2,000 advisory cases in the latest period, reflecting an increasingly strained market for senior talent. Unemployment among executives jumped 14 percent in 2025, reaching 49,000.

The stakes are unusually high because German severance costs — averaging 31 months' gross salary per dismissal — are the highest among comparable economies. In Switzerland, by contrast, the average payout amounts to just 2.5 months. That twelvefold gap has forced large corporations to earmark enormous provisions. Since the start of 2024, DAX-listed firms have set aside roughly €16 billion for severance packages. Bayer alone accounted for €2 billion of that total as it shed 14,000 positions.

The standard rule of thumb in negotiations is one month's gross pay for each year of service. On a typical package of €250,000 gross, a departing executive takes home around €130,000 after tax. Economists Markus Brunnermeier and Galina Kolev have argued that Germany should ease dismissal protection for high earners, a stance that finds sympathy in both the CDU and SPD but meets firm resistance from unions such as the DGB.

Even before a letter arrives, certain corporate moves should set off alarm bells. DFK experts point to promotions that strip general dismissal protection — becoming a managing director, for example — as a classic red flag. Other advance signals include the installation of a co-CEO, the removal of personnel or budget authority, a sudden shift to project-only tasks, or a transfer abroad at age 50-plus. In such circumstances, executives are advised to negotiate return clauses and keep a meticulous record of their own performance.

Once a dismissal is handed down, procedural missteps by the employer can still derail it. A recent ruling from the Federal Labour Court (BAG) underscores that a notice issued during the mandatory waiting period for input from the disabled employees' representation (SBV) is invalid if the body was not granted the full statutory week to respond. In the case at hand, the employer sent the termination on the afternoon of the deadline's final day instead of waiting until midnight. A mere note that the SBV had acknowledged receipt also fell short of a formal opinion.

Another BAG decision, handed down in May 2026, strengthens employees' hand over reference letters. If a court settlement stipulates that the employer must issue a reference based on a draft prepared by the employee, that clause is enforceable. The employer may deviate only for an important reason; failure to comply can trigger enforcement measures.

Legal obligations do not end with the receipt of a dismissal. Employees must continue performing their duties properly until the notice period expires, unless explicitly placed on garden leave. Unauthorised absence can be treated as a refusal to work, leading to written warnings, salary deductions or even immediate termination. Such a summary dismissal ends the contract at once and may taint the final reference. Verbal dismissals should always be confirmed in writing to secure the burden of proof in any subsequent proceedings. For those who suspect their job may be cut for operational reasons and later see the business conditions improve before the notice period ends, the law recognises a right to reinstatement — provided they act swiftly. A claim contesting the dismissal must in any case be filed with the labour court within three weeks of receiving the notice.

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