Berlin Targets Severance Packages: New Cap Set at 12 Months' Salary for High Earners
Published on 07/07/2026 at 23:24 | Redaktion boerse-global.de
Bayer managers with 35 years of service currently walk away with up to 52.5 months of pay when they leave. Volkswagen executives have collected hundreds of thousands of euros in individual cases. These numbers fly in the face of a labor-law reform that Berlin wants to push through from January 2027: a hard ceiling on severance of 12 gross monthly salaries for employees earning roughly €177,450 a year or more – 1.75 times the social-security contribution ceiling.
The draft aims to give companies more flexibility when parting ways with top earners, making separation costs predictable. Legal experts expect the cap to apply to new contracts signed after the reform takes effect. Also under discussion is a tax break on severance payments if the affected employee quickly finds a new job.
Continental Sale Frees Up €3.1 Billion, Most for Shareholders
While the government plans to tighten executive payouts, corporate Germany is moving in the opposite direction. Continental signed an agreement to sell its Contitech division to private-equity firm Lone Star for around €3.1 billion. Completion is planned for end-2026, subject to antitrust approval. Of that sum, €2.5 billion is earmarked for shareholders through special dividends or share buybacks.
The contrast could not be starker. In the first nine months of 2025, DAX companies spent roughly €6 billion on restructuring. At Mercedes, experienced team leaders received up to €500,000 in voluntary redundancy programs.
Court Ruling Shows Limits: Zero Severance for Negligence
High pay does not always mean a golden parachute. The Berlin-Brandenburg State Labor Court confirmed in late May 2026 the immediate dismissal – without any severance – of a department head who had approved unchecked invoices. The ruling underlines that caps and protections do not apply when gross misconduct is proven.
When the Money Runs Out: Insolvency and State Support
Not every company can afford hefty severance. Automotive supplier MoldTecs filed for insolvency in self-administration, putting 580 jobs at risk. In such cases, the insolvency benefit under § 165 of the German Social Code (SGB III) kicks in, securing workers' net pay for up to three months.
Software firm DeepL is taking a different path. It is cutting around 250 jobs as part of an AI restructuring. Affected employees can use education vouchers for retraining. During qualification, unemployment benefits continue, topped up with monthly bonuses.
Severance Agreements: Three Traps to Avoid
Signing a settlement agreement triggers a waiting period for unemployment benefits of up to 12 weeks. Lawyers advise clear criteria: there must be a valid reason – for example, an imminent operational dismissal – and the severance should not exceed 0.5 monthly salaries per year of service. Otherwise, the employment agency may refuse to approve the agreement.
A recent ruling by the Federal Labor Court offers some relief: formal errors in mass-redundancy notices will less frequently invalidate dismissals going forward, provided the consultation with the works council was conducted correctly.
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