OutPlacement - NewPlacement - Karriere Coaching

NewPlacement AG

OutPlacement - NewPlacement - Karriere Coaching

Tel.: 0800 873 6686 (gebührenfrei)

Tel.: 040 18198668 (Zentrale)


NewPlacement AG - deutsch
NewPlacement AG - deutsch
NewPlacement AG - french
NewPlacement AG - french

Contracts and Tax

Severance pay

Severance pay upon termination of employment

Severance pay is like a pain killer: it masks the underlying problem and gives you false feeling of security. But you cannot buy a new job with your severance pay. That's why it's better to think of severance pay as a bridge you can cross to get to your new job. NewPlacement coaching will help to make this time as short as possible. Legislation regarding severance pay as compensation for damages for the early termination of employment or service relationship has changed several times since 1999.

Since 1 January 2006 severance pay must be taxed in full.


One-fifth principle

For taxable severance pay there is the so-called "one-fifth principle": for tax purposes, the severance pay is calculated over five years. The tax for income excluding severance pay is subtracted from the tax for income including severance pay. The difference is multiplied by five and added to the income tax in the year of the payment.


This information does not constitute legal advice and is without guarantee

Tax issues (reference XI R 22/00)

The Federal Tax Court has ruled on the taxation of outplacement consulting.

At the time, severance pay up to 12,271 was tax-free. In the case being dealt with, the company had also paid for outplacement consulting. The question was whether this additional compensation should be treated as social relief and thus be tax-free. The Federal Tax Court ruled that it should, provided the outplacement fee is not paid to the candidate.


That means: if you agree on severance pay in the amount of 20,000, that amount will be taxed.

If you arrange for NewPlacement coaching and your employer pays us, your severance pay becomes tax-free. This is clearly the best option. Get in contact with us. Not only can we help you quickly find a new position; we can also save you tax.


Why a severance agreement instead of a dismissal?


A severance agreement

  • Offers the chance to part on amicable terms - Is often used to avoid a legal dispute - Requires both sides to balance their interests and handle the separation fairly


Legal aspects

The severance agreement should be designed so that the job center cannot block unemployment benefits. In particular the severance agreement should adhere to the contractual notice period; otherwise a block can be imposed. The severance payment should be defined exclusively for the loss of the job.


Tax law is an important aspect to consider when drafting a severance agreement. It is worth finding a neutral tax lawyer to arrange a balanced representation of interests and a fair, amicable separation. We will be happy to help you find such a lawyer for your needs.


Components of a severance agreement

  • The formal cancellation of an employment contract with a date of termination, possible early release from duties, return of work materials, documents, company car etc.
  • Severance pay: 50% to 100% of one twelfth of current annual salary incl. premiums, bonus etc. per year of service
  • Company pension plan
  • Acceptance of outplacement coaching fees
  • A letter of reference (truthful and favorable) as condition of severance agreement.


This information does not constitute legal advice and is without guarantee