The rules on severance pay in detail

Employees who are dismissed with notice on grounds of ‘cancellation’ (i.e. closure of the business) and/or relocation of the employer, redundancy, the employee’s health (e.g. an occupational disease, maximum level of exposure in the workplace, or an accident at work) are entitled to a statutory severance payment, according to the following formula:

Length of service Severance pay

From two to five years of employment

one month’s pay

From five to ten years of employment

two months’ pay

From ten to 20 years of employment

three months’ pay

Over 20 years of employment

four months’ pay

 

If the employer and employee end the employment by agreement (for the above reasons), the employee is entitled to the following compensation:

Length of service Severance pay

Less than two years of employment

one month’s pay

From two to five years of employment

two months’ pay

From five to ten years of employment

three months’ pay

From ten to 20 years of employment

four months’ pay

Over 20 years of employment

five months’ pay

 

If the employer terminates the employment by notice or by agreement for the reason that the employee is no longer able to perform his or her work owing to an accident at work, occupational disease or the threat of such a disease, or if s/he has reached the maximum permissible exposure at the workplace determined by a decision of the public health authority, the employee is entitled to severance amounting to at least ten months’ pay (unless the occupational injury was the employee´s fault).

Sometimes employers have redundancy pay schemes that are more generous than the statutory minimum. These may be agreed in the employment contract, by collective agreement and/or in internal regulations.

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Author: Nitschneider & Partners

Date: December 2019