Dismissal for personal reasons: Grounds, examples & severance pay

Dismissal for personal reasons is – alongside conduct-related and redundancy-based dismissal – one of the three types of termination recognized under the Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz). Personal dismissals are relatively rare: only about three percent of all employees are dismissed on personal grounds. However, the consequences for those affected are often particularly severe, as dismissals for personal reasons include, for example, terminations due to illness. Strict legal requirements must be met for such a dismissal to be lawful. This article outlines the conditions, examples, and grounds for dismissal for personal reasons.

What is a dismissal for personal reasons?

Dismissal for personal reasons is one of the three types of termination under the Protection Against Unfair Dismissal Act (Kündigungsschutzgesetz). The law also recognises conduct-related and redundancy-based dismissals as the other two categories.

Personal dismissals occur relatively rarely. In practice, they account for only about three percent of all terminations.

The most common case arises when an employee becomes unable to perform their job due to illness, which we cover in a separate article. Employers can also rely on other personal reasons for dismissal, such as a lack of professional qualifications, the loss of a required licence, or pre-trial detention.

Requirements for dismissal for personal reasons

In order for an employer to effectively dismiss an employee on personal reason, the following requirements must be met:

Negative prognosis:
The employee cannot fully or partially perform their job due to physical, psychological or professional limitations. The employee does not control this condition, and fault does not matter.

Operational impact:
The limitation must significantly disrupt business operations or create costs, such as overtime, production losses, continued wage payments or replacement hires.

Balancing of interests:
The employer weighs employee factors (service length, age, family situation, job prospects) against operational impact. A dismissal only stands if the employer’s interests prevail.

Ultima ratio principle:
The employer may only dismiss as a last resort. Before termination, the employer must consider milder options such as reassignment, workplace adjustments or retraining (including BEM).

Practical Tip:
Employers must prove all three conditions (negative prognosis, operational impact, and balancing of interests). If one requirement is missing, the dismissal is usually invalid. Employees should therefore always request written justification and review it carefully.

Further general requirements

In addition to the requirements under the Unfair Dismissal Protection Act, further requirements must be met:

• If there is a works council, the employer must consult it before dismissing an employee on personal grounds. Dismissal without the involvement of the works council is invalid.
• In addition, the provisions of special protection against dismissal, for example for severely disabled persons, persons on parental leave, works council members, trainees or pregnant women, must be observed.

Examples of dismissals due to personal reasons

Reasons for dismissals for personal reasons can include, for example:

• Illness of the employee: The most important case of dismissal for personal reasons is the illness of the employee. This includes both long-term illness and frequent short-term illnesses, as well as the employee’s reduced performance due to illness. You can find more information on this in our separate article ‘Dismissal due to illness’.
• Lack of aptitude means that the employee is no longer suitable for performing their work. This may result, for example, from the withdrawal of a professional licence or authorisation, such as a doctor’s licence to practise medicine, a pilot’s licence, or a truck driver’s licence. Similarly, the lack of work permit for non-EU foreigners may constitute a lack of suitability.
• Prevention: The employee is unable to perform their work, e.g. due to a prison sentence of several years.
• Conflict of belief or conscience: The employee refuses to work as a result of a conflict of conscience or belief. For example, an employee in a slaughterhouse may refuse to kill animals due to newly acquired religious beliefs. As a result, they are no longer able to fulfil their professional duties.
• Student assistants and working students: Many companies employ student assistants and working students. For this type of employment, the employee usually must remain enrolled at a university or university of applied sciences.
  If a student drops out of their studies or graduates, the employment relationship can end for personal reasons. According to Federal Labour Court (BAG) case law, employers can rely on the loss of student status because it forms an essential contractual requirement and qualifies as a personal circumstance.

Severance pay in the event of dismissal for personal reasons

There is also no legal entitlement to severance pay in the event of dismissal for personal reasons. However, employers are often willing to pay severance pay in this type of dismissal. This is because the requirements for effective dismissal for personal reasons are high – as is the employer’s interest in parting ways with the employee. The greater the likelihood of success in an action for unfair dismissal, the greater the willingness to pay severance pay.

Frequently asked questions (FAQ)