Voluntary redundancy programmes (Freiwilligenprogramm) can be a real alternative to dismissals while a company is reducing jobs. They offer many advantages, but mostly for employers. For the employee, a voluntary programme only makes sense where the terms are much better than under a retrenchment, e.g. higher severance pays, additional bonuses (Sprinterprämien) or other incentives. But there are disadvantages as well, such as possible suspension periods on unemployment benefits (Sperrzeiten). This article explains the details of such programmes, the advantages and the risks.
Key points at a glance:
- Voluntary redundancy programmes aim to reduce the workforce through the conclusion of termination agreements (Aufhebungsverträge).
- Advantages: To encourage that, the employer has to offer much better terms for leaving the employment relationship, e.g. significantly higher severance pay, additional bonuses such as sprinter bonuses (Sprinterprämie).
- Disadvantages: An employee loses the general and special legal protection against dismissal, and risks a possible suspension period (Sperrzeit) on unemployment benefits.
- An employee should not turn down an offer immediately, but seek legal advice first. As an employer wants to retrench a certain number of employees, an employee is in a strong negotiating position.
Contents
What a voluntary redundancy programme covers
In a voluntary redundancy programme, employers offer employees the chance to leave voluntarily. Rather than dismissing the employee based on operational reasons, the aim is to sign termination agreements by mutual consent.
Employers often offer materially better terms than they would in the case of an operational dismissal:
- Higher severance payments,
- A sprinter bonus (Sprinterprämie) as an additional bonus: An employee is able to leave the employment relationship before the end of the notice period. In return, the severance pay increases by a part of the salary the employee would have earned during the notice period. Such a clause is valid.1 Note: The employee’s declaration to leave earlier must be in writing to be effective, because it ends the employment relationship.2
- Outplacement support: many employers cover the cost of professional career coaching. This might include application coaching (help with CVs etc.) or support in finding a new job.
- Other advantages: early release from work, relocation support, training subsidies, references etc.
These extras are usually part of a Social Plan (Sozialplan: an agreement between the works council and the employer). But the parties can also agree on them in an individual (termination) agreement.
Employees have no right to a voluntary redundancy deal. Neither the employer nor the employee is obliged to enter into a termination agreement.
Pros and cons of a voluntary redundancy programme
For employees, a voluntary redundancy programme can open up real opportunities. At the same time, signing a termination agreement means giving up important legal protections:
With an operational dismissal, the employer has to prove in court that the dismissal is valid. Where the parties sign a termination agreement instead, employees give up the protection against a dismissal.
The same applies to special protection against dismissal (e.g. for disabled employees, pregnant employees, employees on parental leave or works council members). The special protection does not apply to termination agreements.
Further, the employer doesn’t have to consult the works council before signing a termination agreement.3
The employee must always consider the potential impact on unemployment benefits. A termination agreement can trigger a suspension period (Sperrzeit) of up to twelve weeks. This applies to the additional payment of a sprinter bonus, too. If you have already lined up a new job, these risks are not that important any more.
Practical tip:
Where several employees are expected to leave the company, the employer is often under considerable time pressure. That strengthens your negotiation position.
Role of the works council
If a voluntary redundancy programme involves significant retrenchments or major organizational changes, the company must involve the works council. They have to negotiate on how to put the changes into practice (Interessenausgleich) and must agree how to reduce the disadvantages for the employees in a Social Plan (Sozialplan).
It is always advisable that employees contact the works council for initial information about the details of such programmes.
In cases of mass dismissals there are stricter requirements: the employer must involve the Employment Agency (Agentur für Arbeit) and the works council.4 So far, the courts have decided that without a proper notification of the Employment Agency the dismissals are invalid. This is currently under review before the European Court of Justice. Whether the same rule applies to termination agreements is not clear: some courts have said it does. If there is any doubt about the validity of a termination agreement, it is worth involving a lawyer to check your individual situation.
For employees, the bottom line is: the works council often knows the details and the background. They can usually give you a first insight into the content of the agreements and recommend either a legal representative of a trade union or an attorney.
Offer on the table: what now?
Practical tip:
Many employers give you short deadlines to accept voluntary programmes. Don’t accept that pressure. In many cases an individual deal is still possible after the first deadline expires, or the terms can be renegotiated.
On the other side, an employee should not reject the offer straight away either. It is always advisable that an employment lawyer checks the termination agreement. It’s also worth clarifying any questions around unemployment benefits and suspension periods with the Employment Agency (Agentur für Arbeit) in advance.
Before deciding, employees should in particular check:
- the severance amount
- any potential suspension period on unemployment benefits
- release from work
- remaining holiday
- bonus payments
- the company car
- non-compete clauses
- the reference letter
- the exit date
Frequently asked questions (FAQ)
- BAG 17.12.2015, 6 AZR 709/14 ↩︎
- Section 623 BGB ↩︎
- Section 102 Betriebsverfassungsgesetz (BetrVG) ↩︎
- Section 17 KSchG ↩︎
