Unfair dismissal claim costs: what employees really pay

Being fired often comes out of nowhere – and employees have only three weeks to decide whether to challenge the dismissal in court. An unfair dismissal claim (Kündigungsschutzklage) can secure continued salary, a higher severance payment (Abfindung), or even reinstatement. But the decision is rarely emotional; it is a cost–benefit calculation: What are the chances of winning, and what are the real costs if you lose? This article explains the typical fees for lawyers and courts, when costs can be avoided, and how to reduce your financial risk.

Key takeaways

• Every unfair dismissal claim has costs, mainly lawyer fees and sometimes court fees. Both depend on the “dispute value,” usually three months’ gross salary.
• Court costs are often zero if the case settles (which happens in most cases), but lawyer fees must still be paid.
• A claim only makes sense if the expected gain (e.g., higher severance or more salary months) outweighs the legal costs.
• Legal expenses insurance or state aid (PKH) can remove most of the financial risk – but conditions apply.

What is an unfair dismissal claim?

An unfair dismissal claim is a court action in which an employee asks the labor court to review whether the termination was legally valid. Claims usually succeed when the employer lacks a valid reason, misses notice periods, or makes procedural mistakes. Most cases end within one to three months, and many result in a settlement that includes severance pay, additional salary months, or both:

The 3-week deadline problem

Employees have exactly three weeks from receiving the termination letter to file a claim. If the deadline is missed, the termination becomes legally valid even if it was unlawful. That deadline forces employees to decide quickly – often before they know whether the employer might still offer a severance deal.

Cost–benefit thinking before filing

Because the deadline is short, employees must quickly weigh:

1. Chance of winning / settlement amount
2. Total legal costs
3. Financial alternatives (new job, unemployment benefits, etc.)

Typical employee decisions:

• File the claim and negotiate during the lawsuit
• Negotiate a severance directly and still file within the 3-week window (to keep pressure on the employer)
• Accept the offer immediately
• Do nothing and let the dismissal stand

The smarter choice depends on how much additional severance or salary the claim could realistically generate – compared to the expected legal cost.

We recommend the pros and cons with a lawyer 

In the example, the decision to file a wrongful dismissal lawsuit seemed straightforward in retrospect. However, at the time of the decision (i.e., before filing the lawsuit), the situation is usually not so clear-cut. Therefore, it is important to discuss the costs (lawyer’s fees for a wrongful dismissal lawsuit) in detail beforehand and compare them with the prospects/chances of winning the case. Lawyers usually ensure a high degree of transparency regarding risks and costs, but it is still worthwhile to ask a few questions for clarification. 

Even if the costs of a wrongful dismissal lawsuit are lower without a lawyer, it is also significantly more difficult to enter negotiations with the right arguments and thus negotiate the maximum severance pay.

Costs of an unfair dismissal claim

The total cost consists of court fees and lawyer fees. Both are calculated from the “dispute value” (Streitwert), which is almost always three times the employee’s gross monthly salary.

Court costs

Court fees only apply if the case ends with a judgment. If the parties settle – which is common in labor courts – court fees are waived entirely.
If a judgment is issued, the number of fee units (usually two or three) is multiplied by the official fee based on the dispute value. The losing party pays these fees.

Lawyer costs

Each party pays its own lawyer in the first instance – even if they win. The fee is based on the same dispute value and includes:

• A procedural fee (for filing and handling the case)
• A hearing fee (for attending court)
• A settlement fee (only if a settlement is reached)
• Plus a small expenses allowance and VAT

A lawyer may charge hourly rates instead, but in labour court, most German employment lawyers use the statutory RVG fee system.

The amount of fees under the German Lawyers’ Fees Act (RVG) depends on the value of the dispute. In first-instance labor court proceedings, each party bears its own legal costs, regardless of the outcome of the case. This only changes from the second instance onwards (i.e., in the appeal before the Regional Labor Court).

Furthermore: In the first instance, i.e., before the labor court, legal representation is not mandatory. Nevertheless, it is often advisable to be represented by a lawyer, especially if you have legal expenses insurance. The lawyer’s fee includes the following fees:

• Procedural fee
• Hearing fee
• Settlement fee (optional in the case of a settlement)

In addition, the lawyer is permitted to charge a maximum of €20 as a lump-sum expense allowance under the RVG (German Lawyers’ Fees Act). And: As a consumer, you also have to pay value-added tax (VAT) on the legal fees.

Unfair dismissal claims cost calculator

Use this cost calculator to quickly estimate the expected expenses of filing an unfair dismissal claim in Germany. The calculation is simplified and intended to give you a first rough orientation based on your monthly gross salary and whether the case ends with or without a settlement. In approximately 80% of all unfair dismissal cases, the parties reach a court settlement, which means no court fees apply and the overall costs are typically lower.

Tax tip: deduct legal fees

Lawyer fees for defending your employment are tax-deductible as work-related expenses. They must be listed in Anlage N of the German tax return. Even if you lose, the tax office reimburses part of the cost through lower taxable income.

Legal expenses insurance and state aid (PKH)

• Legal expenses insurance (RSV) covers lawyer and court costs if the policy existed before the dispute. It often includes telephone advice before filing.
• State aid (Prozesskostenhilfe / PKH) is available if the employee has low income or assets. The court examines finances and the chances of success. If approved, the state pays the lawyer and court.

Frequently asked questions (FAQ)