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.

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 

Filing a wrongful dismissal lawsuit often seems straightforward in hindsight, but the situation is usually unclear at the time. Costs (lawyer’s fees) and chances of success should be carefully weighed. Lawyers usually provide transparency, though it’s still worth asking questions. While going without a lawyer can be cheaper, negotiating a higher severance is much more difficult.

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 costs arise if a judgment is issued and are waived if the employer and employee reach an out-of-court settlement. In the case of a judgment, the costs are determined based on the amount in dispute, which usually corresponds to three months’ gross salary. For example, with three monthly salaries of €3,000 each, the total amount in dispute would be €9,000.

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

Employment lawyers in Germany usually charge fees in accordance with the German Lawyers’ Fees Act (RVG), although hourly rates may also be agreed. The amount of the fees depends on the value of the dispute.

• First instance (Labour Court):
  Each party bears its own legal costs, regardless of the outcome of the case. Cost reimbursement only applies from the second instance onwards (appeal before the Regional Labour Court).
• Legal representation:
  Legal representation is not mandatory in the first instance. However, it is often advisable, especially if you have legal expenses insurance.

Typical RVG lawyer’s fees include:

• Procedural fee
• Hearing fee
• Settlement fee (only if a settlement is reached)

In addition:

• Lump-sum expense allowance: up to €20
• VAT is payable by consumers on all 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)