Redundancy in Germany (betriebsbedingte Kündigung): when the dismissal is valid, severance pay and what to do

What is a betriebsbedingte Kündigung (redundancy dismissal) in Germany?

A betriebsbedingte Kündigung is an ordinary dismissal by the employer based on urgent operational requirements that prevent the employee from being kept on (section 1(2) sentence 1 KSchG). The reason lies with the business, not with the employee: fewer orders, a department closed, work outsourced, automation or the closure of the whole establishment.

German law recognises three grounds for an ordinary dismissal: reasons relating to the employee as a person (for example long-term illness), reasons relating to conduct (for example repeated breaches after a formal warning) and operational reasons. Only for operational reasons must the employer carry out a social selection, and only here can the dismissal letter offer the statutory severance payment under section 1a KSchG. Because the employee is not at fault, simply accepting a redundancy dismissal does not, as a rule, trigger a suspension of unemployment benefit.

All requirements below apply only where the Dismissal Protection Act applies. That requires employment in the same establishment or company for more than six months (section 1(1) KSchG) in an establishment that regularly employs more than ten employees (section 23(1) KSchG). Part-timers count pro rata: up to 20 hours a week as 0.5, up to 30 hours as 0.75 (section 23(1) sentence 4 KSchG). The threshold of ten applies to employment that began after 31 December 2003. Employees hired earlier may already be protected in establishments with more than five employees if that many long-standing employees still work there (section 23(1) sentences 2 and 3 KSchG). Protection in small businesses is covered in a separate section below.

When is a redundancy dismissal in Germany valid?

A redundancy dismissal is valid only if four conditions are met at the same time: the employer has taken a business decision, implementing it removes the need for the employee’s work permanently by the end of the notice period at the latest, there is no other vacant position for the employee in the company and the social selection is correct (section 1(2) and (3) KSchG). If one condition is missing, the dismissal is socially unjustified and void.

The employer bears the burden of proving the operational requirements (section 1(2) sentence 4 KSchG). Buzzwords such as “drop in sales” or “reorganisation” are not enough. The employer has to explain, with figures and concrete measures, why precisely the claimant’s job disappears. The employee can challenge each of the four conditions separately in court.

The decisive moment is when the dismissal is received. At that point the forecast that the need for the employee’s work will cease by the end of the notice period must already be objectively justified, and the developments leading to it must be settled (BAG, judgment of 31 July 2014, 2 AZR 422/13, confirmed by BAG, judgment of 28 February 2023, 2 AZR 227/22). A mere intention or a non-binding restructuring paper is not enough.

Formal requirements that apply to every dismissal come on top: written form with a handwritten signature, so no e-mail or text message (section 623 of the Civil Code, BGB), consultation of the works council where one exists (section 102(1) of the Works Constitution Act, BetrVG), a collective redundancy notification where the thresholds of section 17 KSchG are reached and official approval where special protection applies, for example during pregnancy (section 17 of the Maternity Protection Act, MuSchG) or for severely disabled employees (section 168 of Social Code IX, SGB IX).

Does the labour court review the employer’s decision to cut jobs?

The labour court does not review whether the decision to cut jobs made economic sense or was necessary. It only checks whether the decision was actually taken, whether implementing it really removes the need for the claimant’s work and whether it is obviously unfounded, unreasonable or arbitrary (BAG, judgment of 28 February 2023, 2 AZR 227/22). An employer may therefore cut jobs even when the business is not in crisis.

This freedom follows from the freedom to conduct a business and the right to property under the German Basic Law (Article 12(1) and Article 14(1) GG). An employer may decide that an outside contractor will take over cleaning, accounting or logistics without having to prove that this saves money. In case 2 AZR 227/22 the BAG also accepted the transfer of tasks to another company of the same group.

Arbitrariness, however, has to be shown by the employee. The employee must put forward circumstances showing that the decision was obviously unfounded or only served to get rid of a particular person, and the court assesses these indications as a whole (BAG, 2 AZR 227/22). An indication may be that the “restructuring” affected only one person who had recently been in dispute with the employer, while someone else carries on doing that person’s tasks unchanged. The fact that other employees also lost their jobs, on the other hand, speaks against arbitrariness.

When must the employer prove more than the abolition of the position?

Where the business decision essentially consists of abolishing one position and spreading its tasks among the remaining staff, the employer must show in detail that they can do the work without overtime and within their contractual working hours. The BAG describes this as a business decision that is practically identical with the decision to dismiss (BAG, judgment of 24 May 2012, 2 AZR 124/11, and judgment of 23 February 2012, 2 AZR 548/10).

In this situation there is no longer a presumption that the decision is objectively justified. The employer must explain which tasks disappear, how much time they took, who takes over the rest and why this fits into the colleagues’ contractual working time. Typical cases are the removal of a management level, the abolition of the only position in a department or the transfer of tasks to supervisors.

For employees this is often the strongest argument in a dismissal case. If the remaining colleagues regularly work overtime after the dismissal, if the employer hires new people for similar tasks or if the claimant’s tasks are still being done to the same extent, the forecast of a permanent loss of work collapses. Secure rosters, job advertisements and messages from former colleagues from day one.

Can my employer replace me with agency workers or a subcontractor?

Not if an agency worker (Leiharbeitnehmer) is to take your position and do the same work under the employer’s instructions. That is an inadmissible replacement dismissal (Austauschkündigung) and it is void (BAG, judgment of 24 January 2013, 2 AZR 140/12). The employer is not removing the need for work, only swapping the person.

Positions that the employer permanently fills with agency workers to cover a constant base volume of work may count as vacant positions that must first be offered to the permanent employee facing dismissal. It is different where agency workers only absorb order peaks or are kept as a staff reserve to stand in for absent permanent employees. According to the BAG, such positions are not vacant (judgment of 18 October 2012, 6 AZR 289/11).

Outsourcing tasks to an independent contractor that performs them on its own account is generally allowed (BAG, judgment of 28 February 2023, 2 AZR 227/22). The limit is circumvention: if the “subcontractor” in practice works under the former employer’s instructions and does the same work in the same establishment, the court may treat the dismissal as a disguised replacement dismissal.

What applies if the business closes or is sold?

Closing down the whole establishment justifies redundancy dismissals if, when the dismissals were received, the employer had made a serious and final decision to close and that decision had already taken tangible form, for example by terminating the lease, selling the machinery or no longer accepting orders. If the employer is still in serious negotiations to sell the business at that time, there is no decision to close and the dismissal is void (BAG, judgment of 16 February 2012, 8 AZR 693/10).

A sale is not a closure. If a buyer takes over the business or part of it while preserving its identity, the employment relationships pass to the buyer by law (section 613a(1) sentence 1 BGB), and a dismissal because of the transfer is void (section 613a(4) sentence 1 BGB). A dismissal for other reasons remains possible, for example because of job cuts under the buyer’s own concept.

When an establishment with a works council closes, employees are usually entitled to severance pay under a social plan (Sozialplan, section 112 BetrVG). This applies in companies that regularly employ more than 20 employees eligible to vote (section 111 sentence 1 BetrVG). If employer and works council cannot agree, a conciliation committee (Einigungsstelle) decides (section 112(4) BetrVG). Social plan payments may not be made conditional on the employee waiving a dismissal protection claim. An additional bonus for not suing is only possible in a separate voluntary works agreement (BAG, judgment of 31 May 2005, 1 AZR 254/04).

Does the employer have to offer me another position?

Yes. A redundancy dismissal is void if the employee could continue working in another vacant position in the same or another establishment of the company, including after reasonable retraining or on changed terms (section 1(2) sentences 2 and 3 KSchG). The BAG derives this duty from the word “urgent” in section 1(2) sentence 1 KSchG: termination must be the last resort (ultima ratio), so the employer has to offer continued employment on its own initiative before dismissing (BAG, judgment of 21 April 2005, 2 AZR 132/04).

A position is vacant if it is unoccupied when the dismissal is received or becomes free by the end of the notice period (BAG, judgment of 29 August 2013, 2 AZR 721/12). The duty covers the employer’s whole company with all its establishments (section 1(2) sentence 2 no. 1(b) KSchG), but as a rule not other companies of the same group. As a rule it does not extend to the employer’s establishments abroad either (BAG, judgment of 29 August 2013, 2 AZR 809/12). The BAG left open whether the same applies where a whole establishment or part of it is relocated abroad. The employer does not have to create a new position.

The employer must also offer a lower-paid or part-time position before ending the employment altogether. Instead of a termination it must then issue a dismissal with an offer of altered terms (Änderungskündigung, section 2 KSchG). The offer may at most be omitted in extreme cases where it would be insulting, such as the porter’s job for the former head of HR. Whether the worse terms are acceptable is for the employee to decide (BAG, judgment of 21 April 2005, 2 AZR 132/04).

In court the burden of presentation is staggered. If the employee only denies in general terms that there was no other work, a general statement by the employer suffices. If the employee names the specific position in which they could have worked, the employer must explain in detail why that was not possible (BAG, judgment of 25 October 2012, 2 AZR 552/11). The employer’s job advertisements from before and after the dismissal are therefore valuable evidence.

Who has to be dismissed? Social selection in brief

If only one of several comparable positions disappears, the employer cannot freely choose whom to dismiss. It must compare all interchangeable employees of the establishment by length of service, age, maintenance obligations and severe disability and dismiss the one least in need of protection (section 1(3) sentence 1 KSchG). An error in the social selection (Sozialauswahl) makes the dismissal void.

At the employee’s request, the employer must state the reasons for the selection (section 1(3) sentence 1, second half-sentence KSchG). It may exclude key performers from the selection if it gives concrete reasons for a legitimate business interest in keeping them (section 1(3) sentence 2 KSchG). The points system approved by the BAG, the comparison group and worked examples are covered in our article on social selection in Germany.

What difference do a works council and a list of names make?

If there is a works council, the employer must consult it before every dismissal and tell it the reasons. A dismissal without consultation is void (section 102(1) BetrVG). For a redundancy dismissal this includes the employee’s social data and the reasons for the selection.

The works council may object in writing within one week, for example because the social selection is wrong or a vacant position exists (section 102(3) BetrVG). The objection does not stop the dismissal. However, if the employee files a dismissal protection claim, they can demand to be kept on unchanged terms until the case is finally decided (section 102(5) sentence 1 BetrVG). Only the labour court can release the employer from this duty by interim injunction.

In the case of an operational change (Betriebsänderung, section 111 BetrVG) employer and works council can name the employees to be dismissed in a reconciliation of interests (Interessenausgleich mit Namensliste). The law then presumes that the dismissal is caused by urgent operational requirements, and the court reviews the social selection only for gross errors (section 1(5) KSchG). The employee must prove the opposite, namely that the possibility of employment continues, and merely casting doubt on the presumption is not enough (BAG, judgment of 27 September 2012, 2 AZR 516/11).

New in 2026: without a collective redundancy notification the dismissal is void

If an employer dismisses so many employees within 30 calendar days that the thresholds of section 17(1) KSchG are reached, it must first consult the works council and notify the collective redundancy (Massenentlassungsanzeige) to the Federal Employment Agency. Under the BAG judgments of 1 April 2026 a dismissal is void if no notification had been filed when it was issued (6 AZR 157/22) or if the notification was filed before the consultation ended (6 AZR 152/22). A later notification does not cure the defect (6 AZR 152/22).

The thresholds depend on the size of the establishment. Notification is required for dismissing more than 5 employees in establishments regularly employing more than 20 and fewer than 60, 10 % of the workforce or more than 25 employees in establishments with 60 to 499, and at least 30 employees in establishments with 500 or more (section 17(1) sentence 1 KSchG). Termination agreements initiated by the employer count as well (section 17(1) sentence 2 KSchG).

The change follows two judgments of the Court of Justice of the European Union of 30 October 2025 (C-134/24 and C-402/24). Under them, a dismissal in a collective redundancy can only take effect after the 30-day period following a proper notification has expired, and a notification filed afterwards does not remedy the defect. The BAG now bases the invalidity on an interpretation of section 18(1) KSchG in line with Directive 98/59/EC instead of section 134 BGB as before. An employer who made a mistake has to repeat the whole procedure and dismiss again.

For employees this means one practical question in any larger job cut: did the employer notify the collective redundancy, when did it do so and had the consultation with the works council ended before that? In court, ask for a copy of the notification and the Agency’s confirmation of receipt. Whether every error in the content of the notification leads to invalidity is still open, the BAG expressly left this undecided.

Can a small business dismiss for operational reasons without a reason?

In establishments that regularly employ no more than ten employees the Dismissal Protection Act does not apply. The employer need not prove urgent operational requirements or carry out a social selection under section 1(3) KSchG (section 23(1) KSchG). The employee is still not without protection: the dismissal must not be immoral or contrary to good faith (sections 138 and 242 BGB).

The Federal Constitutional Court (Bundesverfassungsgericht, BVerfG) upheld the small-business exemption, subject to an interpretation in line with the constitution, partly because general clauses of civil law such as sections 138 and 242 BGB secure a minimum protection (BVerfG, order of 27 January 1998, 1 BvL 15/87). When choosing between several employees, the court requires a certain degree of social consideration and regard for the trust built up through long service. Where the employer chooses between several employees, it must show a minimum of social consideration and may not dismiss the person clearly more in need of protection unless it has significant interests of its own in doing so, for example the employee with 20 years of service and three children instead of the colleague hired a year ago (BAG, judgment of 21 February 2001, 2 AZR 15/00, and judgment of 28 October 2010, 2 AZR 392/08). The small employer’s freedom carries considerable weight, and the circumstances showing a breach of good faith must be proved by the employee.

Am I entitled to severance pay after a redundancy dismissal in Germany?

There is no general right to severance pay (Abfindung) in Germany, not even after a redundancy dismissal. The law grants it only in specific cases: where the employer offers it in the dismissal letter under section 1a KSchG, under a social plan (section 112 BetrVG), as compensation where the employer departs from or does not attempt a reconciliation of interests in an operational change (section 113 BetrVG), or by a court order dissolving the employment (sections 9 and 10 KSchG). In practice, severance is usually agreed in a settlement before the labour court.

Severance under section 1a KSchG amounts to 0.5 monthly earnings for each year of employment, with a period of more than six months rounded up to a full year. The employer must state in the dismissal letter that the dismissal is for operational reasons and that the employee will receive the severance if they let the deadline for a claim pass, and the employee must not sue within three weeks. Example: 8 years and 4 months of service, EUR 3,000 gross a month: 0.5 × 3,000 × 8 = EUR 12,000 gross. Filing a claim, even a late one, forfeits this entitlement (BAG, judgment of 13 December 2007, 2 AZR 971/06).

If the employer offers a different amount in the dismissal letter, the wording decides. A deviating offer must be unambiguous, because the employee has to know within the claim deadline what they are agreeing to (BAG, judgment of 10 July 2008, 2 AZR 209/07). A much lower amount introduced with “we offer” is then an ordinary contractual offer and not a claim under section 1a KSchG.

In settlement negotiations the same formula is often the starting point: 0.5 gross monthly salaries per year of service. It is a negotiating benchmark, not a statutory rule or settled case law. The actual amount depends on the prospects of the claim: the weaker the grounds for dismissal, the higher the multiplier. When a settlement payment falls due is explained in our article on when severance pay is paid, and tax is covered in severance pay tax in Germany.

Will I get unemployment benefit without a suspension period?

Yes, if the employee simply accepts the dismissal or challenges it. Not filing a dismissal protection claim does not trigger a suspension period (Sperrzeit) for unemployment benefit (Arbeitslosengeld), because merely accepting a dismissal is not a termination of the employment by the employee. The Federal Social Court (Bundessozialgericht, BSG) restated this earlier case law in its judgment of 18 December 2003 (B 11 AL 35/03 R) and at the same time held that a settlement agreement concluded after the dismissal can amount to such a termination. Under the Agency’s internal guidelines on section 159 SGB III (Fachliche Weisungen, no. 159.1.1.1(4), as of 07/2026) this also applies where the employee accepts severance, for example under section 1a KSchG.

The risk arises if the employee signs a termination agreement (Aufhebungsvertrag) or, after the dismissal, a settlement agreement (Abwicklungsvertrag). The Federal Employment Agency then checks whether there was an important reason (section 159(1) of Social Code III, SGB III). Without one, the suspension period is generally twelve weeks (section 159(3) SGB III) and the benefit period is reduced by at least a quarter (section 148(1) no. 4 SGB III). Under the same guidelines (no. 159.1.2.1.1(2)) there is an important reason where the employer had firmly announced a redundancy dismissal for the same date, the notice period would have been observed, the employee could be dismissed by ordinary notice and the severance does not exceed 0.5 monthly salaries per year of service. The Agency then does not examine whether the announced dismissal would have been lawful. Have a termination agreement checked before signing, see our article on the Aufhebungsvertrag.

Separately, you must register as a jobseeker no later than three months before the employment ends, or within three days of learning the end date if less time remains (section 38(1) SGB III). Late registration leads to a one-week suspension (section 159(1) sentence 2 no. 9 and (6) SGB III).

Will I be paid for the time the case takes?

If the court finds the dismissal void, the employer must pay the salary for the entire period from the end of the notice period until the employee returns, even though the employee did not work in that time (default of acceptance, section 615 sentence 1 BGB). Other earnings, unemployment benefit and anything the employee maliciously failed to earn are deducted (section 11 KSchG).

The BAG expects employees to look for reasonable work while the case is pending. An employee who registers with the Agency but makes no efforts of their own risks losing part of the back pay, even with good prospects of winning (BAG, judgment of 15 January 2025, 5 AZR 273/24). The employer, however, has to name a specific reasonable job the employee could have taken. In that case it failed to do so and had to pay. Keep a record of applications and responses to job offers from the Agency.

What should I do after receiving a redundancy dismissal in Germany?

The deadline comes first: the dismissal protection claim (Kündigungsschutzklage) must reach the labour court within three weeks of receiving the written dismissal (section 4 sentence 1 KSchG). After that the dismissal is deemed valid from the outset, even if it was defective (section 7 KSchG). A late claim is only admitted if the employee was prevented from filing in time despite exercising all reasonable care, and the application must be made within two weeks after the obstacle ceases (section 5(1) and (3) KSchG).

Before the labour court of first instance you may act on your own (section 11(1) of the Labour Courts Act, ArbGG). Each side bears its own lawyer’s fees at first instance, whatever the outcome (section 12a(1) sentence 1 ArbGG). The procedure is described in our article on the German labour court, and all steps after a dismissal in the guide dismissal in Germany: what to do.

Before deciding whether to sue, check whether the letter offers severance under section 1a KSchG and compare it with the realistic value of the case. The notice period for a redundancy dismissal is the same as for any other ordinary dismissal by the employer and depends on length of service: from four weeks to seven months (section 622(1) and (2) BGB), details in our article on notice periods in Germany.

Frequently asked questions

What does betriebsbedingte Kündigung mean in English?
It is a redundancy dismissal, a dismissal for operational reasons based on urgent requirements of the business rather than the employee’s person or conduct (section 1(2) sentence 1 KSchG). Typical reasons are a lack of orders, a closed department, outsourcing or the closure of the establishment.

Do I always get severance pay after a redundancy dismissal in Germany?
No. The statutory severance of 0.5 monthly salaries per year applies only where the employer offers it in the dismissal letter under section 1a KSchG and you do not sue. A social plan may also provide severance (section 112 BetrVG). In all other cases severance is negotiated, usually in a settlement before the labour court.

How much severance pay is usual in Germany?
Under section 1a KSchG it is 0.5 monthly earnings per year of service. Settlements often start from the same formula, but the multiplier rises with the prospects of the claim. Where the court dissolves the employment, up to twelve monthly earnings are possible, and up to 15 or 18 for older employees with long service (section 10 KSchG).

Can I be made redundant while on sick leave in Germany?
Yes. Sick leave does not protect against dismissal in Germany and plays no role in assessing operational reasons. The three-week deadline for a claim also runs during illness.

What notice period applies to a redundancy dismissal?
The same as for any ordinary dismissal by the employer: four weeks to the 15th or the end of a month, one month after two years and seven months to the end of a month after 20 years (section 622(1) and (2) BGB), unless a collective or individual agreement provides for longer periods.

Will I lose unemployment benefit after a redundancy dismissal?
No, as long as you only accept the dismissal or sue (BSG, B 11 AL 35/03 R). A suspension of up to twelve weeks is a risk if you sign a termination or settlement agreement without an important reason (section 159 SGB III).

Can my employer hire someone new after making me redundant?
If the new person does the same work in the same position, that speaks against a permanent loss of work and is a strong argument in court. Replacing you with an agency worker is an inadmissible replacement dismissal (BAG, 2 AZR 140/12).

Legal position: October 2026. This article is for general information and does not replace legal advice in an individual case.

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