When does severance pay from a court settlement fall due in Germany?
If a court settlement (gerichtlicher Vergleich) does not state a payment date, the employee may demand the severance immediately. This follows from section 271 (1) BGB: where no time for performance is fixed and none can be inferred from the circumstances, the creditor may demand performance at once. The provision also applies to settlements concluded in court.
The Higher Labour Court of Lower Saxony (LAG Niedersachsen) added a practical cap in its decision of 7 July 2026 (case no. 5 Ta 165/26). Its official headnote reads:
„Es gibt keinen allgemeinen Rechtssatz, dem zufolge die in einem Vergleich vereinbarte Abfindung erst mit dem nächsten Gehaltslauf fällig wird. Vielmehr gilt § 271 Abs. 1 BGB und die Abfindung wird sofort, spätestens nach einem angemessenem Abrechnungszeitraum von 14 Tagen fällig.”
“There is no general rule of law under which a severance agreed in a settlement only falls due with the next payroll run. Rather, section 271 (1) BGB applies and the severance becomes due immediately, at the latest after a reasonable accounting period of 14 days.”
LAG Niedersachsen, decision of 7 July 2026 — 5 Ta 165/26, official headnote — own translation
What happened in the case?
The employee had brought an unfair dismissal claim (Kündigungsschutzklage) before the Labour Court (Arbeitsgericht) of Hanover. On 29 September 2025 the parties settled: the employment relationship ended on a date before the settlement was concluded, and the employer undertook to pay severance of EUR 38,000. The settlement said nothing about when the money was due.
When no payment arrived, the employee’s lawyer sent a payment demand threatening enforcement on 16 October 2025. By order of 29 May 2026 (case no. 1 Ca 133/25), the Labour Court of Hanover directed the employer to reimburse EUR 422.57 in enforcement costs plus statutory interest. The employer’s immediate appeal (sofortige Beschwerde) failed. The decision of the LAG Niedersachsen cannot be appealed further.
Can the employer point to the next payroll run?
No. The employer argued that it was common labour court practice to account for and pay out amounts from settlements with the next available payroll cycle. The court rejected this: no such established practice exists, and a different payment date must be expressly agreed in the settlement.
The court also noted a simple point. Since the employment had already ended when the settlement was concluded, nothing prevented the employer from preparing the payout for a former employee outside the usual monthly payroll rhythm. Internal payroll routines are not “circumstances” within the meaning of section 271 (1) BGB that would postpone the due date.
What if the employment ends only after the settlement?
Then the timing changes. Where the agreed end of the employment relationship still lies in the future at the time of the settlement, the circumstances imply that the severance falls due upon termination — even without an express clause. Until then, the employee cannot demand payment.
In practice: a settlement signed in October with termination agreed for 31 December means the severance is due at the end of the year. A settlement concluded after the employment has already ended — as in the Hanover case — means the severance is due immediately, with at most a 14-day processing window (LAG Niedersachsen 5 Ta 165/26).
What are the consequences? Enforcement and interest
A settlement recorded by a German court is an enforceable title (section 794 (1) no. 1 of the Code of Civil Procedure, ZPO). The employee does not need to file a new lawsuit. With an enforceable copy (vollstreckbare Ausfertigung) of the settlement, enforcement against the employer can begin straight away.
The debtor bears the necessary costs of enforcement (section 788 (1) ZPO). In the Lower Saxony case this included the lawyer’s payment demand threatening enforcement — EUR 422.57 in total. On top of that, default interest of five percentage points above the German base rate accrues (section 288 (1) BGB). Default typically starts with a payment reminder sent after the due date (section 286 (1) BGB), and without any reminder where the settlement fixes a calendar payment date (section 286 (2) no. 1 BGB). Taxation is a separate question — see our article on severance pay tax in Germany.
Securing your severance payment
Put a specific payment date into the settlement, because a calendar date triggers default interest without a further reminder (section 286 (2) no. 1 BGB). Without a payment clause the severance is due immediately, at the latest after about 14 days (LAG Niedersachsen 5 Ta 165/26). If the employment ends later, payment falls due upon termination unless agreed otherwise. If the employer does not pay, have a payment demand threatening enforcement sent — the employer bears those costs (section 788 (1) ZPO). The settlement itself is an enforceable title (section 794 (1) no. 1 ZPO), so no new lawsuit is needed. Remember income tax on the severance and the possible relief under the Fünftelregelung (one-fifth rule).
Frequently asked questions
How quickly must the employer pay severance after a settlement?
Immediately, if the employment has already ended and the settlement contains no payment date. The LAG Niedersachsen (5 Ta 165/26) allows the employer at most a reasonable accounting period of 14 days (section 271 (1) BGB).
Is severance pay in Germany mandatory after a certain number of years?
No. Length of service alone does not create a severance claim. Severance usually results from a settlement or a termination agreement (Aufhebungsvertrag). A statutory claim exists under section 1a of the Protection Against Dismissal Act (KSchG) only for redundancy dismissals in which the employer offers severance in the dismissal letter — at 0.5 monthly salaries per year of service (section 1a (2) KSchG).
Can the employer pay the severance with the next salary?
Only if the settlement expressly says so. According to the LAG Niedersachsen (5 Ta 165/26) there is no rule that severance is paid with the next payroll run.
What can I do if the severance is not paid?
Have a payment demand sent after the due date and enforce the settlement (section 794 (1) no. 1 ZPO). The employer bears the necessary enforcement costs and default interest (section 788 (1) ZPO, section 288 (1) BGB).
Is severance pay taxed in Germany?
Yes, severance pay is subject to German income tax. The Fünftelregelung (one-fifth rule) may lower the burden — see our separate article on severance pay tax in Germany.
Basis of this article: LAG Niedersachsen, decision of 7 July 2026 – 5 Ta 165/26 (ECLI:DE:LAGNI:2026:0707.5Ta165.26.00), lower court: Labour Court of Hanover, decision of 29 May 2026 – 1 Ca 133/25. Legal position: September 2026. This article is for information purposes only and does not replace legal advice in an individual case.