Severance Calculator: Calculate Severance and Save on Taxes 2026
Calculate your severance pay for free and save on taxes with the one-fifth rule (2026)
- Free Severance Calculator: Calculate your potential severance amount quickly and without obligation using proven rules of thumb.
- One-Fifth Rule 2026: Save up to several thousand euros in taxes on your severance pay – apply for it yourself starting in 2026.
- Professional Consultation: Optimize your severance through skillful negotiation and avoid expensive tax errors.
Summary of Key Points
Calculating severance made easy: Use our free severance calculator to determine your potential severance amount quickly and without obligation. The calculation is based on proven rules of thumb and takes into account your years of service and your gross salary.
No automatic entitlement: In Germany, there is generally no statutory right to severance pay. Payment usually occurs within the framework of negotiations during dismissals or via termination agreements (Aufhebungsverträge).
Tax optimization possible: Severance payments are taxable, but you can save significant taxes using the one-fifth rule (Fünftelregelung). Since 2026, however, you must apply for this yourself in your tax return.
When are you entitled to severance pay?
A severance payment is not paid automatically. However, it can arise in the following situations:
Operational Redundancy: If your employer dismisses you for economic reasons, you often have a good chance of receiving severance – especially if the dismissal is legally contestable.
Social Plan or Collective Agreement: Some companies have social plans (Sozialpläne) or collective bargaining agreements (Tarifverträge) that provide for severance pay in the event of layoffs.
Defective Dismissal: If your dismissal is unlawful, many employers prefer to pay severance rather than risk a lengthy court process.
Calculating Severance: The Most Important Factors
The amount of your severance pay depends on various factors:
Years of Service: The longer you were with the company, the higher the severance usually is. This is the most important factor in severance calculation.
Gross Monthly Salary: Your severance is based on your last salary – including regular allowances and overtime.
Legal Situation: If the dismissal is contestable, your negotiation chances increase significantly. An experienced labor law attorney can identify legal weaknesses.
Rule of Thumb: How to Calculate Your Severance
The proven rule of thumb serves as the basis for severance calculation:
Severance = 0.5 x Gross Monthly Salary x Years of Service
However, this formula is only a starting point. In practice, factors between 0.25 and 2.5 are often achieved – depending on negotiation skills and the legal situation.
Severance by Years of Service
Calculating Severance after 5 Years
After five years of service, you can expect roughly 2.5 gross monthly salaries. With good negotiation, higher amounts are possible.
| Gross Monthly Salary | Standard Severance | Optimal Severance |
|---|---|---|
| 3,000 € | 7,500 € | 12,000 € |
| 4,000 € | 10,000 € | 16,000 € |
| 5,000 € | 12,500 € | 20,000 € |
Calculating Severance after 10 Years
After ten years, you have a strong negotiating position. The standard severance is 5 gross monthly salaries, but significantly higher amounts can often be achieved.
| Gross Monthly Salary | Standard Severance | Optimal Severance |
|---|---|---|
| 4,000 € | 20,000 € | 30,000 € |
| 5,000 € | 25,000 € | 37,500 € |
| 6,000 € | 30,000 € | 45,000 € |
Calculating Severance after 20 Years
With 20 years of service, age and reintegration prospects play an important role. The standard severance is 10 salaries, but factors up to 2.0 are quite realistic.
| Gross Monthly Salary | Standard Severance | Optimal Severance |
|---|---|---|
| 5,000 € | 50,000 € | 100,000 € |
| 7,500 € | 75,000 € | 150,000 € |
| 10,000 € | 100,000 € | 200,000 € |
Taxing Severance: What You Need to Know
Tax Liability: Severance payments are generally subject to tax and are treated like wages. You must pay income tax, the solidarity surcharge, and church tax if applicable.
No Social Security Contributions: The big advantage: no social security contributions are due on severance payments. You therefore save on contributions for health, long-term care, pension, and unemployment insurance.
Reducing Severance Tax with the One-Fifth Rule
You can save significant taxes using the one-fifth rule (Fünftelregelung). This involves distributing the severance over five years for tax purposes, which lowers the tax rate.
What is the One-Fifth Rule?
Under the one-fifth rule, the severance is not added to the annual income as a one-time full amount. Instead, for the tax calculation, the severance payment is distributed equally over five years. For the employee, this results in tax savings that are greater the lower the other income is and the higher the severance amount is.
Important Change in 2026: Apply for the One-Fifth Rule Yourself
Attention: Since January 2026, employers are generally no longer legally obliged to apply the one-fifth rule automatically. This follows adjustments within the Growth Opportunities Act (Wachstumschancengesetz).
The reimbursement of the tax advantage is now handled by the tax offices (Finanzämter). For dismissed employees, this means that the application for the one-fifth rule must be made as part of the tax return.
Reporting Severance in the Tax Return
When applying the one-fifth rule, the severance must be entered in the tax return in Annex N (Anlage N), Line 17. If the one-fifth rule is not applied, the severance must be entered in Line 18.
When is the Rule of Thumb Unsuitable?
The standard rule of thumb does not always work. It is often too low for:
Short tenure and weak legal position of the employer: If your dismissal is obviously unlawful, you can demand significantly more than the standard severance.
Executives: Senior employees often receive higher severance payments as their reintegration into the labor market is more difficult.
Conversely, the rule of thumb is often too high in cases of long-term illness or if you have already found a new job.
Professional Severance Advice Pays Off
Professional severance advice can make the difference between a low and a fair severance. Our labor law experts know:
- Industry-specific peculiarities and typical severance levels
- Legal pitfalls in termination agreements and severance settlements
- Tax optimization options with the one-fifth rule
- Professional negotiation tactics for significantly higher severance payments
Investing in legal advice usually pays for itself even with minor increases in severance. In more complex cases, you can often double or even triple your severance pay.
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Questions and answers
The one-fifth rule (Section 34 of the German Income Tax Act - EStG) is a tax relief for severance payments. Instead of taxing the entire severance in one year, it is distributed equally over five years for tax purposes. This lowers the tax rate and saves you significant taxes.
Example: With a severance of 50,000 euros and an annual salary of 40,000 euros, you can save several thousand euros in taxes using the one-fifth rule. Important: Since 2026, you must apply for the one-fifth rule yourself in your tax return – it is no longer applied automatically.
The proven rule of thumb is: Severance = 0.5 x Gross Monthly Salary x Years of Service. Example: For 10 years of service and a 4,000 euro gross salary, the standard severance is 20,000 euros (0.5 x 4,000 x 10).
However, this formula is only a starting point. In practice, factors between 0.25 and 2.5 are often achieved – depending on the legal situation, negotiation skills, and individual circumstances. An experienced lawyer can significantly strengthen your negotiating position.
No – since January 2026, employers are no longer obliged to apply the one-fifth rule automatically. This follows the Growth Opportunities Act. This initially means higher tax deductions when the severance is paid out.
You must apply for the one-fifth rule yourself in your tax return (Annex N, Line 17). The reimbursement of the tax advantage is then handled by the tax office. This leads to a temporary liquidity disadvantage, as you must initially pay the taxes upfront.
The big advantage of severance payments: no social security contributions are due on them. This means you do not have to pay contributions for health, long-term care, pension, and unemployment insurance – which usually account for about 20% of the gross salary.
As a result, significantly more net remains from your severance than from your normal salary. Only income tax, the solidarity surcharge, and church tax apply – but you can also save significantly on these using the one-fifth rule.
High severance payments are particularly realistic in cases of legally contestable dismissals, long tenure, and difficult reintegration prospects. Your chances are especially good if the employer made mistakes or if you enjoy special protection against dismissal.
In cases of operational redundancy without correct social selection, lack of works council consultation, or dismissals of severely disabled persons and works council members, severance payments of 1.0 to 2.5 monthly salaries per year can often be achieved. A lawyer can identify legal weaknesses and strengthen your negotiation position.
