Termination agreement: basics

In short: A termination agreement (Aufhebungsvertrag) ends an employment relationship by mutual consent, without either side issuing a dismissal. It offers flexibility but can also bring disadvantages for unemployment benefits.

In more detail: Unlike a dismissal, both sides must agree to a termination agreement.

In detail

• Voluntariness: A termination agreement only comes into effect if both parties sign; there is generally no obligation to sign.
• Benefit suspension period: Someone who agrees to a termination agreement themselves risks a suspension period of up to twelve weeks for unemployment benefits.
• Severance pay: A severance payment is often agreed within the termination agreement, taxed differently from regular salary.
• Time to consider: It’s advisable not to sign a termination agreement immediately but to request time to review it.
• Reference letter: The wording of the employment reference can often also be negotiated as part of the termination agreement.
• Legal advice: Employment law advice before signing helps spot pitfalls in deadlines and wording.
• Alternatives: Depending on the situation, a regular dismissal with an unfair-dismissal claim may be a better option than a termination agreement (steuerklassen-und-lohnsteuer, mietrecht-grundlagen-fuer-mieter).