Dismissal by the employer

Social selection: the Achilles’ heel of redundancy for operational reasons

If a post is made redundant, the employer may not freely choose who is affected. Among comparable employees at the same level of the company hierarchy, the selection must be made in accordance with statutory criteria such as length of service, age, maintenance obligations and severe disability (Section 1(3) of the German Employment Protection Act (KSchG)). An employee is considered interchangeable if they work at the same level within the company hierarchy (horizontal comparability) and the employer could, by virtue of their right to issue instructions – without a notice of change or a contract amendment – assign them to another employee’s post. A short induction period does not preclude comparability. The selection is company-specific and does not extend to other sites of the company

High-performing employees may be excluded from the social selection process under Section 1(3), second sentence, of the German Employment Protection Act (KSchG) if their continued employment is in the legitimate interests of the business, for example to ensure a balanced age structure or to retain key knowledge holders. The thresholds are high. Exclusion must be justified by a specifically demonstrated and, where in doubt, documented business interest. The works council must also be informed, during the consultation, of the reasons for excluding employees from the social selection process.

In practice, preparation is key. This includes a clear delineation of the comparison groups, a transparent scoring system, an assessment of vacant posts in other departments as well, and the documentation of the business decision itself. In the case of larger-scale staff reductions, the notification of mass redundancies under Section 17 of the German Redundancy Protection Act (KSchG) must also be submitted; errors in this notification have caused entire waves of redundancies to be overturned. The relevant thresholds, the consultation procedure with the works council, and the timing of the notification to the Employment Agency must all be included in any procedural planning. 

Consultation with the works council under Section 102 of the Works Constitution Act (BetrVG): no valid dismissal without consultation

Where a works council exists, it must be consulted prior to any dismissal. A dismissal issued without such a consultation is invalid (Section 102 of the Works Constitution Act). The employer must inform the works council of the employee’s identity, personal details, the type of dismissal and, above all, the grounds for dismissal in the same manner as they intend to present them later in legal proceedings. Reasons added at a later stage which were not communicated to the works council are inadmissible in proceedings for protection against unfair dismissal; however, reasons not yet known to the employer at the time of giving notice may be added subsequently, provided the employer involves the works council again before introducing them into the ongoing proceedings. Deliberately incorrect or misleading information provided to the works council renders the consultation invalid in all cases. The works council has one week to submit its opinion in the case of ordinary dismissal, and three days in the case of extraordinary dismissal. The notice of dismissal may only be served once the deadline has expired or a final opinion has been issued.

The consultation is the most common individual error in proceedings concerning protection against unfair dismissal, as it takes place under time pressure and its importance is often underestimated. A written consultation, including a full statement of the facts, a documented date of receipt by the works council and strict adherence to deadlines, has proven to be effective. Our article on the German works council from the perspective of foreign parent companies explains how foreign parent companies should factor co-determination into their overall planning.

Formal defects and service: the real reasons why notices of termination fail

Notice of termination must be in writing and bear a handwritten signature; email, fax or a scanned signature are not sufficient (Section 623 of the German Civil Code (BGB)). The notice must be signed by a person authorised to act on behalf of the employer, and this is where Section 174 of the German Civil Code (BGB) comes into play: if an authorised representative – such as a head of human resources without a publicly declared authority to give notice – gives notice without enclosing an original power of attorney with the letter, the employee may reject the notice of termination immediately, with the result that it is invalid and must be reissued, possibly after important deadlines have expired.

Delivery is the second perennial issue. The notice of termination only takes effect upon delivery, and the employer must prove that it has been delivered. Registered post by postbox provides circumstantial evidence; registered post by hand delivery fails if the recipient is not present; the safest option remains a courier who places the letter in an envelope, documents the posting and is available as a witness. Finally, special protection against dismissal must be borne in mind: in the case of pregnant women and mothers during the protected period as well as those on parental leave, dismissal requires prior official authorisation; for people with severe disabilities, the consent of the Integration Office is required; and works council members are, in principle, protected against ordinary dismissal. A dismissal without the necessary official approval is void and cannot be rectified.

Calculating litigation risk: default of acceptance, severance pay and the alternative

If an employee brings an unfair dismissal claim within the prescribed time limit, the parties often end up in litigation for over a year. If the employer loses the case, they are obliged to continue the employment and, in addition, to pay wages for the entire duration of the proceedings due to default of acceptance, less any other income that the employee has maliciously failed to earn. This risk is the real cost driver behind lost unfair dismissal cases. German law recognises a statutory entitlement to severance pay only in exceptional cases, for example under Section 1a of the Unfair Dismissal Act (KSchG) in the event of redundancy, provided the notice of dismissal includes a corresponding reference, amounting to half a month’s earnings for each year of service, in the case of a court application for termination under Sections 9 and 10 of the German Employment Protection Act (KSchG) (court application for termination), or in the case of compensation for disadvantage where there is a deviation from the reconciliation of interests under Section 113 of the German Works Constitution Act (BetrVG). Otherwise, severance payments are the result of negotiations, although legal practice nevertheless regularly follows this approach.

For separations that can be planned in advance, a termination agreement is therefore often the more cost-effective option than a notice of termination. It terminates the employment relationship in a legally secure manner, avoids the risk of default of acceptance and can be prepared confidentially. However, such an agreement may have negative social security law consequences for the employee when claiming unemployment benefit. Where dismissal is necessary, the basic rule set out in this article applies: the grounds for dismissal, documentation, notice periods and the hearing determine the process. Our advice for employers is summarised on the ‘Employment Law for Employers’ page; the specific issues for foreign employers are covered in the article on dismissal in Germany from the perspective of international companies.

Legal status: July 2026.