Severance Payments for Dismissed Employees in Germany

41 Pages Posted: 14 Oct 2003

See all articles by Christian Grund

Christian Grund

RWTH Aachen University - School of Economics and Business Administration; IZA Institute of Labor Economics

Date Written: September 2003

Abstract

This contribution investigates severance payments for dismissed employees in Germany. Subsequent to an overview about the legal framework, we respond to the following questions: Who receives severance payments? By which characteristics is the level of severance payments determined? Is overcompensation to be considered a relevant issue? Hereby, individual and collective dismissals are always distinguished. This is the first study on this issue using individual representative data - the German Socio-Economic Panel - and multivariate methods. The results indicate that rather women, persons with many years of tenure and working in big firms receive severance payments. There is a huge variance in the size of the payments, which can only partly be explained by tenure, the wage, firm size and the region. At least one quarter of dismissed employees is better off in their following careers independent of having received a severance payment.

Keywords: severance payments, dismissals, plant closings

JEL Classification: M51, M52, J32, J53

Suggested Citation

Grund, Christian, Severance Payments for Dismissed Employees in Germany (September 2003). IZA Discussion Paper No. 875. Available at SSRN: https://ssrn.com/abstract=446381

Christian Grund (Contact Author)

RWTH Aachen University - School of Economics and Business Administration ( email )

Aachen
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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