How does a severance payment affect my unemployment benefits?
January 23, 2024 | 40,00 EUR | answered by Albrecht Schlüter
Dear tax advisor,
My name is Anneliese Büchner and I am facing the decision of whether to accept a severance payment from my employer. I have worked in my company for many years and unfortunately, I have been terminated due to restructuring measures. My employer is offering me a severance payment to terminate the employment relationship.
My concerns and uncertainties mainly revolve around how the severance payment will affect my unemployment benefits. I want to ensure that I am financially secure after the termination of my employment and do not face any disadvantages due to the severance payment. Therefore, it is important for me to know whether the severance payment will reduce my unemployment benefits and what options there are to avoid this.
Could you please explain to me how a severance payment will impact my unemployment benefits and if there are measures to prevent negative consequences? Are there specific regulations or laws that I need to consider in order to optimize my financial situation after the termination of my employment?
I thank you in advance for your help and advice on this important matter.
Sincerely,
Anneliese Büchner
Dear Ms. Büchner,
Thank you for your inquiry and your trust in my expertise as a tax advisor regarding the topic of severance pay. It is understandable that you are concerned about how the severance payment will affect your unemployment benefits and what steps you can take to optimize your financial situation after the termination of your employment.
In general, a severance payment is usually offset against unemployment benefits. This means that the severance payment may reduce your entitlement to unemployment benefits for a certain period of time. This is because unemployment benefits are calculated based on your last salary, and when you receive a severance payment, this salary is considered as income for the period of the severance payment.
However, there are various ways to avoid or minimize negative effects on your unemployment benefits. One option is to receive the severance payment in installments rather than as a lump sum. This way, you can spread the offset against unemployment benefits over a longer period of time and therefore have a less significant impact on the monthly amount of unemployment benefits.
Furthermore, there is a way to avoid a so-called "waiting period" for unemployment benefits. A waiting period occurs when you have become unemployed through your own fault, for example, through a voluntary resignation. However, if you were terminated due to restructuring measures and receive a severance payment, a waiting period is usually not imposed.
It is important to note, however, that there are specific regulations and laws that you must consider when processing the severance payment and applying for unemployment benefits. It is advisable to seek advice from an experienced tax advisor or labor lawyer to ensure that you consider all relevant aspects and avoid any disadvantages.
I hope that this information has been helpful to you. If you have any further questions or would like more detailed advice, I am at your disposal.
Best regards,
Albrecht Schlüter
