Optimization of severance payments and fifth rule
Good evening,
I am currently employed at a large German corporation and am planning to accept a severance package for all employees amounting to 1.5 months' salary per year of service. This comes with a termination agreement. My gross monthly salary is 5,788EUR (69,456EUR per year) and in 2015 I received a bonus payment of 6,500EUR. The resulting severance amount is calculated using the following formula:
69,456 + 6500 = 75,956EUR
75,956EUR / 12 = 6,330EUR
6,330EUR * 7 * 1.5 = 66,465EUR
My notice period is 7 months, but I wish to terminate the employment relationship no later than February 29, 2016, as I am planning to start a self-employment venture in the summer of 2016 and need at least 3 months lead time for this. I am aware that due to the amount of the severance and my notice period, there will be a waiting period for unemployment benefits until around the end of June 2016.
In this context, I have questions about the optimal timing of the severance payment and the maximum possible payout amount:
A) Exit on December 31, payout of severance in December
According to my calculations, a payout in 2015 would result in taxation at the top tax rate and applying the fifth rule would lead to a net payout of only 37,014.68EUR.
B) Exit on December 31, payout of severance in January
I have learned that it is possible to inform my employer in writing that I will have no income other than the severance in this year, so that this information can be taken into account when calculating the severance. However, the fifth rule would not apply because the severance falls short of the previous year's salary by 9,491EUR. From the self-employment, no positive income is expected in the first year. The net payout would be 45,706.82EUR.
1. Is it possible to include the payment of fictitious 1,821EUR of unemployment benefits from July to December 2016 (after the waiting period) in this calculation? This would be a total of 10,926EUR. Is it possible to obtain written confirmation of the theoretical entitlement to unemployment benefits in advance from the employment agency?
2. If yes, what tax rate would be used when applying the fifth rule and what would be the actually paid severance amount? The unemployment benefits are only used to ensure the concentration of income and are subject to the progression clause.
3. Which of the two options (including or excluding unemployment benefits) is financially preferable?
C) Exit on January 31, payout of severance in February
In this case, the same applies in terms of the concentration of income. The severance and gross salary for one month are 3,703EUR lower than the previous year's salary.
1. Does the bonus paid out in 2015 count as a variable component of compensation for the reference salary used to assess the applicability of the fifth rule? If not, then there is already a concentration of income. In this case, the net payout would be 56,695.70EUR.
2. If yes, there is no concentration of income and the above questions 1-3 are also applicable here.
It would be very helpful if the amounts I have calculated could be briefly checked and confirmed/corrected.
My main goal is to maximize the sum of my paid salary and the severance payout. Since I plan to be self-employed in 2016, liquidity is important and I want to avoid having to "repeat" overpaid taxes in the summer of 2017.
In principle, my employer is open to adjusting the calculation to my preferences. However, it is important that my employer has as accurate information as possible, possibly with supporting numbers. Therefore, a detailed answer to my questions is very important to me.
Thank you!
