severance pay/unemployment benefits
March 27, 2011 | 30,00 EUR | answered by StB Manuela Ponikwar
Hello! On 9.2., I received a dismissal without notice resulting in a three-month suspension of benefits from the employment office. Payment will only be made starting on 4.5.2011 at a daily rate of 39.76. After initiating a dismissal protection procedure, an agreement has been reached whereby my former employer must continue paying my salary from 9.2. to 31.5.2011 (I am released from work during this time), which I can also receive as a severance payment if I terminate the employment relationship with a 3-day notice period. The dismissal without notice has been converted into a regular dismissal with a 3-month notice period. There is also the option of receiving the outstanding wages as regular salary plus vacation entitlements (equivalent to 14 hours per month). From 1.6., I have a new job where I work only 25 hours per week instead of 30 hours like at my former employer. However, there is also the option to work only 20 hours per week, which would correspond to a gross salary of 1872,- plus a proportionate 13th salary in December. The salary at my previous workplace was 2984,- per month. It is not certain whether pro-rata holiday and Christmas bonuses will be paid for 2011. I have been employed at the former company for almost 16 years and am 51 years old, tax class 1. Now to my questions: 1. Would it be more advantageous for me to work only 20 hours at my new job, as I believe the severance payment would then be higher because it is also calculated tax-wise based on the total annual gross? 2. Would it be advantageous for me to wait until 2012 to receive the proportionate 13th salary at my new job? 3. Would I still be entitled to unemployment benefits despite receiving a severance payment? What would be the best financial solution for me? Thank you for your response!! Kind regards.
Dear client,
thank you for your inquiry. Due to the limited information provided, it is not possible to give a precise assessment or calculation with concrete numbers at this point. However, in the context of an initial consultation and considering the information you have provided, I would like to answer your questions as follows:
1)
The amount of severance pay is determined by your former employer, possibly taking into account criteria such as social selection (e.g. your age, length of service, children, etc.).
It seems that in your first question, you are referring to the taxation of the severance pay. Severance payments for the loss of a job are taxed as compensation under §24 No. 1 of the Income Tax Act (EStG) according to the "Fünftelregelung" (one-fifth rule) of §34 EStG, if the criterion of "Zusammenballung" is met and the payment is made in one year.
This means that you must have more income in the relevant year due to the severance pay than if the employment had continued unchanged. Your total income will be taken into account (including, for example, unemployment benefits, your income from the new employer, and other sources of income). A comparison will be made with the previous year.
If you had a higher income in the year of the severance pay than in the comparison period, the criterion of "Zusammenballung" is met. Then, the severance pay will be subject to tax at a reduced rate according to the "Fünftelregelung." This rule means that the taxable severance pay is taxed as extraordinary income for tax purposes, with one-fifth treated as other income and the tax on this one-fifth being multiplied by five.
The "Fünftelregelung" corrects the negative effect of the severance pay on the progression (i.e. the tax rate).
As you mentioned, the severance pay would only cover the amount of wages until 31.5.2011. In this case, the criterion of "Zusammenballung" would not be met solely by the severance pay, as it does not compensate you for the loss of your job beyond that year. Therefore, your employer will not apply reduced tax rates to the severance pay. However, if other income leads to "Zusammenballung" (see 2.), this can be corrected in the tax return.
2)
If all other payments you receive, which you would not have received if the employment had continued unchanged (such as new salary, unemployment benefits, etc.), in total exceed your income from the previous year including the benefits from the old employer and the severance pay, the "Fünftelregelung" will be applied.
Without having calculated the specific values, in general, you should benefit more from higher payments from the new employment (higher base salary, payment of 13th salary) if this leads to "Zusammenballung."
3)
You are entitled to unemployment benefits despite receiving severance pay. However, the Employment Agency may impose a waiting period.
I hope this information has been helpful to you.
Manuela Ponikwar
Tax Advisor
www.ponikwar.de
