Termination agreement: have it reviewed before you sign

A termination agreement (Aufhebungsvertrag) ends the employment relationship by mutual consent – without a dismissal, without protection against dismissal and without a deadline for filing a claim. It can be a good solution if the terms are right. But never sign under time pressure: once signed, it can only be undone in rare exceptional cases.

Termination agreement, settlement agreement after dismissal, court settlement – the difference

With a termination agreement, the employer and employee agree on termination without a prior dismissal. With a settlement agreement after dismissal (Abwicklungsvertrag), the employer first dismisses; the parties then settle the details and the employee waives the right to bring a claim. A court settlement ends pending unfair dismissal proceedings. These variants may be assessed differently with regard to unemployment benefit – which is why the structure matters.

Advantages and risks

Possible advantages

• A predictable termination date and a quick move to a new employer
• Severance pay without having to go to court
• Influence over the employment reference, the agreed wording for communication and references
• Avoiding a conduct-related dismissal in your personnel file

Typical risks

• Loss of protection against dismissal and special protection against dismissal (e.g. pregnancy, severe disability)
• Suspension of unemployment benefit (Sperrzeit and Ruhen)
• Waiver of outstanding claims through a far-reaching general waiver clause
• Disadvantages with regard to company pension schemes, share options or bonuses

Benefit suspension and suspension of entitlement

In the view of the Federal Employment Agency (Agentur für Arbeit), anyone who participates in terminating their employment relationship “dissolves” it themselves. If there is no good cause, a suspension of benefits (Sperrzeit) of usually twelve weeks is imposed. In addition, the entitlement period is reduced by at least a quarter.

According to the technical guidelines of the Federal Employment Agency (Bundesagentur für Arbeit), good cause may exist in particular if

• the employer would otherwise have threatened a dismissal for operational or personal reasons with effect from the same date,
• this dismissal would have observed the notice period, and
• the severance pay is between 0.25 and 0.5 months’ earnings per year of service (in the case of higher severance pay, the Agency examines whether the dismissal would have been lawful).

Irrespective of this, the entitlement to unemployment benefit is suspended (Ruhen) if the employment relationship ends against payment of severance before the ordinary notice period has expired (§ 158 SGB III). The wording of the agreement is decisive here.

Checklist: what belongs in a termination agreement

• Termination date in compliance with the ordinary notice period, and reason for termination (e.g. “at the instigation of the employer to avoid a dismissal for operational reasons”)
• Severance pay with amount, due date, inheritability and a note that it is stated gross
• Garden leave – irrevocable, with continued payment of remuneration and offsetting of remaining holiday and overtime
• Remuneration until the end, including bonuses, commissions, 13th month’s salary; provisions on target agreements
• Company car, laptop, mobile phone – return date or takeover
• Employment reference – grade, content, closing statement; ideally your own draft attached as an annex
• Sprinter clause – early departure in return for increased severance pay
• Company pension scheme – vesting, transfer of direct insurance
• Non-compete clause – waiver or compensation for the restricted period
• General waiver clause – word it carefully so that no claims are lost unintentionally

Can a termination agreement be undone?

There is no statutory right of withdrawal; the Federal Labour Court (Bundesarbeitsgericht) has made it clear that the consumer right of withdrawal does not apply to termination agreements concluded at the workplace. However, the following may be considered:

• Rescission on grounds of unlawful threat (§ 123 BGB), for example if the employee was threatened with a summary dismissal or a criminal complaint that a reasonable employer could not seriously have considered. Deadline: one year from the end of the coercive situation.
• Breach of the requirement of fair negotiation: If the employer created or exploited a situation of psychological pressure that made a free decision considerably more difficult, the agreement may be invalid (BAG, judgment of 7 February 2019 – 6 AZR 75/18). According to case law, however, a short acceptance window alone is not sufficient.
• Formal defects: If the signature of one party is missing from the same document, the agreement is void.

For employers: legally sound separation

For companies, too, a termination agreement is often the best route: it avoids litigation risks, back pay due to default of acceptance (Annahmeverzug) and publicity. We draft agreements that withstand rescission, regulate return and confidentiality obligations and – in the case of mass redundancies – take into account the notification obligations under § 17 KSchG, because termination agreements initiated by the employer also count towards these.

Practical examples

The following cases are simplified, typical scenarios from employment law practice. They are for illustration only; each individual case must be assessed separately.

Frequently asked questions

Note: This information provides a general overview of the legal situation (as of November 2026) and does not replace legal advice in an individual case.

This page is a translation of the German original. It is for general information only and does not replace legal advice on your individual case. German version