Cancellation agreement

In addition to dismissal, the termination agreement is an instrument for terminating the employment relationship. With a termination agreement, the employer and employee mutually agree on the termination of the employment relationship and often regulate other termination modalities such as the payment of severance pay, vacation compensation or the preparation of a qualified reference. A termination agreement offers an employee the advantage of leaving the employment relationship without having to observe the ordinary notice period. However, a termination agreement can only be concluded if both parties agree. In practice, it is more common for the employer to offer the employee a termination agreement because they do not want to take the risk of giving notice. An employee with special protection against dismissal (severely disabled persons, persons of equal status, pregnant women, employees on parental leave, etc.) can also sign a termination agreement.

For employees, signing a termination agreement has consequences under social law. As the termination agreement leads to unemployment and the employee terminates the employment relationship themselves, the Federal Agency must be expected to impose a suspension period in accordance with § 159 Para. 1 No. 1 SGB III when receiving unemployment benefit. In such a case, the Federal Agency will not pay any unemployment benefit for 12 weeks, as the employee has terminated their employment relationship themselves and thus caused their unemployment on their own responsibility. In addition, the total period of entitlement to unemployment benefit is also reduced by at least a quarter of the entitlement period in accordance with § 148 Para. 1 No. 4 SGB III.

There are exceptional cases in which the signing of a termination agreement may not lead to the imposition of a suspension period. This is particularly the case if the employer would otherwise have issued a lawful dismissal for operational reasons. The payment of a severance payment can also lead to disadvantages when receiving unemployment benefit if the relevant ordinary notice period was not observed at the same time. Any agreed payment in lieu of leave for vacation days not taken can also have a negative effect on the receipt of unemployment benefit, as the entitlement to unemployment benefit is suspended for the period of compensated leave in accordance with Section 157 (2) SGB III.

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