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Employment Settlement Agreement for Germany

Employment Settlement Agreement Template for Germany

A German Employment Settlement Agreement (Aufhebungsvertrag) is a legally binding document that formalizes the mutual termination of an employment relationship between an employer and employee under German law. The agreement outlines the terms and conditions of the employment termination, including severance payments, final salary arrangements, treatment of benefits, and mutual releases of claims. It must comply with German employment law requirements, including specific provisions for employee protection, and typically includes arrangements for the mandatory employment reference letter (Arbeitszeugnis). The document addresses tax and social security implications of payments and may require Works Council consultation in certain circumstances.

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What is a Employment Settlement Agreement?

The Employment Settlement Agreement (Aufhebungsvertrag) is a crucial document in German employment law used when an employer and employee mutually agree to terminate their employment relationship. It serves as an alternative to unilateral termination and helps avoid potential employment litigation. The agreement is particularly relevant in situations involving corporate restructuring, leadership changes, or when parties wish to amicably conclude the employment relationship. It must comply with strict German legal requirements, including provisions for employee protection, notice periods, and mandatory benefits. The document typically includes comprehensive terms covering severance payments, final salary, bonus arrangements, company property return, continuing obligations, and the legally required employment reference letter. Given Germany's employee-friendly legal framework, careful consideration must be given to ensure the agreement is fair, transparent, and legally compliant.

What sections should be included in a Employment Settlement Agreement?

1. Parties: Identification of the employer and employee with full legal names and addresses

2. Background: Brief description of the employment relationship, including start date and current position

3. Definitions: Key terms used throughout the agreement

4. Termination of Employment: Agreement on the termination date and immediate release from duties if applicable

5. Final Payments: Details of outstanding salary, bonus, commission, and holiday pay up to the termination date

6. Severance Payment: Amount, timing and conditions of the severance payment (Abfindung)

7. Tax and Social Security: Provisions regarding tax treatment and social security implications of payments

8. Company Property: Requirements and timeline for returning company property

9. Confidentiality: Ongoing obligations regarding confidential information

10. Release of Claims: Mutual waiver of claims, subject to statutory limitations

11. Reference Letter: Agreement regarding the provision and content of the employment reference (Arbeitszeugnis)

12. Final Provisions: Governing law, jurisdiction, and standard boilerplate clauses

13. Execution: Signature blocks and date

What sections are optional to include in a Employment Settlement Agreement?

1. Garden Leave: Used when employee is to be released from duties before termination date

2. Post-contractual Non-compete: Include if maintaining or modifying existing non-compete obligations

3. Outplacement Support: Include if employer is providing career transition services

4. Company Benefits Continuation: Used when certain benefits will continue post-termination

5. Works Council Approval: Required if works council exists and their involvement is necessary

6. Press Release/Communications: Include if parties agree on public/internal communications about the departure

7. Share Options/LTIP: Include if employee participates in share schemes or long-term incentive plans

8. Legal Costs: Include if employer is contributing to employee's legal costs

What schedules should be included in a Employment Settlement Agreement?

1. Schedule 1 - Payment Calculation: Detailed breakdown of all payments including salary, severance, and benefits

2. Schedule 2 - Company Property List: Itemized list of company property to be returned

3. Schedule 3 - Reference Letter: Agreed form of employment reference (Arbeitszeugnis)

4. Schedule 4 - Continuing Obligations: Detail of any continuing post-employment obligations

5. Appendix A - Benefits Summary: Summary of treatment of various benefits and insurances

6. Appendix B - Tax Information: Information about tax treatment of various payment components

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Germany

Publisher

Ƶ

Document Type

Employment Contract

Cost

Free to use
Relevant legal definitions






























Clauses
































Relevant Industries

Banking and Financial Services

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Professional Services

Retail

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Relevant Teams

Human Resources

Legal

Finance

Compliance

Executive Leadership

Corporate Governance

Employee Relations

Compensation and Benefits

Talent Management

Relevant Roles

Chief Executive Officer

Managing Director

Department Head

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HR Business Partner

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Research Scientist

Product Manager

Business Development Manager

Legal Counsel

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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