Mindful separation discussions shape an appreciative separation culture and are a guarantee for a positively experienced corporate culture. Today's People Thursday article deals with the most important aspects of separation management and provides an overview of which payments can be granted by employers on the occasion of the termination of an employment relationship.
Why is fair separation becoming more and more important?
Digitization, shortage of specialists, demographic and value-driven change are completely reshaping our working world. The race for talent is becoming ever more prominent and is generating massive pressure for change at many companies. The new generation of employees is paying more attention to the working atmosphere and the prevailing culture and is selecting their employers on the basis of this. For successful employer branding and a functioning talent supply chain, dealing with new, existing and departing employees is a fundamental success factor. The way in which a company organizes separations and accompanies them on a human level points the way ahead.
An appreciative approach to termination that is anchored in the corporate culture1) is unavoidable. Unpleasant terminations always burden the entire system. Material costs such as process or fluctuation costs are directly quantifiable and occur in the short term. In the long term, however, hidden costs such as the negative impact on the working atmosphere due to rumors and fears, the loss of know-how and work motivation, and even damage to the image of those who have been dismissed are more noticeable. If separations are handled in an appreciative manner, a culture of freedom from fear can be established, which in turn opens up space for urgently needed creativity and innovative spirit.
It is usually not the "what" but the "how" that makes people unhappy.
In order to cushion fears of loss, it is essential to say goodbye to those affected in a respectful manner and to provide professional support during the separation phase. A respectful farewell not only facilitates the consensual termination of employment relationships, but also conveys internally and externally that harmonious cooperation is important to the company. Professional separation management must be well thought out in all phases and implemented consistently and uniformly so that it has a positive effect on all those involved. For this reason, New Placement must not be missing from a fair separation management.
The "how" of separations is crucial, because it has the greatest influence on the remaining employees. They observe very closely how terminated colleagues are dealt with and draw their conclusions from this. A holistic separation strategy is therefore enormously conducive to behavior. If the company provides institutionalized spaces for exchange, unrest and uncertainty can be absorbed. Honest information and communication promote trust, loyalty and identification - essential factors of employee retention. Regular feedback processes ensure that a balance is struck between old and new.
How do you conduct your seperation interviews?
Managers who conduct separation interviews still have too little training in how to constructively manage relationship conflicts and openly confront feelings in the most difficult of employee interviews. Only about a fifth2) of managers prepare for this with the help of separation workshops. The way in which the conversation is conducted, as well as the content of the interview, must be coordinated with management, HR management and the works council and must fit in with your corporate culture. The sustainable culture-promoting task is to bring about a creative, mutually agreeable solution. Only in this way will a separation process be experienced throughout the company as fair, careful and organized.
Which payments in the context of the termination of an employment relationship are tax-privileged?
From a tax and social security law perspective, the true economic content of a payment made in connection with the termination of an employment relationship must always be taken into account:
As a token of gratitude and in recognition of many years of service, employers may grant their employees (additional) voluntary severance payments (freiwillige Abfertigung) upon termination of employment, in addition to any existing statutory or collective agreement severance payment entitlement. For those employees who are subject to the "old severance pay" system, these are not only exempt from social security contributions and ancillary wage costs, but can also be taxed (within certain limits) at the preferential tax rate of 6%.
If, on the other hand, disputed salary claims are settled on the occasion of the termination of the employment relationship, this settlement payment (Vergleichszahlung) can be accounted for with preferential wage tax treatment; the extent of the preferential treatment depends on the severance payment system ("old" or "new"). In both cases, however, these payments are subject to social security contributions.
In addition, it is possible to motivate employees to terminate their employment relationship by mutual agreement by making payments for the waiver of work performance for future salary payment periods (Abgangsentschädigung). Although these payments are exempt from social security contributions, they are subject to full wage tax and ancillary wage costs.
In addition, payments made upon or after termination of the employment relationship on the basis of a social plan to mitigate the financial losses of the terminated employees are (partially) tax-privileged in terms of income tax under certain conditions and exempt from social security contributions and ancillary wage costs.
Since payments in connection with the termination of employment relationships always involve the risk of a tax-damaging conversion of claims ("concealment" of claims subject to contributions or wage tax, such as vacation replacement benefits, open time credits, bonuses, etc.), we recommend that you seek individual advice by examining the specific case from the perspective of contributions and wage tax.
We are happy to advise and support you!
Authors:
|
Julia Mäder |
Kerstin Tomancok |
Contact:
|
Thomas Neumann |
1) Heppe, C. (119 2023). HR Journal. The 3 most important trends in separation culture: https://www.hrjournal.de/die-3-wichtigsten-trends-in-der-trennungskultur/ retrieved
2) Kienbaum Consultants International GmbH. (2021). Separation Management Update 2021. Germany: Kienbaum Consultants International GmbH
Abonnieren Sie die neuesten Nachrichten von BDO.
Please fill out the following form to access the download.