Losing Your Job and Unemployment Benefits in Germany

Unemployment Benefits in Germany (Arbeitslosengeld)

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Last updated: 23 May 2020 / by Sam Williams

If you are working in Germany, you will be hoping to have a job that you enjoy for as long as you want. Unfortunately, that’s not always the case and sometimes you may find yourself facing unemployment through no fault of your own.

German has the lowest rate of unemployment in the EU and has a rock-solid economy. Your chances of employment are therefore much lower in Germany than anywhere else. There are no guarantees, and you may be one of those who are unlucky enough to lose their job.

There is a safety blanket as Germany has unemployment benefits for those who lose their job and don’t have an income. Here is a look at what happens in different circumstances and what you’ll need to do to claim for unemployment benefit.

Different Types of Dismissals

There are many different circumstances in which you may lose your job, but in general, you are protected against unfair dismissal by Kündigungsschutzgesetz, the Employment Protection Act. As well as these general rights, some groups of workers receive extra special protection. These groups are:

  • Pregnant women or mothers who have just given birth
  • Severely disabled employees
  • Employees on parental or maternity leave

The rules exist to protect these employees as they are more vulnerable. The rules largely prevent employees from being dismissed if they fall into one of these categories. There are only a few exceptions to this.

If you work at a company where there are fewer than 10 employees or have been in your position for less than six months, there is not the same protection. In these cases, your employer does not have to justify the reason for the dismissal. The rules around discrimination will still apply regardless.

In general, employers must be able to prove why they are terminating any contract of employment. Different terms apply to different types of contract:

Temporary contracts

The employer is not obliged to renew a temporary contract. If it is due to expire, the employer can choose to allow it to lapse. However, they must provide confirmation one month before the contract is due to end that they do not intend to renew it.

If an employer wants to finish a temporary contract earlier than the agreed expiry date, they can only do so for one of the reasons applicable to permanent workers.

 

Permanent contracts

Redundancy/dismissal for business reasons (betriebsbedingte Kündigung)

There are several types of circumstance which would fit into this category. Your employer must be closing completely, restructuring or facing financial problems to be able to terminate a permanent contract. The employer must give you notice, even if the company is going into liquidation. Your employer can only terminate your contract if there is proof that your job no longer exists and there is nothing else suitable for your skills.

Dismissal due to conduct (verhaltensbedingte Kündigung)

There are many ways your employer can dismiss you due to conduct, such as poor performance or chronic rule-breaking. The breaches do not have to be severe, but they should be persistent or repeated, and they must allow you to improve. Under German law, your employer must issue at least one warning (Abwarnung). Your employer should also be supportive and offer constructive feedback, so there is the best chance for a successful outcome. If your conduct does not improve, despite these measures, your employer can terminate your contract.

There are limited circumstances when you can be dismissed instantly without warning (fristlose / außerordentliche Kündigung). There must be serious misconduct for this to occur, such as fraud or abuse. Your employer must terminate your contract within two weeks of finding out about your breach of employment contract, or else they will waive their right to act. Some countries describe this type of significant breach as gross misconduct.

Dismissal due to the individual (personenbedingte Kündigung)

In direct contrast to dismissal due to misconduct when it’s due to the individual, there is an acceptance that you may not be at fault. The most common example of this is an individual unable to carry out the main duties of their role due to ill health, and the situation is unlikely to change. In these cases, the employer has the right to terminate the contract, but they must be able to demonstrate where you are failing in your responsibilities.

If your employer terminates your contract as a direct result of your illness, you can claim on your health insurance.

Resignation

If you choose to leave your job, you will generally have to provide notice in writing. The amount of notice you need to give will be set out in your employment contract. If you do not have another job to go to, you may not be eligible for Unemployment Benefit for the first three months.

Notice Period

If your employer terminates your contract, they must typically give you sufficient notice. This must be in writing; you are not obliged to take notice of a contract termination, which is issued orally.

You should receive a notice period before your contract ends. If you are still on probation (Probezeit), the notice’s statutory minimum length is two weeks. Your employer can give you longer if it is stipulated in your contract. The amount of notice that your employer must give you is set out in your employment contract but it can be up to seven months if you have been working for the same company for longer than 20 years.

While you are working your notice period, your employer must carry on paying your salary and you will have to work your usual hours. Your employer might want to pay you instead of notice, but you must agree to this.

The only exception is for serious misconduct where your dismissal is effective immediately with no notice period necessary.

If you are unhappy about the termination of your contract, you have the right to file a complaint (Klage). You must lodge this with the labor court (Arbeitsgericht) within three weeks of when your employer-issued notice. By doing so, you may be able to negotiate a severance pay package (Abfindung) with your employer.

Important: your employer may ask you to sign a separation agreement (Aufhebungsvertrag) when they terminate your employment contract. The purpose of this agreement is to show that both sides agree to the termination. If you sign this, you cannot later appeal and you cannot ask for severance pay. It is essential that you do not sign this contract unless you have received financial or legal advice.

What You Are Entitled To From Your Employer

Germany does not have statutory redundancy pay so if your employer terminates your contract you won’t automatically receive a payout. Severance pay is typically negotiated as part of a collective agreement. This process can be very time-consuming for both parties. Employers are typically keen to avoid being dragged into this type of process and may offer you severance pay as a goodwill gesture. The circumstances of your dismissal will influence how much your employer offers. As a general rule, it’s reasonable to expect half of your monthly salary for every year of service.

Regardless of the circumstances of your dismissal, your employer must provide you with proof that you have been deregistered from the Social Security System (Abmeldung zur Sozialversicherung) and a reference. You can also ask for a copy of your electronic income tax certificate (Lohnsteuerbescheinigung) as this will make it easier to claim a refund on your tax return.

Unemployment Benefit in Germany

Regardless of the reason, if your employer has terminated your contract, you will be entitled to receive unemployment benefits in Germany. This is also the case if you were a temporary worker and your contract has not been renewed.

Unemployment benefit is split into two categories in Germany: Unemployment Benefit I (Arbeitslosengeld I) and Unemployment Benefit II (Arbeitslosengeld II). The length of your unemployment plus your previous contributions to statutory unemployment insurance will determine which benefit applies to you.

Unemployment benefit I (Arbeitslosengeld I)

If you have been working in Germany and making regular contributions to the social security system, you should be eligible for Unemployment Benefit I. This is administered by the Federal Employment Agency (Bundesagentur für Arbeit), and they will pay you an income while you seek new work.

The amount you can claim and the duration of your claim will depend on how much you were earning and how long you paid into the system for.

To qualify for Unemployment Benefit I, you must fulfill the following criteria:

  • You are currently unemployed
  • You have registered with the local unemployment office (Arbeitsamt)
  • You have paid a minimum of 12 months of unemployment insurance contributions in the past 30 months. Exemptions can be made for time off work to raise children or due to illness.

  • You are an EU/EEA/Swiss citizen, or you hold a permit which allows you to work in Germany

  • You are looking for work for 15 hours per week or more

If you don’t meet all of these eligibility criteria, you may not qualify for Unemployment Benefit I, but could receive Unemployment Benefit II.

Payment of Unemployment Benefit I

The amount you will receive is based on your income in the 12 months before the termination of your contract. If you have children, you will receive 67% of your average wage; if you don’t have children, you’ll receive 60%. These figures are subject to a maximum limit of €6900 in West Germany and €6450 in East Germany.

These payments are treated as a wage, which means you will need to pay taxes and make social security contributions. You will not need to do anything about this as the payment office will automatically make the following deductions:

  • Statutory health insurance – 7.3-8.2%
  • Unemployment insurance – 1.2%
  • Pension insurance – 9.45%

  • Long-term care insurance – 1.025%
  • Income tax
  • Solidarity surcharge (ceasing in 2020)

The amount of time you will receive payment for varies depending on your current age, and how long you paid contributions for:

Length of contribution Age now Payment entitlement
12 months 6 months
16 months 8 months
20 months 10 months
24 months 12 months
30 months 50 15 months
36 months 55 18 months
48 months 58 24 months

How to Apply for Unemployment Benefit I

To claim Unemployment Benefit I, the sooner you start the process, the better. If there is any delay in notification or registration, your payments may be delayed or refused.

You can register as a jobseeker before your employment contract finishes. Ideally, you should register at least three months before you leave your job. If you don’t have a notice period or your employment finishes suddenly, you have three days to register. You can do this in person, by phone or online at the Federal Employment Agency website.

You will need to fill in a form to claim Unemployment Benefit I. This is available to download from the website or you can collect a form in person from the employment office. This form is not available in English, just German.

Within a fortnight, you will receive a letter confirming the benefit and inviting you to attend an interview. When you meet with your counselor from the employment agency, you will be asked for proof of your efforts to find work. It’s, therefore, a good idea to keep track of everything you’ve done, including keeping proof where you can.

Many people view these meetings with the employment advisor as negative, but with the right approach, they can be very beneficial. The advisor is there to provide genuine support and if you are open and honest, they will be able to identify coaching and training that will help you progress.

Unemployment Benefit II (Arbeitslosengeld II)

Unemployment Benefit II can be paid as either a standalone benefit or alongside Unemployment benefit I.

If you do not qualify for Unemployment benefit I, or the amount payable is not enough for you to survive on, you can claim Unemployment benefit II.

Another name you might hear for this benefit is Hartz Vier. This is a reference to the head of the committee who helped to restructure unemployment payments.

The qualifying criteria for Unemployment Benefit II are:

  • You are between 15 years old and statutory retirement age.

  • You can work for a minimum of three days per week under “normal conditions”.

  • You do not have enough money to meet the essential needs of either yourself or others in your household. This may include an income from working.

  • You are an EU/EEA/Swiss citizen, or you hold a permit that allows you to work in Germany.

Unemployment Benefit II is more than a payment for those who are out of work. It is also paid to households where the income is not enough to meet their needs, even if they have a job. If you have never worked in Germany and have not contributed to the system, this is the benefit that you can claim.

As well as meeting the above eligibility criteria, you must demonstrate that you are ready and willing to do everything possible to return to the workplace. This could include certain “integration” measures such as training courses, further education or work experience. Your benefit may reduce or cease entirely if you reject what is believed to be a reasonable and helpful opportunity.

Payment of Unemployment Benefit II

The Jobcentre pays Unemployment Benefit II at a flat rate depending on age and other factors. The amount is intended to be enough to cover essential costs without being too generous. You will receive payment every month in advance for a maximum of 12 months initially. Your circumstances will be subject to review after a year to see if you continue to qualify for payments. You may be asked to undertake more integration measures to ramp up efforts to place you in work.

The Jobcentre calculates your benefit by using your age to get the basic sum, and then topping up this with extras to cover heating and accommodation.

Age Amount per month
Individuals/single parents over 18yrs €432
Adults plus partner aged under 18yrs €432
Partners/married couples aged over 18yrs €389 (each)
Children aged up to 6 years €250
Children aged 6-13 years €308
Children aged 14-17 years €328
Young people aged 18-24 years €345

Children and young adults qualify for extra assistance to cover educational essentials such as school trips or classroom supplies. The aim is to make sure they don’t lose out on any educational experiences, including leisure, sports and culture activities. In these circumstances, parents of the child will be able to apply for the top-up child allowance (Kinderzuschlag).

Further support is made available if you fall into any of the following categories:

  • Pregnant women
  • You have a disability but can work
  • Single parents (depending on the number and age of children)
  • Special dietary needs

You will also receive additional payments for water heating and housing costs. If you receive this, you will not be eligible to apply for housing benefit.

How to Apply for Unemployment Benefit II

As Unemployment Benefit II is a top-up payment, which is only payable as a last resort, you should first exhaust all other possibilities. This means checking that you don’t qualify for:

  • Sickness benefit
  • Housing benefit
  • Maternity benefit
  • Reduced early retirement pension
  • Parental allowance
  • Child allowance or child benefit

Only once you have explored all possible other sources of funding should you apply for Unemployment Benefit II. To do this, you will need an appointment at the JobCentre. Take your ID along with your social security ID, your passport (or ID card), and your residence permit or visa (if you need one). Your advisor will give you the forms to complete; these are available in many languages, including English.

As this benefit is payable to assist with living costs, you will need to prove how much you pay. Your advisor will let you know exactly what they want to see, but typically this includes bank statements, proof of living costs, rental contract and details of both your income and assets.

If you are approved, you will receive a schedule of payments and information about the steps your advisor expects you to take to find work.

Start-up Grants

In addition to the two types of unemployment benefits, the German government offers various grants for start-up businesses.

If you are out of work but want to start up your own business, you may qualify for funding and support. This includes a start-up grant plus extra training and coaching from established entrepreneurs.

Unemployment Benefits in Germany (Arbeitslosengeld)

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