Entitlement to Severance Pay

This article on the Right to Severance Pay applies only to the Czech Republic.

Termination of employment is, in most cases, associated with an entitlement to severance pay. This is a financial compensation that an employee is entitled to in the case of involuntary termination of employment. How to proceed with a severance pay request? What severance pay is an employee entitled to? When is there no entitlement to severance pay? What are the other options, and what should you be aware of when applying for severance pay? These questions are addressed below in the article.

When is an Employee Entitled to Severance Pay?

1. Termination of employment by the employer: An employee is entitled to severance pay if their employment is terminated for organizational or operational reasons. Other cases include the cancellation or relocation of a position or if the employee is deemed redundant (downsizing).
2. Health reasons: If an employee cannot perform their work due to a disability, an occupational disease, or a work-related injury.
3. Legally protected groups: Employees who belong to specific protected groups, such as pregnant women, individuals caring for children, or citizens who have reached a certain age, may also be entitled to severance pay.

What is the Amount of Severance Pay?

If the employment is terminated by the employer for organizational reasons, the employer may, out of goodwill, increase the amount of severance pay. Employees can also negotiate and present their proposal, supporting its justification.

On the other hand, if the termination occurred due to a breach of the employment contract, the entitlement to severance pay may be reduced or entirely revoked.

The amount of severance pay depends on several factors, including:

Length of employment: Generally, the longer an employee has worked for the employer, the higher the severance pay.

• Less than 1 year: 1 average monthly salary.
• 1–2 years: 2 average monthly salaries.
• 2 years or more: 3 average monthly salaries.
• More than 5 years: 3 monthly salaries or more.

Agreements in the employment contract: Some employment contracts may include specific conditions for severance pay.

Legal regulations: In some countries, laws govern the minimum amount of severance pay.

Severance pay must be paid by the employer on the next regular payday (unless otherwise agreed upon in writing).

If the employer fails to send the severance pay after an agreement, try requesting a correction in writing first. If the severance pay is still not issued, you will need to take the matter to court.

How to Request Severance Pay?

A severance pay request should be submitted in writing. It is important to include:

1. Formal request: Clearly state that you are requesting the payment of severance pay.
2. Reason for termination: If the reason is an organizational change, this should be detailed.
3. Documents: Attach all relevant documents to the request, such as the termination notice or a work certificate.

Entitlement to Severance Pay Upon Resignation

An employee is not entitled to severance pay if they resign voluntarily or are dismissed due to a breach of work obligations. However, if the reason is merely unsatisfactory work performance, the employee may only be dismissed after the employer has issued a written warning within the past 12 months, requesting the deficiencies to be addressed, and the employee has failed to remedy them within a reasonable timeframe.

Entitlement to Severance Pay Upon Termination by Mutual Agreement

Termination by mutual agreement is not explicitly covered in the labor code. Employment can only be terminated by the employee’s resignation or by mutual agreement. If both parties agree to terminate the employment relationship, severance pay is not mandatory. The employee may waive their entitlement, or the terms depend on mutual agreement and are then included in the contract.

Employers typically offer severance pay equivalent to one base salary. In such cases, the received financial compensation is considered more of a reward than severance pay. As for mandatory deductions, they are the same as for any other salary, including personal income tax and social and health insurance.

Entitlement to Severance Pay for Health Reasons

Entitlement to severance pay for health reasons is an important form of protection for employees facing difficult situations due to health complications. It is essential to follow the law and adhere to the correct procedure to successfully claim this entitlement.

Employees are entitled to severance pay if, according to a medical opinion, they are prohibited or unable to perform their work due to a disability, occupational disease, or work-related injury. In such cases, severance pay amounts to at least 12 times the employee’s average monthly earnings. The reason for termination should be emphasized. If the contract only states a general illness, the employee is not entitled to severance pay.

To claim severance pay for health reasons, the following steps must be taken:

1. Medical examination: The employee should visit a doctor and obtain a medical opinion confirming that their health condition prevents them from continuing to work.
2. Notification to the employer: The employee must inform the employer as soon as possible of their intention to terminate the employment due to health problems.
3. Submitting a request: As part of the termination process, it is advisable to submit a written request for severance pay along with the doctor’s confirmation.
4. Agreement with the employer: The employer may agree to the request or offer an alternative form of assistance, such as transferring the employee to another position, if feasible.

Entitlement to Unemployment Benefits After Receiving Severance Pay

Do I qualify for unemployment benefits if I received severance pay? This is one of the common questions employees ask after the termination of their employment. The answer to this question depends on several factors, which we will explore in detail.

How Does Unemployment Support Work?

Unemployment benefits are state-provided payments designed to help individuals who have lost their jobs and are actively seeking new employment. Eligibility for these benefits generally depends on the duration of insurance contributions and previous earnings.

Am I Eligible for Benefits if I Received Severance Pay?

Yes, even if an employee receives severance pay, they may still qualify for unemployment benefits. However, there are important conditions:

1. Duration of insurance: The employee must have been insured for unemployment for a certain period (at least 12 months within the last 24 months).
2. Registration at the Employment Office: After the end of the employment relationship and receipt of severance pay, it is necessary to register at the Employment Office as a job seeker. The employee may qualify for benefits during this time, but payments may be deferred.
3. Amount of severance pay: If the employee receives substantial severance pay, this may affect the timing of benefit payments. The Employment Office may assess when the employee becomes “financially inactive” and when they are eligible to start receiving benefits.
4. Duration of severance pay: If severance pay is spread over a longer period, the start of benefit payments may be postponed.

Are Retirees Entitled to Severance Pay?

Entitlement to severance pay is an issue that concerns not only employees but also retirees who decide to end their employment. The following section explores whether retirees are entitled to severance pay and what factors may influence this situation.

Retirees who are still employed, whether full-time or part-time, may be entitled to severance pay in the same way as other employees. This means that if their employment is terminated for reasons that require severance pay, the retiree should have the right to receive this compensation.

Certain specific situations may impact a retiree’s entitlement to severance pay:

• Inability to perform work: If a retiree is dismissed due to long-term inability to work, they typically are not entitled to severance pay.
• Probationary period: If a retiree is employed on a probationary basis and the employment is terminated, severance pay is usually not granted.

Even if retirees are not entitled to severance pay, they may have access to other forms of protection, including pension and social benefits. These programs can provide financial support during the transition to retirement.

Entitlement to Severance Pay in Germany

Entitlement to severance pay in Germany generally applies to the following situations:

1. Termination of employment by the employer: An employee may be entitled to severance pay in cases of mass layoffs or organizational changes that result in the elimination of a job position.
2. Agreed severance pay: Some employers agree on severance pay in their employment contracts or collective agreements. In such cases, the employee is entitled to payment under the agreed terms.
3. Anti-discrimination protections: If an employee is dismissed for discriminatory reasons (e.g., age, gender, disability), they may also be entitled to severance pay.

Conditions for Entitlement:

• Length of service: The longer you have been employed, the higher the severance pay you are generally entitled to.
• Age of the employee: Older employees may be entitled to higher severance pay.
• Salary: The amount of salary also affects the total severance payment.
• Agreements: Severance pay may also be regulated by collective agreements or individual terms in an employment contract.

1. Negotiation options: Even if there is no legal entitlement to severance pay, it is often possible to negotiate severance with the employer after dismissal.
2. Reason for termination: If the dismissal is due to organizational changes, entitlement to severance pay is likely. Conversely, if it is due to disciplinary measures or violations of work duties, severance pay is unlikely.

When Am I Entitled to Severance Pay in 2025?

Starting January 2025, a significant change will take effect. If an employee terminates their employment due to a loss of health fitness (work-related injury, occupational disease, etc.), severance pay will be newly provided directly by the insurance company with which the employer is legally insured. The severance amount remains at 12 times the monthly earnings. Previously, the employer was responsible for the payment, which could be financially crippling for some smaller businesses.

Severance pay plays an important role for employees in the transition between jobs. It provides financial support during the search for new employment and helps mitigate the costs associated with sudden job loss. It is essential to be informed about the conditions under which severance pay can be obtained and the amount one can expect.

If you are considering terminating your employment or have been dismissed, do not hesitate to consult a labor law expert who can provide valuable advice and assistance.