What is a mutual termination agreement?
A mutual termination agreement (Aufhebungsvertrag) is a bilateral agreement by which employer and employee end the employment relationship at a specified point in time. Unlike a dismissal, there is no unilateral declaration, no statutory notice periods in the strict sense, and no involvement of the works council under § 102 BetrVG.
Advantages for both sides
| Employer | Employee |
|---|---|
| No unfair dismissal proceedings | Negotiable severance pay |
| Predictable termination date | Garden leave and time to search for a new job |
| No works council consultation procedure | Preferred wording in the reference letter |
| Legal certainty through a full and final settlement clause | Termination without a "dismissal" on the CV |
The biggest risk: the blocking period
Anyone who plays an active part in ending their own employment regularly triggers a blocking period (Sperrzeit) of up to twelve weeks for unemployment benefit. This does not apply if there is good cause — for example, an otherwise certain operationally motivated dismissal whose notice period is observed, combined with severance pay of 0.25 to 0.5 monthly salaries per year of service. If the employment relationship ends early, unemployment benefit may additionally be suspended under § 158 SGB III.
Mandatory content and sensible clauses
- Termination date and reason for termination
- Severance pay: amount, due date, inheritability
- Garden leave: revocable or irrevocable, offsetting against holiday entitlement
- Settlement of outstanding claims: holiday, overtime, variable pay
- Reference letter with agreed rating and closing formula
- Return of work equipment, company car, access credentials
- Post-contractual non-compete clause: lift or confirm
- General full and final settlement clause
Form and revocation
A mutual termination agreement must be in writing under § 623 BGB — an email or a scan is not sufficient. There is no statutory right of revocation; according to Federal Labour Court (BAG) case law, consumer rights of withdrawal do not apply to mutual termination agreements. However, the requirement of fair negotiation must be observed: catching someone off guard, time pressure, or negotiations conducted while the employee is ill can render the agreement invalid.
Tax treatment of severance pay
Severance pay is subject to income tax but exempt from social insurance contributions, provided it is genuinely paid for the loss of the job. In certain circumstances the one-fifth rule (Fünftelregelung) under § 34 EStG applies and eases the effect of progressive taxation — it requires a bunching of income.
The process in practice
Hand over the draft in writing and allow time for consideration. Both original copies are signed, and each side keeps one. If a personal handover is not possible, send the agreement by post — this documents the timing and content far better than any chat message.