Severance Pay Calculator 2026
Calculate your net severance pay with the one-fifth rule (§34 EStG) – individual & joint assessment, employer perspective, net target
As of September 2026Basis: § 34 EStG, 2026 algorithmCalculated in your browser – your inputs are not transmitted and are kept on this device only if you choose
Tap to type · drag sideways to adjust
Without the severance I earn € gross a year, tax class , living in , church tax, children.
Check in detail (aggregation of income)Not checked – estimate
Tax return and insuranceSingle assessment · Work-related expenses lump sum · statutory 2.9%
Assessment in the tax return
For the one-fifth rule the assessment type matters, not the wage tax class. The tax class only pre-selects it. Tax class 2 includes the single-parent relief amount (§ 24b EStG).
Leave empty = lump sum of €1,230.
Health insurance
Preset to the 2026 average (2.9%).
Tap or drag here too: your target net amount becomes the required gross severance.
Of €30,000 severance you keep €20,330 – with the one-fifth rule probably €1,248 more than without.
Applicability not checked
Whether your income in the payout year is "aggregated" (§ 34 para. 2 no. 2 EStG) has not been checked. You can check it under "Check in detail".
Possible benefit of the one-fifth rule+€1,248
Without the one-fifth rule you would keep €19,082 – with it 4.2% more.
RZ-26 · headon.pro
What happens to unemployment benefit?
Unemployment benefit starts without a waiting period.
Days by which the job ended before the employer's ordinary notice period. 0 = notice observed.
- Suspension due to severance (45% of the severance counted)If the notice period was observed, the claim is not suspended (Section 158(1) SGB III). Suspension only delays the start; the duration stays.
- none
- Unemployment benefit per month (estimate)
- €1,637.85
Assumption: insured for at least 24 months, monthly gross = annual gross ÷ 12. The severance itself is not deducted from unemployment benefit; it can only suspend it (Section 158 SGB III). Continue in the unemployment benefit calculator with these values
How much of the severance do you keep?
Net amount by severance, with and without the one-fifth rule. Drag the point to change the severance.
What you can do
You get the benefit via your tax return
Since 2025 your employer first withholds the full tax on the severance – without the one-fifth rule. You only receive the more favourable taxation via your income tax return.
Does the one-fifth rule apply to you?
With your exit month, later pay and your income in the previous year the calculator checks the aggregation of income – under "Check in detail".
How this was calculated
Your taxable income
- Annual gross without severance
- €50,000
- Work-related expensesLump sum
- − €1,230
- Insurance contributions (pension, health, long-term care, unemployment)
- − €10,050
- Special expenses lump sum
- − €36
- Taxable income without severance
- €38,684
One-fifth rule step by step
Tax is calculated as if only one fifth of the severance were received. The additional tax on it is then multiplied by five. This keeps the severance from falling fully into the top tax rate.
- 1. Tax on your income without severance
- €6,796
- 2. Tax on income + one fifth of the severance€38,684 + €6,000
- €8,730
- 3. Difference between 2 and 1
- €1,934
- 4. Difference × 5 = income tax on the severance
- €9,670
Tax comparison
- Net with normal taxation
- €19,082
- Net with one-fifth ruleapplies
- €20,330
From gross to net
- Gross severance
- €30,000
- Income tax
- − €9,670
- Total deductions
- €9,670
- Net severance
- €20,330
Estimate – assumptions
- Statutory health insurance with the average additional contribution (adjustable)
- No income besides employment income
- Lump-sum allowances for work-related and special expenses
- No wage replacement benefits, hence no progression clause
- Child benefit entitlement for twelve months
Basis: § 34 EStG (one-fifth rule), income tax scale § 32a EStG 2026, official algorithm of the Federal Ministry of Finance. The severance itself is exempt from social security.
What is the one-fifth rule?
The one-fifth rule under §34 EStG is a tax relief for extraordinary income such as severance payments. Because our progressive tax system applies higher tax rates to higher incomes, a one-off large severance payment would be taxed particularly heavily.
The one-fifth rule softens this progression: the tax is calculated as if the severance had been paid out evenly over 5 years. As a result, a smaller part of the severance moves into higher tax brackets.
Advantages of the one-fifth rule
- Tax saving
- Up to several thousand euros less tax thanks to reduced progression
- Genuine severance is contribution-free
- Genuine severance payments for the loss of the job are free of contributions; settled pay entitlements (non-genuine severance) are employment income (§14 SGB IV).
- Automatic check
- The tax office applies the one-fifth rule automatically if it is more favourable
- Possible retroactively
- Can also be claimed for past years via the tax return
How the one-fifth rule is calculated
Factors that affect your tax saving
- 1Amount of the severanceThe higher the severance, the greater the progression effect and thus the saving
- 2Regular annual incomeWith a low base income, the effect is often smaller
- 3Assessment & partner incomeJoint assessment with a low-earning partner lowers the marginal tax rate on the severance (splitting); a high-earning partner raises it
- 4Child allowancesReduce the tax burden additionally and affect the solidarity surcharge
- 5Church tax8-9% of the wage tax, increases the overall burden
- Regular annual income
- €45,000
- Severance pay
- €30,000
- 1/5 of the severance
- €6,000
- Tax on €45,000
- €5,577
- Tax on €51,000 (+ 1/5)
- €7,428
- Difference × 5
- €9,255
- Tax on severance (one-fifth rule)
- €9,255
For comparison: Without the one-fifth rule, the severance would be taxed at your regular marginal tax rate of approx. 40% – that would be around €10,503 in tax. With the one-fifth rule, you save over €1,200 in this example.
Anyone who receives outstanding overtime paid out in the year of termination should note that this counts as regular salary within the annual income and thus increases the progression in the severance calculation. The net payout of the overtime can be determined separately.
Tax class or assessment type – what matters for severance pay?
Since 2025, the one-fifth rule only applies in the income tax assessment. What counts there is not your wage tax class, but whether you are assessed individually or jointly with your spouse or civil partner (§26b, splitting tariff §32a(5) EStG) – and how high their income is. In the calculator, the tax class is now only a default: tax class 3, 4 or 5 assumes joint assessment, tax class 1, 2 or 6 assumes individual assessment. For tax class 2, the calculator additionally applies the single-parent relief amount (§24b EStG: €4,260 plus €240 per additional child).
Types of assessment for severance pay
- Individual assessment (tax class 1, 2, 6)
- For single, divorced, widowed and permanently separated married people. Only your own taxable income counts, without splitting.
- Joint assessment with partner income (tax class 4, 5)
- Married people who both have their own income are assessed jointly. Your partner’s annual gross income flows into the combined taxable income and can raise the marginal tax rate on the severance.
- Joint assessment with little or no partner income (tax class 3)
- The splitting tariff has the strongest effect here: if the partner earns little or nothing, spousal splitting significantly lowers the marginal tax rate on the severance.
Important change since 2025
Since 1 January 2025, the one-fifth rule is no longer applied to the monthly wage tax deduction by the employer (Growth Opportunities Act). This means:
What changes
- Full wage tax
- Your employer initially withholds the full wage tax on the severance
- Tax return required
- You only receive the tax relief via your income tax return
- Time delay
- Plan for the refund in time (approx. 6-12 months after filing)
- Liquidity planning
- You have to pre-finance the higher tax at first
Severance pay from the employer’s perspective
From an employer’s perspective, the size of the severance follows a rule of thumb: 0.5 monthly salaries per year of service (statutory severance under §1a KSchG). More than 6 months of a started year of service are rounded up to a full year.
A statutory cap applies only where the labour court dissolves the employment relationship on application (§9 KSchG): §10 KSchG then limits the severance to 12 monthly salaries, 15 from age 50 with 15 years of service, 18 from age 55 with 20 years of service. The monthly salary includes cash and benefits in kind from the last month (§10(3) KSchG). Freely negotiated severance payments from a termination agreement or court settlement, the statutory severance under §1a KSchG and social plan severance payments have no general statutory cap.
Cost picture and wage tax withholding for employers
- Statutory severance (§1a KSchG)
- 0.5 monthly salaries per year of service; more than 6 months are rounded up to a full year.
- Cap only after a court dissolution (§10 KSchG)
- Only where the court dissolves the employment relationship under §9 KSchG: 12 monthly salaries; 15 from age 50 with 15 years of service; 18 from age 55 with 20 years of service. Freely negotiated, §1a and social plan severance payments have no statutory cap.
- No social security contributions
- A genuine severance payment is not employment income under §14 SGB IV – the employer pays no social security contributions, and the amount is deductible as a business expense.
- Wage tax without the one-fifth rule
- Since 2025, the employer withholds wage tax under §39b(3) EStG as a special payment without the one-fifth rule; the pension expense allowance is not applied to the severance.
Practical notes
- 1Church tax capFor high severance payments, a cap or partial waiver of church tax may be possible – this is governed by state law and usually requires an application to the relevant church tax office.
- 2Suspension of unemployment benefitIf employment ends before the end of the statutory notice period, unemployment benefit is suspended under §158 SGB III for up to 1 year – depending on age and length of service, at least 25% and up to 60% of the severance counts as "used up".
- Employee annual gross income (monthly salary × 12)
- €48,000
- Agreed severance payment
- €30,000
- Wage tax withheld (§39b(3) EStG, without the one-fifth rule)
- €10,750
- Employer social security contribution (§14 SGB IV)
- €0
- Total employer cost (business expense)
- €30,000
- Final tax with the one-fifth rule (via tax return)
- €9,510
Frequently asked questions about severance pay
Key facts on the one-fifth rule and severance taxation
What is the one-fifth rule for severance payments?
The one-fifth rule (§34 EStG) is a tax relief for extraordinary income such as severance payments. The tax is calculated as if the severance had been paid out over 5 years. This softens the progression and reduces the tax burden.
How does the one-fifth rule work since 2025?
Since 2025, the one-fifth rule no longer applies to the wage tax deduction (Growth Opportunities Act). The employer initially withholds the full tax on the severance. You only receive the tax relief under the one-fifth rule via your income tax return as a refund.
How do I calculate my gross-net severance in 2026?
The net severance is the gross severance minus wage tax, the solidarity surcharge and, where applicable, church tax. No social security contributions apply to a genuine severance payment; settled pay entitlements (non-genuine severance) remain employment income and are subject to contributions. Our severance pay calculator 2026 automatically computes both scenarios: regular taxation and taxation with the one-fifth rule, so you can see the tax saving immediately.
What role does the tax class play in the severance calculator?
Since 2025, the one-fifth rule only applies in the income tax assessment. What counts there is not the wage tax class, but whether you are assessed individually or jointly with your spouse or civil partner, and how high their income is. In the calculator, the tax class is now only a default (tax class 3, 4, 5 → joint assessment; 1, 2, 6 → individual assessment) and determines the single-parent relief amount for tax class 2 (§24b EStG).
Is a severance payment subject to social security?
A genuine severance payment – paid for the loss of the job – is free of contributions: no health, pension, unemployment or long-term care insurance is due, because it is not employment income within the meaning of §14 SGB IV. A non-genuine severance is different: where it settles pay entitlements already earned – outstanding salary, holiday compensation, bonuses or overtime – the payment remains employment income and contributions are due. On a genuine severance, deductions only apply to wage tax, the solidarity surcharge and, where applicable, church tax.
How large is a typical severance payment?
As a rule of thumb: 0.5 monthly salaries per year of employment. With 10 years of service and a monthly salary of €4,000, that would be €20,000. The actual amount is a matter of negotiation.
When is the one-fifth rule applied automatically?
The one-fifth rule is only applied when the severance leads to an "accumulation of income" – that is, when the total income in the severance year is higher than it would be without the termination. For small severance payments, or if you did not work at all during the year, it may not apply.
What does a severance payment cost the employer?
The employer’s total cost equals exactly the gross severance payment. Since a genuine severance payment is not employment income under §14 SGB IV, no employer social security contributions apply. In addition, the severance is tax-deductible as a business expense.
How much wage tax must the employer withhold?
The employer withholds wage tax under §39b(3) EStG as a special payment WITHOUT the one-fifth rule (Growth Opportunities Act, since 2025). Example: with €48,000 annual income, a €30,000 severance and tax class I, the employer withholds €10,750 in wage tax – but the final tax with the one-fifth rule is only €9,510. The employee gets the difference back via the tax return.
How do I calculate the gross severance needed for a target net amount?
Using the reverse calculation: enter your desired net target in the calculator, and the severance pay calculator works out the gross severance required to reach it – including the one-fifth rule, assessment type and church tax.