Letter Of Compensation Settlement Template for Germany

The Letter of Compensation Settlement (Abfindungsvereinbarung) is a crucial document in German employment law, primarily used when an employment relationship is terminated by mutual agreement or as part of a dispute resolution. This document becomes relevant when both parties agree to end their employment relationship with a financial settlement, whether due to restructuring, voluntary separation, or resolution of employment disputes. The letter must comply with German legal requirements, including specifications from the Civil Code (BGB), Protection Against Dismissal Act (KSchG), and relevant tax regulations. It typically includes detailed information about the settlement amount, payment terms, tax treatment, and mutual releases, while also addressing any continuing obligations or restrictions. The document serves as a legally binding agreement that provides clarity and finality to both parties while ensuring compliance with German employment law requirements.

1. Sender Details: Full company name, address, and contact information of the employer

2. Recipient Details: Employee's full name and address

3. Date: Date of the letter

4. Subject Line: Clear indication that this is a compensation settlement letter

5. Reference to Employment: Details of current employment relationship including start date and position

6. Settlement Amount: Clear statement of the compensation amount and calculation basis

7. Payment Terms: When and how the settlement amount will be paid

8. Tax Treatment: Statement regarding tax handling and social security contributions

9. Release of Claims: Mutual release of all claims related to the employment relationship

10. Confidentiality: Terms regarding confidentiality of the settlement

11. Signature Block: Space for signatures of both parties