Severance Pay Calculator: one-off payment vs. the one-fifth rule
A severance payment is withheld like a one-off payment at source — usually at a high marginal rate. The "Fünftelregelung" (one-fifth rule) can soften that, but since 2025 it no longer applies automatically at payroll — only via your tax return. This calculator shows both methods side by side.
Result
The cheaper method saves 356,00 € compared to the other.
Method 1: one-off payment (§ 39b(3) EStG)
| Item | Month |
|---|---|
| Severance payment (gross) | 20.000,00 € |
| Income tax | −4.746,00 € |
| Solidarity surcharge | −0,00 € |
| Total deductions | −4.746,00 € |
| Net from the severance payment | 15.254,00 € |
This is the method your employer actually applies at payroll — the severance payment is taxed like a Christmas bonus, following the official annual-table method. Unlike a bonus, NO social security applies here: a genuine severance payment compensates for the loss of the job, it is not wages within the meaning of § 14 SGB IV.
Method 2: one-fifth rule (§ 34(1) EStG)cheaper
| Item | Month |
|---|---|
| Severance payment (gross) | 20.000,00 € |
| Income tax | −4.390,00 € |
| Solidarity surcharge | −0,00 € |
| Total deductions | −4.390,00 € |
| Net from the severance payment | 15.610,00 € |
Since 1 January 2025, employers no longer apply the one-fifth rule at payroll (Wachstumschancengesetz) — this amount does NOT arrive automatically with your pay. If the one-fifth rule is cheaper, you must claim it via your income tax return; the tax office refunds the difference afterwards.
Regular month (without the severance payment)
| Item | Month |
|---|---|
| Gross pay | 2.890,00 € |
| Total deductions | −897,83 € |
| Net pay | 1.992,17 € |
- Voluntarily statutorily insured employees: for them, part of the severance payment can exceptionally still be subject to health/long-term-care contributions (a "social share") — not modeled here
- The one-fifth-rule calculation uses the payroll-tax procedure as an approximation of the real income tax assessment — the tax office decides the exact refund based on your full tax return
FAQ
Do I have to pay social security on a severance payment?
No, a genuine severance payment (compensation for the loss of your job) is free of social security contributions — it does not count as wages within the meaning of § 14 SGB IV. Exception: voluntarily statutorily insured employees may still owe contributions on part of it.
Does my employer automatically apply the cheaper method?
Only through 2024. Since 1 January 2025, employers always withhold using the one-off-payment method (usually the worse one) — you now have to claim the one-fifth rule yourself via your tax return.
Why is the one-fifth rule often cheaper?
It smooths out tax progression: instead of taxing the full severance payment at once, only a fifth is notionally added to your annual income, and the tax on that is multiplied by five. The lower your regular income and the higher the severance payment, the bigger the advantage usually is.