Compensation payment according to a social plan in Germany

The European Court of Justice had to decide whether it is valid to agree on compensation payments in a social plan, which takes into account that employees will be entitled to a pension payment due to age or a severe disability in the near future. According to the relevant social plan there are two ways to pay compensations: 

• “Standard calculation method”: The amount of compensation payment is calculated especially according to the job seniority.

• “Alternative calculation method”: This method is applicable for employees, who are older than 54 years. The compensation payment is calculated depending on the earliest beginning of the statutory pension payment, even if this early beginning is due to a severe disability. Although the amount of compensation payment may be smaller than the amount calculated according to the standard calculation method, the amount may not fall below half of the “standard” amount.

The European Court of Justice decided that it is valid to differentiate between employees who are young enough to find a new job and employees who will be entitled to a pension payment in the near future and therefore will probably not look for a new job. However, the court decided that it is a discrimination of severe disabled persons if the fact that they may be entitled to a pension payment even earlier is taken into account as these people face high costs due to their disability.