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Social Plan – What Workers and Employers should know

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When changes in the company lead to a social plan obligation and what this means for employers and employees, read in the following article:

What is a social plan and what is regulated in it?

A social plan is the written agreement between the employer and the works council to compensate for or mitigate the economic disadvantages suffered by the employees of the company as a result of an operating change planned by the employer. For example, the change in business may be a reorientation of the business, where departments are closed or outsourced, and mass layoffs are inevitable.

In general, it is about how to mitigate the disadvantages caused to the employee by the loss of his previous job. In a nutshell: in most cases, it is about the amount of severance pay. However, a social plan can also be created if the jobs are retained, but the work content, methods or location changes. Here, too, it is about the compensation for resulting disadvantages, such as relocation or compensation payments.

Lane Cove Social Plan is an example for you.

Do all companies have to draw up a social plan in case of company changes?

No. When it comes to downsizing, it is mainly the age of the company and the size of the company that has to do with a social plan. Because Social plan costs not affect small businesses and start-ups. Companies younger than four years usually do not need to create a social plan.

How does a social plan come about?

The social plan is an agreement between the company and the works council. This agreement may be voluntary or if the parties can not agree, based on a settlement claim. In that case, one speaks of a “forced social plan”. The social plan has the effect of a company agreement after its conclusion.

Does the social plan apply to all employees?

Usually, a social plan negotiates the employees who may effect by the changes in the business and who have the disadvantage. In certain cases, however, employees may be excluded from the social plan. In practice, executives not include in the social plan due to separate rules for them. Similarly, for workers who are about to retire have a separate agreement. A voluntary waiver of the affected employees on the agreed benefits, however, is not possible. As already mentioned, the social plan is on the same level as the company agreement and is therefore in principle also binding for all employees. And of course for the employer.

Do employees lose their further rights through the social plan?

No. If employees are giving dismissal for employment-related or change, still free to file a dismissal protection claim. For example, seek to obtain a higher severance payment in the process than agreed in a social plan. The employer must not exclude employees who opt for this path from a social plan. This agreed severance pay is therefore always available to the employee. However, the employer may stipulate in a clause that the severance pay from the social plan is not payable until the completion of the unfair dismissal action – which may take years. Also, he may make employees waive the claim by offering bonuses for those who refuse to sue. Also, a social plan does not release the employer from meeting the applicable notice periods.

However, some caution required when transferring companies:

Some social plans stipulate that severance pay lapses if the employee objects to a new decent job.


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Mukhtiar Ali Khan has been working on the topic of self-employment since 2010 and would like to use the website to support other founders in the successful founding and start-up life. Through his own experience, he knows the questions and problems of other founders very well and offers together with other authors help with the creation and management of the company.

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