What is a Sozialplan and when is it required?

A Sozialplan (social plan) is an agreement negotiated with the works council (Betriebsrat) to compensate and mitigate the economic disadvantages to employees from an operational change (Betriebsänderung) — restructuring, plant closure, or significant headcount reductions — under §§111-112 BetrVG. It typically covers severance payments, retraining, outplacement, and transition support. It's required (for businesses above the size threshold) where the change qualifies as a Betriebsänderung affecting employees; alongside it, the employer must seek a 'reconciliation of interests' (Interessenausgleich) on the whether/how/timing of the change. If the parties can't agree, a conciliation committee (Einigungsstelle) can be convened and can impose the Sozialplan (an imposed plan is often more expensive than a negotiated one). For M&A and restructuring this matters because the social-plan cost (rules of thumb run into tens of thousands of euros per affected employee) and the consultation timeline are real cash and timing inputs to the deal/restructuring plan — and skipping the process invites injunctions and damages. So you budget and sequence it early.