I use openSUSE Leap 15.0 with KDE/Plasma5. The same problem exists also on
openSuSE 42.x
My system wide locale settings are:   de_DE@euro  (German, no UTF8). All
files/folders (their names) are correctly encoded in iso-8859-1.

Since Plasma5 I experience the following mis-behavior, while this smoothly
worked on KDE4 (openSuSE 13.x):

I am able to open Dolphin. Inside Dolphin I can navigate without any problem
into folders having German Umlauts in their names. I also can click a file with
German Umlauts in its name. I also can copy/paste and/or drag/drop such
files/folders from Dolphin directly onto the desktop. Everything is fine here.

I am also able to right-click such file/folder on the desktop to rename it
(this also works as it should).

When trying to click such file/folder on the desktop (to open it), I get an
error:
(translated German->English by me):
"This command cannot be executed. The file or folder <.....> does not exist"

Surprisingly the correct filename is showing up in <....>! As an example, a
testing filename is:  /home/rainer/Desktop/miniL�T-Deckel.pdf  (notice the "�"
inside the file name.
When renaming the file (right-click -> rename) to i.e.  miniLOeT-Deckel.pdf, I
am able to open the file afterwards.

This happens with any kind of file/folder (also symlinks, etc..., even over NFS
mounts). converting the entire system (and also all servers) is no option.