I think you can dissect the red square (on the left here) as follows

And then rearrange to form the larger square

This is always possible when the red square is larger than the blue.
Construction
If the length of the side of the larger square is $A$ and the smaller square $B$ then we find the point along each side of the large square which is a distance $\frac{A+B}{2}$ from each vertex going in a clockwise direction. Then join opposing points in this construction.
The lines traversing the square intersect at right angles due to symmetry. Also, the length of each line $d$ can be determined with Pythagoras theorem by constructing a line from one of the vertices to the opposite side parallel to the side of the square. That is, $$ d^2 = A^2 + \left(\frac{A+B}{2} - \frac{A-B}{2}\right)^2 = A^2 + B^2$$ It follows that the five pieces can be rearranged to form the combined square as shown.