When a French employment contract ends through dismissal, most employees are entitled to a mandatory payment known as the indemnité de licenciement, commonly referred to in English as severance pay or redundancy pay. For foreign companies managing a workforce in France, understanding how this payment is calculated, when it is due, and how it interacts with collective bargaining agreements (CBAs) is essential to budgeting terminations accurately and avoiding disputes.
This guide covers the statutory formula, the three-tier hierarchy of severance entitlements, the tax and social security treatment, the barème Macron, and the specific rules that apply to mutually agreed terminations (rupture conventionnelle). For the broader dismissal procedure, valid grounds, procedural steps and notice period entitlements, see our guide to dismissal in France.
What Is Severance Pay in France?
The legal term: indemnité de licenciement
The indemnité de licenciement is a mandatory cash payment owed by the employer to an employee whose permanent contract (CDI) is terminated by dismissal. It is governed by articles L.1234-9 and R.1234-1 to R.1234-4 of the Code du travail, which set both the eligibility conditions and the minimum calculation formula.
The payment is owed on the date of the effective end of contract, that is, at the end of the notice period, or immediately if notice is waived and replaced by compensation.
Who qualifies and who does not
An employee is entitled to statutory severance pay when all of the following conditions are met:
- The contract is a CDI (permanent contract). Fixed-term (CDD) contracts are not covered by this provision.
- The employee has completed at least eight months of continuous service with the same employer (this threshold was reduced from twelve months in 2017).
- The dismissal is not for faute grave (gross misconduct) or faute lourde (wilful misconduct with intent to harm the employer).
Employees dismissed for cause réelle et sérieuse (genuine and serious cause, such as underperformance or minor misconduct) do retain their right to severance. The nature of the cause affects the validity of the dismissal, see our dismissal in France guide for details on grounds, but it does not remove the severance entitlement unless it reaches the threshold of faute grave.
How to Calculate French Severance Pay
The statutory formula (1/4 and 1/3 rule)
The Code du travail sets a two-bracket formula based on length of service:
- First 10 years: 1/4 of a month's reference salary per year of service
- Beyond 10 years: 1/3 of a month's reference salary per year of service (for each year above 10)
Partial years are prorated. An employee with 6 years and 4 months of service is entitled to 6.33 years of credit for the purposes of calculation.
The salary reference base: 3-month vs 12-month average
The "month's salary" used in the formula is defined as the most favourable of two figures:
- The average monthly gross salary over the 12 months preceding the notification of dismissal, or
- The average monthly gross salary over the 3 months preceding the notification of dismissal (in this case, any bonuses or irregular payments received during that quarter must be apportioned on a monthly basis)
The employer must calculate both figures and apply the higher one. Variable compensation, sales commissions, annual bonuses, profit-sharing under intéressement, must be included in the calculation base.
Worked examples with different seniority levels
Scenario A, 6 years of service, 2 800 €/month
- Applicable bracket: 1/4 × month × years (all within the first 10-year bracket)
- Calculation: 1/4 × 2 800 × 6 = 4 200 €
Scenario B, 12 years of service, 3 200 €/month, IT sector (Syntec CBA)
- Statutory calculation:
- First 10 years: 1/4 × 3 200 × 10 = 8 000 €
- Years 11–12: 1/3 × 3 200 × 2 = 2 133 €
- Statutory total: 10 133 €
- Syntec CBA provides 1/5 per year for the first 7 years + 3/10 per year beyond (more favourable beyond 7 years); see the CBA section below for the comparative figure.
Scenario C, 20 years of service, 6 000 €/month
- Statutory calculation:
- First 10 years: 1/4 × 6 000 × 10 = 15 000 €
- Years 11–20: 1/3 × 6 000 × 10 = 20 000 €
- Statutory total: 35 000 €
- Tax treatment of this amount: see the fiscal section below.
Statutory, Conventional and Supra-Legal Severance
One of the most common sources of confusion for foreign HR teams is the existence of three distinct levels of severance obligation. No competitor in this space formalises this hierarchy clearly, yet understanding it is essential for accurate budgeting.
Level 1: statutory minimum (Code du Travail)
This is the floor set by legislation. Every dismissed CDI employee with eight-plus months of service is entitled to at least this amount, regardless of any contract clause or company policy. It cannot be waived by agreement.
Level 2: CBA enhancement (conventions collectives)
Most French employees are covered by a collective bargaining agreement specific to their industry sector. When the applicable CBA sets a severance formula more favourable than the statutory minimum, the employer must apply the CBA formula, not the statutory one. CBA provisions that fall below the statutory minimum have no effect (the Code du Travail floor always applies).
Identifying the applicable CBA is the employer's responsibility and must be done at the point of dismissal. Applying the wrong CBA, or ignoring the CBA entirely, is one of the most frequent compliance errors made by foreign employers (see the Common Mistakes section below).
Level 3: negotiated/supra-legal severance (rupture conventionnelle, negotiated departures)
Beyond the statutory and CBA amounts, employers and employees can agree on additional severance through negotiation. This is typical in mutual termination (rupture conventionnelle) and in executive departure agreements. The amount is uncapped upwards, but amounts exceeding the statutory minimum (or the prud'homal reference under the barème Macron) become partially subject to income tax and social charges.
Industry-by-Industry CBA Comparison
The table below compares the severance formula under four major CBAs against the statutory baseline. The figures are approximate guides, always verify the current version of the applicable CBA before a specific dismissal.
IT / Tech sector (Syntec)
Syntec is the dominant CBA for digital, consulting and engineering firms. Its formula favours employees with longer tenures. For a 12-year employee earning 3 200 €/month, the Syntec calculation yields approximately 11 200 €, around 10% above the statutory minimum. For shorter tenures (under 7 years) the Syntec formula is marginally less favourable than the statutory one, so the Code du Travail floor applies.
Metallurgy (UIMM)
The UIMM CBA introduces an age coefficient that significantly increases severance for older employees. An employee aged 52 with 11 years of service and a salary of 7 000 €/month will receive materially more than a 38-year-old with identical seniority and salary, under the same CBA formula. This age-linked enhancement is a critical planning factor for restructuring operations that affect senior workforces.
Telecoms
The telecoms CBA (IDCC 2148) similarly enhances severance for employees over 45 and for those with long service. Companies in this sector routinely budget 20–30% above the statutory floor for dismissals involving senior employees.
Banking / Finance
The banking CBA (AFB, IDCC 2120) is considered one of the most employee-favourable in France. Employers in this sector should budget well above the statutory minimum and seek specialist HR advice before any significant headcount reduction.
Tax Treatment of Severance Pay in France
Income tax exemption: the statutory amount
Severance pay received on dismissal benefits from a partial income tax exemption under French tax law. The statutory portion (the amount owed under the Code du Travail formula) is fully exempt from income tax, regardless of its size.
Beyond the statutory portion, the excess is exempt up to the most favourable of three thresholds:
The three thresholds for excess severance
PASS = Plafond Annuel de la Sécurité Sociale. The 2026 value is 48 060 €, set by URSSAF.
The employee applies whichever of the three thresholds is highest, subject to the absolute ceiling of 5 × PASS. Any severance above the applicable threshold is subject to income tax at the marginal rate.
Social charges: CSG, CRDS and the social security ceiling
For social charges (CSG and CRDS), a separate exemption applies. The severance amount is exempt from CSG/CRDS up to 2 × PASS (98 120 € for 2026). Any portion above this threshold is subject to CSG at 9.2% and CRDS at 0.5%.
Note: the social charge exemption threshold (2 × PASS) is lower than the income tax exemption ceiling (5 × PASS). Large severance packages may therefore be exempt from income tax but partially subject to social charges.
Worked tax example
Returning to Scenario C (20 years of service, 6 000 €/month, statutory severance = 35 000 €):
- Annual salary in year preceding dismissal: 72 000 €
- Threshold 1 (2 × annual salary): 144 000 €
- Statutory amount: 35 000 €, fully exempt (statutory portion always exempt)
- Since the total severance (35 000 €) equals the statutory amount, no excess portion exists, no income tax applies.
- Social charges: 35 000 € is well below 2 × PASS (98 120 €), no CSG/CRDS applies.
For a negotiated departure with a supra-legal amount of 80 000 € on the same profile:
- Statutory portion (35 000 €): fully exempt
- Excess (45 000 €): exempt up to Threshold 1 (144 000 €), still no income tax
- Social charges: total (80 000 €) is below 2 × PASS (98 120 €), no CSG/CRDS
The Barème Macron: Wrongful Dismissal Cap and Its Impact on Negotiations
What the barème Macron sets
Introduced in 2017, the barème Macron (articles L.1235-3 et seq. of the Code du Travail) is a scale of maximum damages that a Conseil de Prud'hommes (labour court) can award an employee in the event of an unfair dismissal, one found to lack genuine and serious cause.
The scale sets a floor and a ceiling based on two variables: length of service and the size of the company (below or above 11 employees). A selection of key reference points:
Source: Legifrance, article L.1235-3 Code du Travail. Amounts expressed in months of gross salary.
How it affects settlement negotiations
The barème Macron does not affect the statutory severance payment itself, that is always owed regardless. Its relevance is in settlement negotiations: when an employer and employee are discussing a negotiated departure or a transaction (settlement agreement), the barème Macron provides the reference frame for what the employee could realistically obtain before a labour court.
In practice, companies wishing to avoid the risk and cost of litigation will offer a supra-legal amount broadly aligned with the upper end of the barème Macron for the employee's seniority bracket. For mutually agreed termination, the employee must receive at least the statutory severance, but in competitive talent markets, the supra-legal top-up is often calibrated against the barème Macron ceiling.
Severance for Rupture Conventionnelle
Minimum = statutory severance
A rupture conventionnelle (mutual termination) entitles the employee to a minimum severance equal to the statutory indemnité de licenciement. This floor cannot be negotiated downwards, even if both parties agree.
In practice, the calculation is identical: 1/4 month per year up to 10 years, 1/3 per year beyond, applied to the most favourable salary reference base. The CBA minimum also applies, if the CBA formula yields more than the statutory formula, the CBA figure is the floor.
Why companies typically pay more
Several factors push supra-legal payments above the statutory minimum in the context of rupture conventionnelle:
- The employee holds leverage: they can refuse to sign and remain employed. Reaching an agreement requires mutual acceptance.
- The barème Macron ceiling provides an implicit reference for what is "reasonable" from the employee's perspective.
- In executive and senior management departures, package expectations typically sit well above the barème Macron reference.
For a complete guide to the rupture conventionnelle procedure, cooling-off period, DREETS approval, and the impact on work permits, see our article on mutually agreed termination in France.
Common Mistakes Foreign Employers Make
Ignoring the applicable CBA
The most frequent error is applying the statutory formula when the employee's CBA formula is more favourable, often because the employer did not identify the applicable CBA at the time of hire, or assumed the statutory minimum was sufficient. French employment contracts must specify the applicable CBA (convention collective), and the employer is bound by it.
For companies managing payroll calculations in France, the CBA reference should be systematically embedded in the payroll setup from the first contract.
Using the wrong salary reference base
Some employers mistakenly use the current base salary only, excluding variable components such as bonuses, commissions, and benefit-in-kind valuations. Others apply the 3-month average when the 12-month average would be more favourable to the employee. Both errors expose the company to a top-up claim before the Conseil de Prud'hommes.
Miscalculating partial years
Partial years are always prorated. An employee with 8 years and 7 months of service does not simply receive 8 × 1/4, the 7 additional months generate 7/12 × 1/4 of a month's salary. Ignoring partial years is a systematic underpayment that can be challenged retroactively.
FAQ: Severance Pay in France
How is severance pay calculated in France?The statutory formula is: 1/4 of a month's reference salary per year of service for the first 10 years, plus 1/3 per year beyond 10. The salary reference base is the more favourable of the 12-month average or the 3-month average gross salary. The applicable CBA may set a higher formula.
What is severance pay called in France?The official French term is indemnité de licenciement. The full legal expression is indemnité légale de licenciement. In the context of a mutually agreed termination, it is called indemnité de rupture conventionnelle.
Is severance pay mandatory in France?Yes, for any CDI employee with at least eight months of continuous service who is dismissed for a reason other than faute grave or faute lourde.
Is severance pay taxable in France?The statutory portion is fully exempt from income tax. Excess amounts are exempt up to the most favourable of: twice the annual salary, 50% of the total payment, or 5 × PASS (240 300 € in 2026). Social charges (CSG/CRDS) apply above 2 × PASS (98 120 € in 2026).
Does the barème Macron limit severance pay?No, it limits the damages a labour court can award for unfair dismissal. It does not cap the severance payment itself, which is always owed based on the statutory or CBA formula. The barème Macron is relevant as a negotiation reference in settlement discussions.
What is the minimum severance for a rupture conventionnelle?The minimum is equal to the statutory indemnité de licenciement, calculated using the same formula as for a dismissal. The CBA minimum also applies. There is no upper cap; the negotiated amount can exceed both.
Managing Severance Pay as a Foreign Employer in France
French severance obligations are often more complex than they first appear, the interplay between the statutory formula, the applicable CBA, the fiscal thresholds and the barème Macron requires careful calculation at each individual departure. For companies without an established French HR function, the risk of underpayment (or overpayment and unexpected tax exposure) is significant.
hreact's HR consultants support foreign companies through the full employee termination process in France: determining the correct CBA, calculating the severance entitlement, preparing the mandatory termination documents, and advising on negotiated departures. Get in touch to discuss your specific situation.
