Compensation for dismissal of employee on permanent contract
Verified 05 December 2025 - Public Service / Directorate of Legal and Administrative Information (Prime Minister)
The employee in DTA: titleContent who is dismissed can obtain severance pay under certain conditions. We present you the information to remember.
The severance pay is granted, under certain conditions, to the employee in DTA: titleContent to compensate for the loss of his job.
The severance pay may be of origin:
- Legal, i.e. provided for by the Labor Code
- Conventional, i.e. provided for by a collective agreement
- Contractual, i.e. provided for in the employment contract.
This allowance is paid by the employer.
These conditions vary depending on the pattern of dismissal and employmentseniority of the employee in the company.
Reasons for dismissal
The severance pay is due to the employee in DTA: titleContent who is being dismissed for personal reason, economic or for unfit.
The compensation is also due in the event of termination or dissolution of the company (except termination for force majeure).
In case of death of an employee where the dismissal has been notified, the compensation shall be paid to rights holders.
In the event of dismissal for gross or gross misconductHowever, the compensation is not paid. However, treaty provisions, the employment contract or a usage in the company may provide for the payment of such compensation.
A simulator allows you to search for the collective agreement with the name of the company or its Siret number:
Seniority
In order to receive the statutory indemnity, the dismissed employee must provide at least 8 months of uninterrupted seniority serving the same employer.
This calculation is carried out on the date of dispatch of the termination letter.
Some treaty provisions, the employment contract or a usage in the company may provide for a shorter period of service.
The calculation of the statutory severance pay differs according to the length of service of the employee:
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Seniority less than 10 years
Amount of compensation
The statutory allowance is calculated from salaries raw prior to dismissal.
The allowance may not be less than 1/4 month's salary per year of service.
If the employee worked full-time before moving to part-time (or vice versa), compensation is calculated proportionally the duration of each period.
Example :
An employee worked 3 years full time, then 2 years part time. His average gross salary for the last 12 months at half-time is €1,000 (or €2,000 full-time). The calculation of the allowance is as follows: (2,000 x 1/4 x 3) + (1,000 x 1/4 x 2) = €2,000.
Please note
This principle does not apply if the full-time employee is dismissed for a period of part-time parental education leave. His severance pay must be calculated on the basis of the remuneration he received when he worked full-time.
Calculation of reference salary
The salary taken into account is called reference salary. It shall be determined by taking into account, according to the most advantageous formula:
- The monthly average of the last 12 months preceding the dismissal
- This is the monthly average of the last 3 months. In this case, exceptional or annual bonuses and gratuities are taken into account in proportion of the working time performed. If an annual premium has been collected, add 1/12e the amount of the premium for each of the last 3 reference months.
When the employee has been sick leave or therapeutic part-time work in recent months, the reference salary to be taken into account is that of the last 12 or 3 months preceding discontinuation or therapeutic part-time.
Please note
If the employee has less than 12 months of seniority, it will be necessary to compare the monthly average over all the months worked with that calculated over the last 3 months, and to retain the most favorable.
Calculation of seniority
Seniority is calculated until the effective date of termination of the employment contract, i.e. the end of the notice period.
In the event of an incomplete year, the allowance shall be calculated proportionally the number of full months.
Example :
For a reference salary of €1,500, the minimum allowance with a seniority of 3 years and 6 months shall be: [(1 500 x 1/4) x 3] + [(1 500 x 1/4) x (6/12)] = €1,312.50.
Seniority greater than 10 years
Amount of compensation
The statutory allowance is calculated from salaries raw prior to dismissal.
The allowance shall be at least equal to the following amounts:
- 1/4 month salary per year of service up to 10 years
- 1/3 month's salary per year of service after 10 years.
If the employee worked full-time before moving to part-time (or vice versa), compensation is calculated proportionally the duration of each period.
Example :
An employee worked 10 years full-time, then 3 years part-time. His average gross salary for the last 12 months at half-time is €1,000 (or €2,000 full-time). The calculation of the allowance is as follows: (2,000 x 1/4 x 10) + (1,000 x 1/3 x 3)= €6,000.
Please note
This principle does not apply if the full-time employee is dismissed for a period of part-time parental education leave. His severance pay must be calculated on the basis of the remuneration he received when he worked full-time.
Calculation of reference salary
The salary taken into account is called reference salary. It shall be determined by taking into account, according to the most advantageous formula:
- The monthly average of the last 12 months preceding the dismissal
- This is the monthly average of the last 3 months. In this case, exceptional or annual bonuses and gratuities are taken into account in proportion of the working time performed. If an annual premium has been collected, add 1/12e the amount of the premium for each of the last 3 reference months.
When the employee has been sick leave or therapeutic part-time work in recent months, the reference salary to be taken into account is that of the last 12 or 3 months preceding discontinuation or therapeutic part-time.
Calculation of seniority
Seniority is calculated until the effective date of termination of the employment contract, i.e. the end of the notice period.
In the event of an incomplete year, the allowance shall be calculated proportionally the number of full months.
Example :
For a reference salary of €1,500, the minimum allowance with a seniority of 12 years and 9 months shall be: [(1 500 x 1/4) x 10] + [(1 500 x 1/3) x 2] + [(1 500 x 1/3) x (9/12)] = €5,125.
FYI
Some treaty provisions, the employment contract or a usage may provide for a more advantageous calculation formula for the employee. In this case, the employee receives the highest compensation.
A simulator allows you to estimate the amount of the minimum severance pay:
Yes. Dismissal indemnity, whether of legal origin, conventional or provided for in the employment contract, may be cumulated with the following allowances:
- Compensation for notice
- Compensatory leave with pay
- Compensation for irregular dismissal, without real and serious cause or null
- Allowance granted by the judge in the event of requalification of a fixed-term contract into a permanent contract
- Consideration in the event of non-compete clause
- Lump sum compensation equal to 6 months' salary granted to the employee whose employment contract has been concealed.
Please note
The severance pay of conventional origin or provided for by the employment contract shall apply if it is more favorable for the employee that the statutory indemnity. In this case, they do not accumulate.
The compensation paid in the event of dismissal (outside job protection plan) is partly exempt of income tax.
The amount corresponding to compensation set by law or collective agreement is fully exempt.
If you have received a higher amount, the exemption shall be limited to one of the following amounts:
- 2 times the amount of gross compensation you received in the year preceding your dismissal
- Half of the severance pay you received.
The tax authorities will choose the solution that is most favorable to you.
In this case, the exemption shall be limited to a maximum of €278,208 for allowances received in 2024 (€282,600 for allowances paid in 2025).
Example :
An employee receives a severance payment of €120,000 of which €70,000 is equal to the compensation provided for in its collective agreement. His gross remuneration for the calendar year preceding the dismissal is €40,000.
The severance pay is exempt up to the amount provided for in the collective agreement, i.e. €70,000.
This amount is greater than 50% of the compensation received (€120,000/2 = €60,000) but less than twice the annual gross remuneration, equal to €80,000 (€40,000 x2).
The compensation is therefore exempt up to the sum of €80,000.
The surplus of €40 000 (€120 000 - €80,000) is taxable.
The severance pay may be exempt from social security contributions, CSG: titleContent and CRDS: titleContent under certain conditions.
Social contributions
The portion of the severance pay exempt from income tax is also exempt from social security contributions, within the limit of €94,200.
Example :
If an employee receives severance pay in the amount of €40,000 exempt from tax, the allowance is also exempt from social security contributions.
On the other hand, if he receives an indemnity of €100,000 exempt from tax, the allowance is then exempt from social contributions up to €94,200.
The portion of the compensation that exceeds that amount, or €5,800 (€100,000 - €94,200), is subject to social security contributions.
Warning
If the severance pay paid is greater than €471,000, it shall be subject to full contributions. No exemption is applicable.
CSG and CRDS
The severance pay shall be exempt from CSG: titleContent and CRDS: titleContent whichever of the following 2 limits is smaller:
- Amount of statutory or contractual severance pay due to the dismissed employee
- Amount of the allowance exempt from social security contributions.
Example :
An employee receives severance pay (statutory indemnity + supra-legal indemnity) of an amount of €40,000 exempt from income tax and social security contributions.
However, the amount of the statutory indemnity received (not including the supra-statutory indemnity) is fixed at €15,000.
The CSG and CRDS exemption applies up to €15,000.
CSG and CRDS are due up to €25,000 remaining (€40,000 - €15,000).
Warning
If the severance pay paid is greater than €471,000, it is subject to CSG and CRDS in full. No exemption is applicable.
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Conditions for award
Limitation period for any action relating to the termination of the employment contract
Calculation of the allowance (alternating between full and part-time)
Calculation of the allowance
Exemptions from social security contributions
Tax exemptions
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