The Mutual Termination Agreement in France
The amicable solution for an employee exit.
An insight into the mutual termination agreement in France
Separations are rarely nice. How employee exits are handled speaks volumes about your company. Nowadays, not only products and services are reviewed, also employers are publically evaluated. A disgruntled employee separation can not only harm your company’s image, it can also have a negative impact on the overall company culture. Amicable employee exits are a great solution if both, employer and employee, want a gentle separation.
The Mutual Termination Agreement in France
According to official statistics in France, 427 000 mutual agreements were concluded in 2020 despite the health crisis. Executive level staff signed more mutual terminations in 2020 than in 2019 (+ 2.3%). This might be due to the flexibility and simplicity of the procedure.
Rupture Conventionnelle explained
The French ‘rupture conventionnelle’ literally translates to ‘breakage agreement’. It is a mutual termination of the French employment contract by consent of the two parties. Based on French labor laws, it allows the employer and the employee to decide on the terms and conditions for the termination. These are fixed in a termination agreement. A mutual termination has advantages for both parties.
What are the Advantages of a Mutual Termination Agreement in France?
From the employer’s perspective, it reduces the risk of legal actions by the employee. It is the best solution if no grounds for a dismissal exist.
From the employee’s perspective, a mutual termination guarantees his unemployment benefits which is not the case if he resigns. There is no extra delay for unemployment allocations in the event of a mutual agreements, as opposed to countries such as Germany. Futhermore, the mutual agreement guarantees a severance payment that cannot be below the legal minimum. If the employer agrees, it is even possible to fix a higher compensation payment.
Lastly, the mutual termination allows to end the employment relationship rather quickly. Especially, when compared to a dismissal which requires not only the respect of a very stringent procedure but also a notice period of several months in many cases.
What are the Disadvantages of a Mutual Termination Agreement in France?
The mutual agreement is not without its risks. The legal procedure must be respected.
For the employer, one risk remains. The employee has the possibility to contest the contractual termination for a period of 12 months. In practice, litigations after a termination agreement relate to outstanding payments, e. g. for overtime hours. Litigations related to a substantial reconsideration of the validity of the mutual termination agreement are rare.
What is the Procedure for a Mutual Agreement?
The mutual termination has to be validated by the labor inspection, referred to as DREETS.
The termination agreement must provide for the following elements:
- Date of termination of the employment contract
The earliest date is the day after the authorization of the labor inspection.
- Amount of the specific indemnity for contractual termination
Regardless of seniority, the employee who signs a mutual termination receives specific compensation at the end of the contract. The indemnity cannot be less than the legal indemnity for dismissal.
How long does the Prodecure of a Mutual Termination Agreement take?
Both, the employer and the employee, have the right to withdrawal for 15 calendar days. The withdrawal period begins the day after the signature of the agreement.
After the 15 calendar days, the mutual agreement can be sent for validation to the labor inspection. After 15 business days, the termination agreement is automatically accepted if the labor inspection did not refuse it.
The employment contract will end on the date fixed in the mutual termination agreement, at the earlist the day following the the authorization by DREETS.
What are the Costs of a Mutual Termination Agreement?
The employee is guaranteed the minimum severance payment of a dismissal, regardless of his seniority.
This indemnity payment corresponds at least to
- 1/4 monthly salary per year of seniority, for the first 10 years
- 1/3 monthly salary per year of seniority, from the 11th year on
Furthermore, some CBAs increase the severance payment for aged employees, so the case in the CBA of the Pharmaceutical Industry
It is also possible that the employee, through negotiation with his employer, obtains higher indemnities than those initially provided for by law or collective branch agreement. This might for instance be the case if the employer has a strong interest to separate from the employee with no grounds at all for a dismissal.
The indemnity can be exempt from employer’s contributions and payroll taxes in France, within certain limits only a flat rate of 20 % is due.
Furthermore, the employee receives payment for remaining vacation days or other outstanding items. There is no notice period.
Mutual Termination Agreement: Conclusion
The mutual termination is often the preferred solution. For its simplicity and flexibility, but also because it allows for an amicable separation.
Before making any decisions, it is crucial to familiarize yourself with your options and the costs involved. My Payroll Pro France with our partners of perfectly bilingual French lawyers can assist with mutual termination agreements and other forms of terminating an employee in France such as dismissals for personal or economic reasons.
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