Severance Pay in France
An insight into severance pay in France.
What you need to know about severance pay in France.
France is a very pro-employee country. This becomes particularly evident when it comes to employee termination. In France, a dismissal requires a valid reason and the respect of a strict procedure. The costs associated with a termination in France, such as the severance pay and notice pay, might seem high, especially when compared to countries like the USA. However, in an European comparison, France actually takes a mid-range position.
Severance Pay in France
In this article we will explain the main characteristics of severance pay in France : from when severance pay is due, to the impact of Collective Bargaining Agreements on the amount of the severance pay.
When is Severance Pay due ?
First of all, severance pay is due for certain employee terminations only, such as for simple misconduct, for non-disciplinary reason or for economic reasons.
In general, no severance pay is due for terminations based on gross or serious misconduct.
In case of a mutual agreement, the settlement pay must correspond at least to the severance pay in case of a dismissal.
Amount of the Severance Pay in France
The amount of redundancy pay is either based on the French labor code or on the collective bargaining agreement applicable to the employee. The two provisions have to be compared and the amount more favorable to the employee has to be paid.
It is also possible that the employment contract contains provisions regarding severance pay. These have to be applied if they are more favorable to the employee.
Severance pay based on the French labor code
According to the French labor code, employees with a seniority of 8 months are entitled to a redundancy pay of
• 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
The calculation is based on an average monthly salary: either the last 12 months’ average or the last three months’ average, whichever is higher. Certain elements like commissions have to be taken into account.
Severance pay based on the Collective Bargaining Agreement
In France, collective bargaining agreement coverage is extremely high. Many CBAs contain provisions about severance pay. These have to be applied in case they are more favorable to the employee.
CBAs can have a crucial impact on severance pay. In many industries, severance pay based on the CBAs are significantly higher than severance pay based on the French labor code.
Comparison of different industries
In order to understand the impact of collective bargaining agreements on severance pay, we will compare severance pay based on the French labor code to severance pay among different industries : CBA Syntec of the IT industry, CBA of the telecommunication industry and the CBA of the metallurgy.
As an example, we will take an employee with the following characteristics:
Status : Executive level
Seniority : 11 years of service
Age : 38
Annual salary : 84000 €
Average monthly salary : 7000 €
| Legislative basis: | Labor code | IT industry | Telecommunication | Metallurgy |
|---|---|---|---|---|
| Provision: | 1/4 monthly salaries for first 10 years, then 1/3 | 1/3 monthly salaries per year of seniority (for executives only) | 3 % of annual salary for first 9 years, then 4 % | 1/5 monthly salaries for first 7 years, then 3/5 |
| Amount: | 19833.33 € | 25666.67 € | 29400 € | 26600 € |
Severance pay based on:
- Labor code: 19833,33 €
- IT Industry: 25666,67 €
- Telecommunication: 29400 €
- Metallurgy: 26600 €
As can be seen from the example, severance pay varies from one industry to another. The variation can be even more significant when the CBA contains additional provisions for older employees.
Impact of the employee’s age
Whereas the French labor code does not provide for higher severance pay for older employees, many CBAs do.
To put this into perspective, we take the same conditions as in the example above: Executive employee with an annual salary of 84000 € and 11 years of seniority.
Only this time the employee is 52 years old, instead of 38 years.
| Legislative basis: | Labor code | IT industry | Telecommunication | Metallurgy |
|---|---|---|---|---|
| Basic severance pay: | 19833.33 € | 25666.67 € | 29400 € | 26600 € |
| Provision for older employees: | No extra pay based on age | No extra pay based on age | + 5 % on annual salary for employees with 10 years of service and aged 50 years or older | + 20% on basic severance pay for employees with 5 years of service and aged 50 years or older |
| Extra amount for aged employees: | 0.00 € | 0.00 € | 4200 € | 5320 € |
| Total severance pay: | 19833.33 € | 25666.67 € | 33600 € | 31920 € |
Severance pay based on:
- Labor code: 19833,33 €
- IT Industry: 25666,67 €
- Telecommunication: 33600 €
- Metallurgy: 31920 €
As can be seen from the example, the employee’s age can have a significant impact on the amount of the severance pay.
Impact of the employee status
In some cases the employee status may also have an impact on the severance pay. Whereas this is not a criteria for the severance pay based on the labor code, some CBAs provide higher severance payments only for executive staff.
Conclusion
Terminating an employee in France can be costly. The amount of the severance pay depends on the employee’s salary, seniority as well as on the collective bargaining agreement. Furthermore, the employee’s age and status can have an impact on the amount.
Before making key decisions, like terminating an employee, it is important to be aware of the costs involved.
My Payroll Pro France is a French payroll provider with a network of perfectly bilingual lawyers that will be of your assistance. Our payroll services in France include cost estimations, notably the calculation of severance pay in France.
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