Severance Pay Calculator

Severance pay benefits from exemptions:

• Income tax: exempt up to the higher of legal/contractual severance, 2 PASS (€92,736 in 2026), or 50% of total severance
• CSG/CRDS: exempt up to the legal or contractual severance amount
• Social contributions: exempt up to 2 PASS

When an employer dismisses an employee in France, severance pay (indemnite de licenciement) is a mandatory compensation designed to cushion the financial impact of job loss. The amount depends on the employee's seniority, salary level, and the applicable collective agreement. Understanding how severance is calculated and taxed is essential for any employee facing dismissal or negotiating a departure.

Legal Minimum vs Conventional Severance

French law establishes a legal minimum severance (indemnite legale de licenciement), but many industries offer more generous terms through their collective agreements (conventions collectives). The employee is always entitled to the higher of the two amounts:

• Legal minimum formula -- One quarter (1/4) of monthly reference salary per year of seniority for the first 10 years, plus one third (1/3) of monthly salary per year of seniority beyond 10 years. Incomplete years are calculated proportionally.
• Conventional severance -- Many collective agreements (metallurgy, banking, technology, retail, etc.) specify higher rates, sometimes reaching one full month per year of seniority for senior employees. Always check your applicable convention collective to determine if it offers better terms.

The reference salary used in the calculation is the more favorable of either the average monthly salary over the last 12 months or the average over the last 3 months (including any prorated annual bonuses such as the 13th month). This ensures that recent pay increases and variable compensation are properly reflected.

Seniority Rules and Eligibility

To qualify for legal severance pay, the employee must have at least 8 months of uninterrupted service with the same employer (reduced from 12 months by the 2017 Macron ordinances). Important seniority considerations include:

• Periods of sick leave, maternity leave, and work accidents are counted as active service for seniority purposes.
• Part-time employees receive severance calculated on their part-time salary, but periods of full-time work prior to switching to part-time can be counted at the full-time rate for those years.
• If the employee was previously employed under a fixed-term contract (CDD) that was converted to a permanent contract (CDI) with the same employer, the CDD period counts toward seniority.
• Employees dismissed for gross misconduct (faute grave) or willful misconduct (faute lourde) lose their right to severance pay entirely.

Tax and Social Contribution Exemptions

Severance pay in France benefits from generous tax exemptions designed to protect employees from an excessive tax burden during a difficult transition:

• Income tax -- Severance is exempt from income tax up to the highest of three thresholds: (a) the legal or conventional severance amount, (b) twice the employee's gross annual salary from the preceding year, or (c) 50% of the total compensation received. In all cases, the exemption is capped at 2 times the annual Social Security ceiling (2 x PASS = 92,736 euros in 2026).
• CSG and CRDS -- The portion of severance exempt from income tax is also exempt from CSG/CRDS, up to the amount of the legal or conventional minimum. Any excess is subject to CSG at 9.2% and CRDS at 0.5%.
• Social contributions -- Severance is exempt from social security contributions up to 2 PASS. Beyond this threshold, full social contributions apply.

Employer Obligations During Dismissal

French labor law imposes strict procedural requirements on employers when carrying out a dismissal. Failure to follow these procedures can result in the dismissal being deemed unfair (licenciement sans cause reelle et serieuse), entitling the employee to additional damages:

• The employer must send a written convocation to a preliminary interview (entretien prealable) by registered letter, with at least 5 working days' notice.
• During the interview, the employer must explain the reasons for the proposed dismissal and hear the employee's response. The employee may be accompanied by a colleague or external advisor.
• The formal dismissal letter cannot be sent earlier than 2 working days after the interview (7 working days for economic dismissal of executives).
• A notice period (preavis) must be observed unless waived by mutual agreement: typically 1 month for employees with 6 months to 2 years of seniority, and 2 months for those with more than 2 years.
• Upon departure, the employer must provide three mandatory documents: the work certificate (certificat de travail), the final pay statement (solde de tout compte), and the France Travail attestation needed to claim unemployment benefits.

Challenging an Unfair Dismissal

If an employee believes their dismissal lacked a genuine and serious cause (cause reelle et serieuse), they can challenge it before the Conseil de Prud'hommes (labor tribunal) within 12 months of the notification of dismissal. Since the 2017 Macron ordinances, damages for unfair dismissal are governed by a scale (bareme Macron) that sets minimum and maximum compensation based on seniority and company size. For example, an employee with 5 years of seniority in a company with at least 11 employees can receive between 3 and 6 months of gross salary in damages. These amounts are in addition to the severance pay already received, not a replacement for it.

Economic Dismissal: Additional Protections

When dismissal results from economic grounds (licenciement economique) -- such as business closure, restructuring, or sustained revenue decline -- additional procedures and employee protections apply. The employer must demonstrate that all efforts to redeploy the employee within the company or group have been exhausted. For companies with 50 or more employees dismissing at least 10 workers, a social plan (PSE - Plan de Sauvegarde de l'Emploi) must be negotiated with employee representatives, typically offering enhanced severance, reclassification assistance, training programs, and extended job-search support. Economic severance compensation is calculated using the same formulas as standard severance but is often supplemented by the terms of the negotiated PSE, which can substantially exceed the legal minimum.

Practical Calculation Example

Consider an employee dismissed after 12 years of service with a monthly reference salary of 3,500 euros. The legal minimum severance would be: (1/4 x 3,500 x 10) + (1/3 x 3,500 x 2) = 8,750 + 2,333 = 11,083 euros. If the applicable collective agreement specifies 1/3 of monthly salary per year for the first 10 years and 1/2 per year beyond, the conventional severance would be: (1/3 x 3,500 x 10) + (1/2 x 3,500 x 2) = 11,667 + 3,500 = 15,167 euros. The employee would receive the higher amount of 15,167 euros, which falls well within the tax-exempt threshold.