Understanding the calculation of the severance pay for a mutual termination in 2025
The mutual termination is a preferred option for many employees and employers wishing to end the employment contract amicably. It allows for finding common ground for a secure departure while respecting labor law. One of the essential aspects of this mechanism is the calculation of the severance amount, which ensures fair compensation in accordance with the applicable legal rules.
To do this, several criteria must be taken into account: the employee’s seniority, the reference salary, as well as the legal minimum imposed by regulations. Here are the key elements and methods to master this calculation well.
The legal rules governing the minimum severance pay
In 2025, the calculation of severance pay for mutual termination respects a legal minimum that cannot be ignored. This legal minimum ensures that the severance pay given to the employee is at least equivalent to the legal severance pay for dismissal. The importance of this framework lies in the protection of the employee and the security of the mutual termination agreement.
- For the first 10 years of seniority, the employee receives at least 1/4 of a month’s gross salary per year.
- Beyond 10 years of seniority, the amount is increased to 1/3 of a month’s gross salary for each additional year.
- This rule applies to employees with permanent contracts having a minimum of 8 months of seniority, with pro-rata adjustment for shorter periods.
| Seniority | Minimum indemnity base |
|---|---|
| Up to 10 years | 1/4 of a month’s gross salary per year |
| Beyond 10 years | 1/3 of a month’s gross salary per year |
This system ensures fair compensation for the length of service while allowing the employer to offer additional severance pay.
Precise determination of the reference salary for the indemnity calculation
The calculation of the indemnity is based on the notion of reference salary, a key element for assessing the monetary value of the termination of the contract. Two methods compete in labor law: the average of the last 12 months or the average of the last 3 months, including exceptional bonuses.
- The average of the last year includes all gross remuneration elements, including bonuses.
- The average over 3 months also integrates bonuses allocated pro rata.
- It is advisable to retain the most favorable value for the employee between these two calculations.
For example, if an employee receives an annual bonus in December, this will be taken into account at one-third when calculating the average over 3 months.
For employees with less than one year of seniority, it is possible to adjust the monthly average based on the total period actually worked.
| Salarial average | Included revenues | Advantage for the employee |
|---|---|---|
| Last 12 months | Gross salaries + regular bonuses | Allows for a complete estimate |
| Last 3 months | Gross salaries + exceptional bonuses pro rata | Considers one-off bonuses |
How seniority influences the amount of severance pay
Seniority is a fundamental pillar in calculating the amount of severance pay during a mutual termination. This duration is measured from the first day of work until the effective date of termination, taking into account or not certain absences.
- Considered: maternity leave, occupational sickness leave, part-time parental leave.
- Not considered: sabbatical leave, unjustified absences, non-occupational sickness leave.
- For part-time employees, the calculation is weighted according to the actual work performed.
For example, an employee who worked 3 years full-time and then 2 years at 80% will have their severance calculated proportionally to these distinct periods.
| Type of absence | Impact on seniority |
|---|---|
| Maternity leave | Considered |
| Sabbatical leave | Not considered |
| Part-time | Weighted seniority |
Concrete examples of calculating the amount of severance pay for mutual termination
Practical examples facilitate understanding of the rules and allow employers or employees to better anticipate the amounts due during a mutual termination agreement.
- For an employee with less than 10 years of seniority, the basic severance calculation applies 1/4 of a month’s gross salary per year.
- Beyond 10 years, this calculation adapts by including 1/3 of a month’s pay for each additional year.
- An additional severance payment can be negotiated to acknowledge specific situations or prevent disputes.
Illustration:
| Situation | Reference salary | Seniority | Calculation | Minimum indemnity |
|---|---|---|---|---|
| Employee 4 years | 2,000 € | 4 years | (2,000 € x 1/4) x 4 | 2,000 € |
| Employee 12 years | 3,000 € | 10 years at 1/4 + 2 years at 1/3 | (3,000 € x 1/4) x 10 + (3,000 € x 1/3) x 2 | 9,500 € |
This last calculation clearly shows how the indemnity amount evolves with seniority, ensuring fair and balanced compensation.
Taxation and exemptions for severance pay during a mutual termination
The mutual termination involves not only a precise calculation of the indemnity but also a specific fiscal and social treatment that must be well understood to avoid any disputes or errors.
- The indemnity may be fully or partially exempt from income tax, provided that defined ceilings are respected.
- Exemption applies up to the highest limit between: legal or contractual indemnity, twice the previous annual gross remuneration, or 50% of the indemnity amount.
- In the case of retirement, the indemnity becomes fully taxable.
- Exemption from social contributions is possible up to 2 PASS, which is €92,736 in 2025.
| Type of exemption | Conditions | Ceiling amount 2025 |
|---|---|---|
| Income tax | Respect of the three mentioned thresholds | Variable depending on revenues and indemnity |
| Social contributions | Up to 2 PASS | €92,736 |
| CSG/CRDS exemption | The indemnity must be less than the legal indemnity or 2 PASS | Variable |
Proper management of these tax aspects is essential for both the company and the employee, particularly regarding the nominative social declaration (DSN) and the annual tax declaration.
What are the main legal obligations in the event of a mutual termination?
Scrupulously respecting the legal steps guarantees the validity of the mutual termination agreement and limits risks for both the employer and the employee. Non-compliance may lead to the reclassification of the termination as unfair dismissal.
- The consent must be mutual, free, and informed.
- At least one formal meeting must be organized.
- A written agreement, using the Cerfa form n°14598*01, must be signed.
- A withdrawal period of 15 calendar days must be respected.
- The application for homologation must be submitted to the DREETS.
- The indemnity must be paid no later than the contract end date.
- The end-of-contract documents must be given to the employee.
| Step | Role of the employer | Role of the employee |
|---|---|---|
| Meeting | Organizing and formalizing | Participating and expressing agreement |
| Agreement | Drafting and having signed | Signing freely |
| Withdrawal | Respecting the deadline | Ability to withdraw within 15 days |
| Homologation | Submitting the file to the DREETS | Waiting for validation |
| Compensation | Paying the indemnity | Receiving the indemnity |
Is there a notice period during a mutual termination?
No, the mutual termination does not provide for a legal notice period. The end date is set by mutual agreement and occurs after homologation by the DREETS.
Does the severance pay affect unemployment benefits?
No, this indemnity is not taken into account in the calculation of unemployment return allowances (ARE). However, a waiting period may apply depending on the amount paid.
Which absences are taken into account for calculating seniority?
Maternity leave, occupational sickness leave, and part-time parental leave are counted. However, sabbatical leave and unjustified absences are not.
What is a supra-legal indemnity?
It is an amount paid in addition to the minimum legal indemnity, negotiated between the employer and the employee to acknowledge specific situations or prevent a dispute.
What to do in case of non-payment of the indemnity?
The employee can contest the final pay within 6 months and take the case to the Labor Court. The employer must keep all receipts and ensure proper reporting to the administration.