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Employee termination benefit at the CDI

Verified 01 January 2023 - Directorate for Legal and Administrative Information (Prime Minister)

The dismissed employee may receive a termination allowance under certain conditions. Do you want to know how this allowance is calculated? We present you the information to remember.

The redundancy allowance shall be granted, under certain conditions, to employees in CDI: titleContent to make up for the loss of his job.

It can be of origin:

  • Legal, i.e. provided for by the Labour Code
  • Conventional, i.e. provided for by collective agreement
  • Contract, i.e. as provided for in the employment contract

This allowance is paid by the employer.

Warning  

the employee CDD: titleContent key termination indemnity.

These conditions vary depending on the reason and theseniority employee in the company.

Reasons for dismissal

The termination indemnity is due to the employee in CDI: titleContent who is being dismissed for personal reason or economic.

In case of dismissal for serious or heavy fault, the allowance shall not be paid. However, treaty provisions, the employment contract or use in the company may provide for the payment of this allowance.

The allowance is also payable in the event of the company's cessation or dissolution (except force majeure).

In case death of employee when the dismissal was notified, the allowance shall be paid to right holders.

Age

In order to benefit from the allowance, the dismissed employee must justify at least 8 monthsuninterrupted seniority for the same employer. This calculation is performed on the date of despatch of the termination letter.

Of treaty provisions, the employment contract or use in the company may provide for lower seniority.

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Seniority less than 10 years

Amount of compensation

The statutory allowance is calculated from the gross salaries prior to termination.

The allowance may not be less than 1/4 months' salary per year of service.

Seniority shall be calculated until the date of actual termination of the employment contract, i.e. at the end of the notice.

In the case of an incomplete year, the allowance shall be calculated proportionally the number of full months.

Example :

for a reference salary €1,500, the minimum indemnity with 3 years and 6 months' seniority shall be: [(1 500 x 1/4) x 3] + [(1 500 x 1/4) x (6/12)] = €1,312.50.

Reference Salary Calculation

The salary taken into account is called reference salary. It shall be determined by taking into account, in accordance with the most advantageous formula:

  • or the monthly average of the last 12 months preceding the termination,
  • is the monthly average of the last 3 months. In this case, exceptional or annual premiums and rewards shall be taken into account in proportion of the time worked. If an annual premium has been collected, add 1/12e the amount of the premium to each of the last 3 months of reference.

When the employee has been on sick leave in the last few months, the reference salary to be taken into account is that of the last 12 or 3 months preceding the stoppage.

Please note

if the employee's seniority is less than 12 months, the allowance shall be calculated by averaging all gross salaries preceding the termination.

Calculation of seniority

Lseniority shall be calculated until the date of actual breach of the employment contract, i.e. at the end of the notice.

If the employee worked full time before moving to part time (or vice versa), the allowance is calculated proportionally the length of time he worked full and part time.

Example :

an employee worked 3 years full time, then 2 years half time. His average gross salary for the last 12 months at half-time is €1,000 either €2,000 full-time). The calculation of the allowance is as follows: (2000 x 1/4 x 3) + (1000 x 1/4 x 2) = €2,000.

Parental leave for part time education is considered to be a full-time working period.

Older than 10 years

Amount of compensation

The statutory allowance is calculated from the gross salaries prior to termination.

The allowance shall be at least equal to the following:

  • 1/4 months salary per year of service up to 10 years
  • 1/3 months salary per year of service after 10 years
Reference Salary Calculation

The salary taken into account is called reference salary. It shall be determined by taking into account, in accordance with the most advantageous formula:

  • or the monthly average of the last 12 months preceding the termination,
  • is the monthly average of the last 3 months. In this case, exceptional or annual premiums and rewards shall be taken into account in proportion of the time worked. If an annual premium has been collected, add 1/12e the amount of the premium to each of the last 3 months of reference.

When the employee has been on sick leave in the last few months, the reference salary to be taken into account is that of the last 12 or 3 months preceding the stoppage.

Calculation of seniority

The seniority shall be calculated until the date of actual breach of the employment contract, i.e. at the end of the notice.

In the case of an incomplete year, the allowance shall be calculated proportionally the number of full months.

Example :

for a reference salary €1,500, the minimum allowance with seniority of 12 years and 9 months is: [(1 500 x 1/4) x 10] + [(1 500 x 1/3) x 2] + [(1 500 x 1/3) x (9/12)] = €5,125.

If the employee worked full time before moving to part time (or vice versa), the allowance is calculated proportionally the length of time he worked full-time and part-time.

Example :

one employee worked 10 years full time, then 3 years half time. His average gross salary for the last 12 months at half-time is €1,000 either €2,000 full-time). The calculation of the allowance is as follows: (2000 x 1/4 x 10) + (1000 x 1/3 x 3)= €6,000.

Parental leave for part time education is considered to be a full-time working period.

FYI  

of treaty provisions, the employment contract or a custom 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:

Termination Benefit Simulator

Yes, the termination indemnity, be it of legal origin, conventional or provided for in the employment contract, may be combined with the following allowances:

Please note

the termination indemnity of conventional origin or provided for in the employment contract shall apply if more favourable for the employee only the legal compensation. In this case, they do not accumulate.

The compensation paid in the event of termination (excluding job backup plan) is partially exempt from income tax.

The amount corresponding to the compensation fixed by law or collective agreement is exempt in full.

If you received a higher amount, the exemption is limited to one of the following amounts:

  • 2 times the amount of gross compensation you received in the year before your termination
  • Half of the severance pay you received

Tax services will choose the solution that is most favourable to you.

Warning  

the exemption is limited to a maximum of €246,816 for allowances received in 2022 (€263,952 for allowances paid in 2023).

Example :

An employee shall receive redundancy pay from €120,000 of €70 000 is the compensation provided for in the collective agreement. His gross remuneration for the calendar year preceding the termination is €40,000.

The termination indemnity shall be exempt up to the amount provided for in the collective agreement, either €70 000.

This amount is greater than 50% of the compensation received (€120,000/2 = €60,000) but less than double the annual gross remuneration, equal to €80,000 (€40,000 x 2).

The allowance is therefore exempt up to the sum of €80,000.

The surplus 40 000 (120 000 € - €80,000) is taxable.

The redundancy allowance may be exempt from social security contributions, CSG: titleContent and CRD: titleContent under certain conditions.

Social contributions

The portion of the termination allowance that is exempt from income tax is also exempt from social contributions, up to €87,984.

Example :

if an employee receives a redundancy payment in the amount of €40,000 tax-free, the allowance is also exempt from social contributions.

On the other hand, if he receives a €90,000 tax-exempt, the allowance is then exempt from social contributions up to €87,984.

The portion of the allowance that exceeds this amount, either €7,728 (€90,000 - €87,984), is subject to social contributions.

Warning  

if the redundancy pay paid is more than €439,920, it shall be subject to contributions in full. No exemption is applicable.

CSG and CRDS

The termination indemnity shall be exempt from CSG: titleContentand CRD: titleContent according to the smallest of the following 2 limits:

  • Amount of statutory or contractual redundancy payment due to the dismissed employee
  • Amount of the allowance exempt from social security contributions

Example :

an employee receives a redundancy allowance (statutory allowance + supra-legal allowance) an amount of €40,000 exempt from income tax and social security contributions.

However, the amount of the statutory allowance received (excluding the supra-statutory allowance) shall be fixed at €15,000.

The exemption from CSG and CRDS applies up to €15,000.

The CSG and CRDS are due to €25,000 remaining€40,000 - €15,000).

Warning  

if the redundancy pay paid is more than €439,920, it is submitted to CSG and CRDS in full. No exemption is applicable.

Termination Benefit Simulator

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