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Employee termination benefit at the CDI

Verified 01 January 2022 - Legal and Administrative Information Directorate (Prime Minister)

Employee CDI: titleContent a person who is laid off is entitled to severance pay under certain conditions. The amount of the allowance shall be determined by the legal calculation formula. The collective agreement use or the employment contract may provide for more favourable provisions. This allowance may be subject to social and tax exemptions.

Any employee hired in CDI: titleContent may benefit from the termination indemnity.

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 or contract use 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 of death of employee in the course of the redundancy procedure, the compensation must be paid to the beneficiaries.

Age

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

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

Older than 10 years
Amount of compensation

The statutory allowance is calculated from the gross salaries before termination.

The allowance shall be at least equal to:

  • 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, called reference salaryshall be determined by taking into account, in accordance with the most advantageous formula:

  • This is the monthly average of the last 12 months before termination
  • This is the monthly average of the last 3 months. In this case, exceptional or annual premiums and rewards shall be taken into account 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 before the stop.

Calculation of seniority

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 12 years and 9 months of service shall be: [(1500 x 1/4) x 10] + [(1500 x 1/3) x 2] + [(1500 x 1/3) x (9/12)] = €5,125.

If the employee worked full time before moving to part time (or vice versa), compensation 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.

Seniority less than 10 years
Amount of compensation

The statutory allowance is calculated from the gross salaries before 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 allowance with 3 years and 6 months seniority shall be: [(1500 x 1/4) x 3] + [(1500 x 1/4) x (6/12)] = €1,312.50.

Reference Salary Calculation

The reference salary shall be determined by taking into account the most advantageous formula:

  • This is the monthly average of the last 12 months before termination
  • This is the monthly average of the last 3 months. In this case, exceptional or annual premiums and rewards shall be taken into account 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 before the stop.

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), compensation is calculated proportionally the length of time he worked full-time 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.

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

The termination indemnity, whether of legal, conventional or contractual origin, may be cumulated with the following allowances:

Compensation for dismissal (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:

  • 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 2021 (€246,816 for allowances paid in 2022).

Example :

An employee shall receive redundancy pay from €120 000 of €70 000 is the compensation provided by 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 €40,000 (€120,000) - €80 000) is taxable.

Social contributions

The portion of the termination allowance exempt from income tax is also exempt from social contributions, up to the €82,272.

Example :

If an employee receives a redundancy payment in the amount of €40,000 the allowance is also exempt from tax.

On the other hand, if he receives €90,000 tax-exempt, the allowance is then exempt from social contributions up to €82,272.

The portion of the allowance exceeding this amount, either €7,728 (€90,000 - €82,272), is subject to social contributions.

Warning  

if the redundancy pay paid exceeds €411,360, it shall be subject to contributions in full. No exemption is applicable.

CSG and CRDS

The termination indemnity is exempt from CSG: titleContentand CRD: titleContent whichever is less:

  • Amount of statutory or contractual termination indemnity due to the dismissed employee
  • Amount of the allowance exempt from social contributions.

Example :

An employee shall receive a redundancy allowance (statutory + supralegal) in the amount of €40,000 exempt from income tax and social contributions.

However, the amount of the statutory allowance received (excluding the supralegal 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 exceeds €411,360, it is submitted to CSG and CRDS in full. No exemption is applicable.

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