France Severance Pay: How the Indemnite de Licenciement Is Calculated

French law guarantees a minimum severance payment, the indemnite legale de licenciement, to most employees dismissed after 8 months of service. The amount is set by a precise formula tied to seniority and salary, not left to discretion. This guide walks through that formula with step by step worked examples so the calculation is transparent rather than a black box.

Information last verified on 19 July 2026. This article presents general legal information, not legal advice.

Jurisdiction scope: This article covers French national employment law (the Code du travail) as it applies in mainland France. It does not address the adapted labor codes used in some French overseas collectivities or the law of any other country.

Who Has the Right to the Indemnite Legale de Licenciement

An employee dismissed under an open ended contract (CDI) is entitled to the indemnite legale de licenciement once they have completed 8 months of continuous, uninterrupted seniority with the same employer. Article L1234-9 excludes the indemnity in terms only for gross misconduct (faute grave). Serious misconduct (faute lourde) is not named in the text, but it is more severe than faute grave and the courts have long treated it as carrying the same exclusion, so in practice neither category attracts the statutory indemnity. An employee dismissed before reaching that 8 month threshold is not entitled to the statutory indemnity, though a collective bargaining agreement may set a different, more favorable rule.

A dismissal for gross or serious misconduct is treated differently under the law and excludes the employee from the legal indemnity entirely, regardless of seniority. That situation is covered separately in the guide to dismissal for gross misconduct in France, and is not used as a calculation example anywhere on this page.

The Legal Formula for Calculating Severance Pay

The statutory formula applies two different rates depending on how many years of seniority the employee has completed:

• One quarter month of reference salary for each year of seniority, for years up to and including the 10th year
• One third month of reference salary for each year of seniority beyond the 10th year

Any partial, incomplete final year of seniority is counted prorata, month by month, rather than rounded up to a full year or dropped entirely. An employee with 6 years and 4 months of seniority, for example, has those 4 additional months factored into the calculation rather than ignored.

Worked Example: Under 10 Years of Seniority

Take an employee with a reference salary of 2,500 EUR per month and 6 years and 4 months of seniority, all below the 10 year threshold, so only the one quarter month rate applies.

The 6 full years are calculated first: 6 times one quarter of 2,500 EUR, which is 6 times 625 EUR, equal to 3,750 EUR. The remaining 4 months of the seventh year are then prorated: 4 divided by 12, multiplied by 625 EUR, equal to 208.33 EUR. Adding the two figures together gives a total legal indemnity of 3,958.33 EUR.

This figure is illustrative only, built by applying the statutory formula to a hypothetical reference salary and seniority period. It is not drawn from a government calculator and should not be read as predicting any individual's actual payout.

Worked Example: Crossing the 10 Year Threshold

Now take an employee with a reference salary of 3,000 EUR per month and 12 years and 6 months of seniority, a period that crosses the 10 year mark, so both rates apply in sequence.

The first 10 years are calculated at the one quarter month rate: 10 times one quarter of 3,000 EUR, which is 10 times 750 EUR, equal to 7,500 EUR. The next full 2 years, from year 11 through year 12, are calculated at the higher one third month rate: 2 times one third of 3,000 EUR, which is 2 times 1,000 EUR, equal to 2,000 EUR. The remaining 6 months of the 13th year are then prorated at that same one third rate: 6 divided by 12, multiplied by 1,000 EUR, equal to 500 EUR. Adding the three figures together, 7,500 EUR plus 2,000 EUR plus 500 EUR, gives a total legal indemnity of 10,000 EUR.

As with the first example, this is a hypothetical calculation built directly from the statutory formula, shown to illustrate how the two rates apply in sequence once seniority passes 10 years, not a promised or predicted amount.

The Reference Salary: Which Method to Use

The reference salary is not automatically the employee's most recent monthly pay. The law requires comparing two methods and using whichever produces the higher figure for the employee:

• The average monthly gross pay over the 12 months preceding the dismissal, or over the full period worked if seniority is shorter than 12 months
• One third of the gross pay over the last 3 months, with any annual or exceptional bonus paid during that period counted only on a prorated basis

This comparison matters most after a recent raise or in a quarter with an unusually large bonus. An employee whose last 3 months of gross pay were 3,200 EUR, 3,200 EUR, and 3,400 EUR after a raise has a one third of last 3 months figure of 3,266.67 EUR. If that same employee's 12 month average works out closer to 3,033 EUR because the earlier months were paid at the lower, pre-raise rate, the law requires using the higher 3,266.67 EUR figure as the reference salary, not the lower 12 month average.

Legal Indemnity or Conventional Indemnity: Which Applies

The statutory formula described above is a floor, not a fixed amount. A collective bargaining agreement, the employment contract, or an established workplace custom can set a calculation formula more favorable to the employee than the legal minimum. When one does, the employee is paid whichever amount is higher, the legal figure or the conventional figure. The two amounts are never added together or paid cumulatively.

Many French sector level collective bargaining agreements do set more generous formulas than the statutory minimum, so the legal calculation above is best treated as a floor to check any conventional or contractual formula against, not as the final answer for every employee. An employee unsure which formula applies to their own situation should start by checking whether a sector level or company level collective bargaining agreement covers their employer, since that document, not the Code du travail alone, often ends up setting the actual amount paid.

Tax Treatment of the Severance Indemnity

The indemnite de licenciement is exempt from income tax up to the greatest of three thresholds: the legal or conventional indemnity amount, 50 percent of the total indemnity paid, or twice the employee's gross annual pay for the calendar year before the dismissal. Whichever of those figures applies, the exemption is capped at 6 times the annual social security ceiling, the PASS, which is 288,360 EUR for 2026.

This 6 times PASS cap is the same ceiling used for the rupture conventionnelle indemnity described in the companion guide to mutual termination pay in France, which also explains a related but different, lower 5 times PASS cap that applies only to retirement related payments, not to an ordinary dismissal indemnity.

Related Topics

Severance pay is only one part of what happens when a French employment contract ends. The formula on this page also sets the floor for the mutual termination pay an employee receives under a rupture conventionnelle, though that payment has no minimum seniority requirement. A dismissal for gross misconduct removes the right to this indemnity entirely. Whatever way the contract ends, the employee's remaining pay is settled through a final pay settlement. For the full set of France employment law topics, see the France hub.

Disclaimer

This article is provided for general informational purposes only and does not constitute legal advice. The worked examples above apply the statutory formula to hypothetical figures for illustration and are not a substitute for an individual calculation based on an employee's actual pay records and employment contract. French employment law and applicable collective bargaining agreements can change, so anyone calculating an actual severance amount should consult a qualified French employment lawyer, payroll professional, or the relevant French labor authorities.

Frequently Asked Questions

How much seniority is needed to receive an indemnite de licenciement?

8 months of continuous, uninterrupted seniority with the same employer, unless the dismissal is for gross or serious misconduct, in which case no legal indemnity is owed regardless of seniority.

What is the formula for calculating the legal severance indemnity?

One quarter month of reference salary per year of seniority for years up to 10, then one third month of reference salary per year of seniority beyond 10 years, with partial years prorated month by month.

How is the reference salary determined?

It is whichever is more favorable to the employee: the average monthly gross pay over the last 12 months, or one third of the gross pay over the last 3 months, with bonuses counted only on a prorated basis.

Can a collective bargaining agreement set a higher severance amount?

Yes, and in that case the employee receives the higher of the legal amount and the conventional amount, not both added together.

Is the severance indemnity subject to income tax?

It is exempt up to the greatest of several thresholds, capped at 6 times the annual social security ceiling, 288,360 EUR for 2026.

How are partial years of seniority handled in the calculation?

A partial final year is prorated by the month rather than rounded to the nearest full year, so 4 extra months after 6 full years adds 4 divided by 12 of that year's rate, not a full additional year or nothing at all.

Does the same 8 month seniority rule apply to a rupture conventionnelle indemnity?

No. The rupture conventionnelle indemnity uses the same calculation formula but has no minimum seniority requirement, unlike the ordinary dismissal indemnity described on this page.

Is a dismissed employee's severance indemnity the same as their final pay?

No, they are separate figures. The severance indemnity is calculated under the formula above, while the final pay settlement separately covers items such as unused paid leave and any outstanding notice pay.