Exemptions on Severance Payments Made in Case of Negotiated Termination of Employment
The scheme concerns the treatment of payments linked to a negotiated termination of an employment contract. Its application depends on the legal framework of the termination, the nature of the sums paid and the caps or rules in force. Payments, social contributions and income tax must be distinguished: their treatment is not necessarily the same.
When an employment relationship ends by mutual agreement, the cost of the termination also depends on the social and tax treatment of the payments made. This page covers the exemptions that may apply in certain situations, not financial aid for the company. For the employer, the key is to classify the termination correctly, calculate the sums due and avoid payroll or declaration errors.
Funded by Ministère du Travail et des Solidarités, URSSAF
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Who can apply
This page is relevant to employers preparing a negotiated termination and to the employees concerned. The regime depends on the type of contract, the procedure used, the employee’s status and the amounts paid. A negotiated termination, a settlement and another form of termination must not be treated as the same without a legal review.
Eligibility conditions
The exemptions are governed by the social and tax texts applicable at the date of termination. The thresholds, caps and combination rules may depend on pay, the amount of the payment and the employee’s situation. Have the treatment validated by the payroll department or a qualified adviser before drawing up the leaving documents.
What the scheme covers
Any advantage concerns the contribution and/or tax treatment of certain termination payments. It is not project funding or a cash-flow grant for the employer. Its practical value is to secure the calculation of the cost of departure and the related declarations.
Amount and funding terms
The catalogue indicates: where the employee is not entitled to a pension from a compulsory statutory scheme, the approved negotiated termination (rupture conventionnelle) payment follows the same social regime as a dismissal payment made outside a job protection plan. It can therefore be exempt, and the exempt amount is assessed using the exemption limits applicable to dismissal payments. On this basis, the negotiated termination payment (all payments made to the employee being added together) is excluded from the social security contribution basis for the non-taxable portion, up to twice the annual social security ceiling (PASS). A payment exceeding 10 times the PASS is subject to social security contributions from the first euro. It is excluded from the basis for CSG and, consequently, CRDS up to the amount of the dismissal payment provided by the branch collective agreement, the professional or inter-professional agreement or, failing that, the law. However, payments above thirty times the annual social security ceiling, even where they correspond to the statutory or contractual payments, are subject in full, from the first euro, to social security contributions, CSG and CRDS. This information must be checked: it is neither a commitment nor confirmation of the scale currently applicable.
How to apply
1. Precisely classify the planned form of termination. 2. Break down the planned sums between statutory or contractual payment, specific payments and other elements of pay. 3. Apply the social and tax rules in force at the date of termination. 4. Have the calculation, declarations and end-of-contract documents checked before they are issued.
Timeline
The applicable regime is determined at the date of termination and under the texts in force. The rules can change: check the current official references before using this page to prepare a payslip or cost an operation.
Key facts
- Funder
- Ministère du Travail et des Solidarités, URSSAF
- Type of funding
- Tax exemption
- Status
- Ongoing
- Geographic scope
- All of France
Frequently asked questions
What are the exemptions on payments made in a negotiated termination of an employment contract for?
The scheme concerns the treatment of payments linked to a negotiated termination of an employment contract. Its application depends on the legal framework of the termination, the nature of the sums paid and the caps or rules in force. Payments, social contributions and income tax must be distinguished: their treatment is not necessarily the same.
Who can benefit, and what are the exclusions?
This page is relevant to employers preparing a negotiated termination and to the employees concerned. The regime depends on the type of contract, the procedure used, the employee’s status and the amounts paid. A negotiated termination, a settlement and another form of termination must not be treated as the same without a legal review.
What amount or advantage is provided?
Where the employee is not entitled to a pension from a compulsory statutory scheme, the approved negotiated termination (rupture conventionnelle) payment follows the same social regime as a dismissal payment made outside a job protection plan. It can therefore be exempt, and the exempt amount is assessed using the exemption limits applicable to dismissal payments. On this basis, the negotiated termination payment (all payments made to the employee being added together) is excluded from the social security contribution basis for the non-taxable portion, up to twice the annual social security ceiling (PASS). A payment exceeding 10 times the PASS is subject to social security contributions from the first euro. It is excluded from the basis for CSG and, consequently, CRDS up to the amount of the dismissal payment provided by the branch collective agreement, the professional or inter-professional agreement or, failing that, the law. However, payments above thirty times the annual social security ceiling, even where they correspond to the statutory or contractual payments, are subject in full, from the first euro, to social security contributions, CSG and CRDS. This parameter must be checked in the official source.
What deadline and steps should I plan for?
1. Precisely classify the planned form of termination. 2. Break down the planned sums between statutory or contractual payment, specific payments and other elements of pay. 3. Apply the social and tax rules in force at the date of termination. 4. Have the calculation, declarations and end-of-contract documents checked before they are issued.
Official source
No official URL is available in our data for this grant.
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