Legal severance pay (partially) increased by 25%.

by François Marteau and Jennifer Carrel

Announced at the end of August 2016 by Labor Minister Madame Muriel Pénicaud[1], Decree no. 2017-1398 of September 25, 2017 on the revaluation of the legal severance indemnity acts to partially raise the legal severance indemnity.

This decree comes on the heels of the publication of Ordinance no. 2017-1387 of September 22, 2017 on the predictability and security of labor relations , which now sets the minimum continuous length of service in the company at 8 months to qualify for this indemnity[2].

An increase for the first 10 years of seniority

Previously, in the absence of more favorable contractual or contractual provisions, an employee with one year’s uninterrupted service with the same employer was entitled, except in the case of serious or gross misconduct, to severance pay of not less than one-fifth of the monthly salary for each year of seniority, plus two-fifteenths of a month’s salary for each year beyond ten.

Now, except in the case of serious or gross misconduct, employees with at least 8 months’ continuous service are entitled to a statutory redundancy payment of no less than[3]:

• 1/4 month’s salary for each year of seniority up to ten years;
• 1/3 of a month’s salary for each year of seniority over 10 years.

The 25% increase therefore concerns only the first ten years of seniority, and not the years worked beyond that. Despite the ambiguous wording, this increase will apply to the tenth year inclusive, by analogy with the previous provisions.

Employers must nevertheless ensure that there are no more favorable contractual or conventional provisions.

Calculation methods for seniority of less than one year

If the employee has less than one year’s seniority and at least 8 months’ seniority, severance pay is calculated in proportion to the number of full months worked[4].

The reference salary used to calculate this indemnity is then, according to the most favorable result[5]:

• The average monthly remuneration for all months prior to dismissal ;
• One-third of the last three months, with annual or exceptional bonuses or gratuities paid during this period prorated.

The calculation methods for employees with at least one year’s seniority remain unchanged, with the exception of the aforementioned 25% increase for the first 10 years of seniority.

Effective immediately

These new provisions apply to redundancies and retirements pronounced and to conventional severance agreements concluded after its publication[6], i.e. from September 27, 2017.

[1] Press conference of August 31, 2017 by Madame Muriel Pénicaud, Minister of Labor.

[2] Article L. 1234-9 paragraph 1 of the French Labor Code.

[3] Article R. 1234-2 of the French Labor Code.

[4] Article R. 1234-1 of the French Labor Code

[5] Article R. 1234-4 of the French Labor Code

[6] Article 4 of Decree no. 2017-1398 of September 25, 2017 revaluing the legal severance pay.