French Labour law : increase of the legal severance compensation (“indemnité légale de licenciement”) (Decree n ° 2017-1398 of September 25th, 2017)

1) The new amount of the legal severance compensation (“indemnité légale de licenciement”) 

The legal severance compensation shall not be less than the following amounts:

A quarter of a month's salary per year of seniority up to ten years;
One third of a month's salary per year of seniority from ten years.  (Art. R. 1234-2 of the French Labour Code)

Please note that if a collective agreement provides for a more favorable severance pay, this applies instead of the legal severance compensation.

For example, the Syntec collective agreement and the advertising collective bargaining agreement provide for a more favorable contractual indemnity of 1/3 of a month's salary per year of seniority.

For journalists, the contractual severance indemnity is even one month's salary per year of seniority.

60% of employees would be covered by a sectoral collective bargaining agreement (“convention collective de branche”) providing for a more favorable contractual severance indemnity than the legal severance compensation of the French Labor Code.

2)Salary to be taken into account in order to calculate the legal severance compensation 
The decree amended Article R. 1234-4 1 ° of the French Labor Code and now specifies that : the salary to be taken into account, for the calculation of the severance pay, is the most advantageous calculation for the employee:

1 ° The monthly average of the last twelve months before the dismissal, or where the seniority of the employee is less than twelve months, the monthly average of the remuneration for all the months before the dismissal;

2 ° One third of the last three months. In this case, any annual or exceptional bonus paid to the employee during this period shall be taken into account only up to an amount calculated proportionately.

3) The legal severance compensation is calculated prorata temporis in case of partial year

Article R. 1234-1 of the Labor Code specifies that "In the case of an partial year, the indemnity shall be calculated in proportion to the number of full months".

4) The decree applies from September, 27th 2017

The decree is applicable to dismissal, enforced retirements pronounced and to mutual agreed termination (“rupture conventionnelle”) concluded after its publication.

In summary,

An employee who holds an open-ended contract of employment, who was dismissed after eight months of uninterrupted period of employment with the same employer, is entitled to a legal severance compensation, except in the case of serious misconduct.

The rate and method of calculation of this compensation are fixed by decree in Council of State (“Conseil d'Etat”).

This decree re-evaluates this compensation and adjusts the calculation of the reference salary when the period of employment of the employee in the company is less than twelve months.

This provision comes into force on September 27th, 2017.

Frédéric CHHUM Avocat à la Cour (Paris et Nantes)

. Paris : 4 rue Bayard 75008 Paris - Tel: 01 42 56 03 00 ou 01 42 89 24 48
. Nantes : 41, Quai de la Fosse 44000 Nantes -  Tel: 02 28 44 26 44

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