Understanding compensation in the event of a conventional termination
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IN BRIEF
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Conventional termination, a mechanism for amicably ending an employment contract, allows the employer and employee to separate on good terms. An essential part of this procedure concerns the compensation which must be paid to the employee. Understanding the calculation methods and the criteria influencing the amount of this compensation is crucial for both parties. It is important to note that this compensation cannot be less than the legal severance pay, thus guaranteeing minimum protection for the employee. The determining factors include in particular the employee's seniority and their gross remuneration.
Conventional termination allows an employee and an employer to end a permanent employment contract (CDI) by mutual agreement. This article offers an overview of the calculation and collection of specific contractual termination compensation, taking into account the employee's seniority and their remuneration, as well as other essential factors to know.
What is conventional termination compensation?
Conventional termination compensation is a sum paid to the employee in return for the termination of their employment contract by mutual consent. It is compulsory and its amount cannot be less than that of the legal severance pay.
Calculation of conventional termination compensation
Determining factors
The calculation of the severance pay mainly takes into account two elements: the employee's seniority in the company and their gross remuneration during the months preceding the termination. These criteria are used to determine the minimum legal amount of the compensation.
Seniority
For employees with up to 10 years of seniority, the compensation is calculated at 1/4 of a month's salary per year of seniority. Beyond 10 years, it is 1/3 of a month's salary per additional year.
Gross remuneration
The basis for calculating the severance pay is the employee's gross remuneration. It includes the fixed salary as well as the various bonuses and benefits received by the employee during the months preceding the termination.
Terms of payment of the compensation
The specific severance pay must be paid to the employee from the effective date of termination of the employment contract, i.e. on the same date as the final settlement. Late payment may result in penalties for the employer. Tax and social consequences
Compensation paid under a mutual termination agreement may be subject to social security contributions and income tax. However, exemptions exist under certain conditions, in particular if the amount of compensation does not exceed a certain threshold.
What to do in the event of a dispute?
In the event of disagreement over the amount of compensation or the terms of the termination, the employee may turn to the industrial tribunal. The latter may cancel the termination and award additional compensation in the event of unfair dismissal.
Understanding the terms of compensation during a conventional termination is essential to guarantee a fair termination of contract that complies with legal provisions. It is recommended to be well informed and, if necessary, to be accompanied by professionals to navigate these procedures.
Criteria
| Description | Legal minimum amount |
| 1/4 month's salary per year of seniority up to 10 years, 1/3 beyond | Length of service |
| Direct impact on the calculation of compensation | Contractual provision |
| The amount may be higher than the legal compensation | Agreement of the parties |
| Necessary to fix the exact amount | Gross remuneration |
| Basis of calculation for compensation | Cancellation by the industrial tribunal |
| Possibility of receiving compensation for unjustified dismissal | Payout time |
| Payment is made in one go after approval | Social charges |
| May apply to part of the compensation | Non-taxation of certain shares |
| Certain shares may be exempt from income tax | Additional bonus |
| Possible subject to individual negotiation | Definition of compensation: |
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Subject to a minimum amount equal to the legal severance pay.
Calculation criteria: -
Based on seniority and gross remuneration in recent months.
Minimum amount: -
1/4 month's salary per year of seniority up to 10 years, 1/3 beyond.
Agreement of the parties: -
The amount of compensation is set by mutual agreement between employer and employee.
Exemption conditions: -
Exempt from social charges under certain conditions.
Payment deadline: -
Generally, paid on the end date of the contract.
