Economic Dismissal or Mutual Termination in 2026: Legal, Payroll and Cost Trade-offs

Updated 12 May 2026. Two routes exist under French law to end a permanent contract (CDI): the individual mutual termination (rupture conventionnelle individuelle, RCI) governed by Articles L1237-11 to L1237-16 of the Labour Code, and the economic dismissal (licenciement économique, LE) governed by Articles L1233-1 to L1233-91. For a director of an SME or mid-cap in Paris, an HR director or a CFO, the trade-off is never neutral: two very different accounting costs, two opposing social-security and tax regimes, two radically distinct labour-court exposures. Cabinet Hayot Expertise works on the payroll, social-contribution and accounting side of severance pay, in close coordination with the client's legal counsel. The final decision always relies on a case-by-case analysis carried out with a labour lawyer.

Procedure and CERFA 14598*01 form#

The RCI codified in Articles L1237-11 to L1237-16 of the Labour Code rests on mutual agreement between an employer and an employee holding a permanent contract. It does not apply to fixed-term contracts or to corporate officers without an employment contract. The procedure requires at least one preparatory interview (assistance is not mandatory but strongly recommended via an employee adviser or staff representative), followed by signature of the CERFA 14598*01 form. Each party then has a 15-calendar-day withdrawal period from signature. At the end of that period, the employer files the agreement with the DREETS (formerly DIRECCTE), which has 15 working days to homologate. Silence is deemed acceptance. The termination date cannot fall before the day after homologation. Overall, expect roughly one month between signature and effective departure.

Specific indemnity and statutory floor#

The specific RCI indemnity cannot be lower than the statutory severance pay defined in Article L1234-9 of the Labour Code: one-quarter of a month's salary per year of seniority up to 10 years, then one-third of a month per year beyond that. For an employee earning €3,500 gross per month with 5 years of seniority, the statutory floor stands at €3,500 × (5/4) = €4,375. The applicable collective bargaining agreement may provide a more favourable amount. In Parisian practice, the negotiated range frequently exceeds this floor, especially for executive staff or sensitive departures: the supra-statutory portion is precisely what makes an RCI more expensive than a bare-bones economic dismissal.

Tax and social-security regime — income tax, contributions, 30% social levy#

This is where the RCI reveals its hidden cost. Article 80 duodecies of the General Tax Code exempts the indemnity from income tax up to the highest of three amounts: the statutory or contractual minimum, twice the prior-year gross annual remuneration, or 50% of the total paid, capped at 6 PASS (around €282,600 in 2026). On the social-contribution side, the exemption follows the same logic but caps at 2 PASS (around €94,200). CSG/CRDS (9.7%) applies to the fraction exceeding the statutory minimum. Above all, the employer bears a 30% social levy under Article L137-15 of the Social Security Code on the fraction not subject to social contributions — a charge introduced by the 2023 Finance Act that weighs heavily on the employer cost of an RCI. If the employee is eligible for a retirement pension, the entire indemnity reverts to the ordinary regime: full contributions and income tax. Always check the employee's age and pension eligibility before signing.

The 4 admissible causes and their proof#

Article L1233-3 of the Labour Code exhaustively lists the economic grounds. Four causes are admitted: economic difficulties evidenced by objective indicators (sustained drop in turnover, drop in operating result, deterioration of cash position, drop in orders), technological mutations, reorganisation needed to safeguard competitiveness, and cessation of activity unless caused by the employer's fault. The assessment perimeter sits at the level of the company, the business segment or the group, in line with the case law stabilised by the Court of Cassation's 26 June 2019 ruling. For a French subsidiary of a globally profitable group, proving the economic cause requires a fine-grained analysis of the relevant business segment. This step conditions the solidity of the whole scheme: an insufficiently substantiated cause exposes the employer to requalification at the labour court.

Individual procedure and CSP#

In a company with fewer than 50 employees carrying out fewer than 10 dismissals over 30 days, the individual procedure applies. It starts with a summons to a preparatory interview sent at least 5 working days before the meeting, followed by the interview itself (with possible assistance), then by the dismissal letter notified at least 15 days after the interview, stating the precise economic grounds. Any company with fewer than 1,000 employees must offer the professional security contract (CSP) — a scheme operated by France Travail (the renamed Pôle Emploi). The employee's acceptance of the CSP results in immediate termination without notice and entitles them to the professional security allowance (ASP) equal to 75% of gross salary for 12 months, well above the standard ARE (around 57% to 72% of gross salary). The notice not served is paid by the employer to France Travail to fund the scheme.

Collective procedure and PSE for 10+ departures#

Beyond 10 dismissals over 30 days in a company with at least 50 employees, the Labour Code mandates a redundancy plan (plan de sauvegarde de l'emploi, PSE): consultation of the social and economic committee (CSE) over at least two meetings, drafting of a detailed document listing redeployment measures, training, supra-statutory indemnities and support, then homologation or validation by the DREETS. Real-world timelines stretch from 2 to 6 months depending on company size and quality of social dialogue. The employer cost of a PSE goes well beyond severance: experts' fees, outplacement consultants, payroll overhead during the procedure. To frame this mechanic with your payroll teams, see our social and payroll support in Paris.

Statutory severance pay (Article L1234-9 of the Labour Code)#

A single formula for both routes: one-quarter of a month per year of seniority up to 10 years, one-third of a month beyond. The reference salary is the average of the last 12 months or the last 3 months if more favourable. Mutual termination cannot dip below this floor; neither can economic dismissal.

More favourable collective bargaining agreements#

Sector-wide agreements often provide a more generous calculation: Syntec, metallurgy, engineering consultancies, banking, press, road transport. Before any pricing, cross-check the applicable collective agreement against the IDCC code and the employee's seniority. The rule: the higher amount applies. Missing this step almost mechanically triggers a labour-court claim.

Macron scale in case of challenge (Article L1235-3 of the Labour Code)#

If the employee challenges the dismissal at the labour court (conseil de prud'hommes) and the genuine and serious cause of the economic dismissal is not recognised, the judge sets compensation within the Macron scale codified in Article L1235-3 of the Labour Code: between 0.5 and 20 months of gross salary depending on seniority. The Court of Cassation confirmed the validity of this scale in May 2022, closing the debate on its compatibility with international conventions. For 5 years of seniority in a company of more than 11 employees, the range is 3 to 6 months. This compensation is added to the statutory severance already paid and represents the main budget risk of a poorly secured economic dismissal.

2 PASS and 6 PASS caps — articulation#

For 2026, the annual social-security ceiling (PASS) sits around €47,100: 2 PASS therefore represents approximately €94,200 and 6 PASS approximately €282,600. These two thresholds structure the entire exemption mechanic for severance pay. Article 80 duodecies of the General Tax Code anchors the income-tax exemption at 6 PASS; Articles L242-1 and L136-1-1 of the Social Security Code anchor the contribution exemption at 2 PASS. Any fraction above 2 PASS is fully subject to social contributions (employer and employee), even if it remains below the income-tax cap.

30% social levy on RCI#

The 30% social levy of Article L137-15 of the Social Security Code applies only to mutual termination, not to economic dismissal. This is the structural difference in 2026. For an RCI set at €7,500 over 5 years of seniority on a €4,000 gross monthly salary, the statutory severance would be €5,000; the negotiated supplement is therefore €2,500, and the social levy applies to the fraction exempt from contributions — here around €938. Total employer cost rises to roughly €8,438. The same departure via economic dismissal with the same €5,000 statutory severance does not bear this social levy, but does trigger the specific employer CSP contribution and the cost of the notice period (or its compensation). To model this precisely, our employer cost calculator allows you to compare both scenarios at identical salary.

The case of an employee close to retirement#

Critical 2026 watchpoint: if the employee is eligible for a full-rate retirement pension (legal age raised to 64 since the 2023 reform, gradual ramp-up), the entire severance becomes subject to social contributions and income tax with no exemption whatsoever. For a director about to sign an RCI with an employee aged 62 to 64, verifying pension eligibility before signature is non-negotiable. An error on this point can turn a €50,000 net RCI into a real employer charge exceeding €75,000.

ARE after RCI and the 75-day deferral#

Mutual termination entitles the employee to the return-to-work allowance (ARE) paid by France Travail under the same conditions as a dismissal, provided the general criteria are met (affiliation duration, active job search). Two deferrals apply before the first payment: the specific indemnity deferral capped at 75 days, calculated on the supra-statutory portion of severance, and the 7-day waiting deferral. The higher the negotiated indemnity above the statutory floor, the longer the specific deferral. A generous indemnity improves the immediate cash exit but pushes the first ARE payment back by several months.

ASP after CSP — 75% of gross salary over 12 months#

The major advantage of economic dismissal on the employee side: opting into the CSP triggers the professional security allowance at 75% of the gross reference daily wage over 12 months. That is markedly higher than the ARE, which sits between 57% and 72% of gross salary depending on profile. Over a full year of compensation, an executive on €4,500 gross receives roughly €40,500 via the CSP, versus €30,000 to €35,000 via the post-RCI ARE. This gap weighs heavily on negotiation: a well-informed employee knows that the economic route is financially more favourable, provided they accept the reinforced support framework.

Possible combination with business creation (ARCE)#

France Travail offers the business creation and takeover assistance (ARCE), which allows the recipient to draw 60% of remaining ARE rights as a capital lump sum. The scheme applies both after RCI and after LE. For an employee planning to set up their own structure, ARCE can deliver a useful cash-flow lever, to be anticipated from the start of the exit negotiation.

Consent defect and RCI annulment#

Litigation around mutual termination remains marginal in practice: the DREETS homologation step already filters out obvious irregularities. The main risk is annulment for consent defect (pressure, harassment, undisclosed conflict context). The limitation period to act is 12 months from homologation. If annulment is granted, the termination becomes a dismissal without genuine and serious cause — triggering the Macron scale. Securing the file relies on traceability of interviews, written confirmation that the employee had time to reflect, and the absence of any documentable element of duress.

Challenging the economic cause#

Risk on the economic-dismissal side is markedly higher. The employee has 12 months to take the matter to the labour court and challenge the reality of the economic cause, the order of dismissals, the absence or insufficiency of redeployment search, or the procedural regularity. If the judge invalidates the grounds, the dismissal becomes without genuine and serious cause and the employer pays the Macron-scale indemnity on top of the statutory severance already paid. For long-tenured profiles with high pay, the bill can reach 18 to 24 months of gross salary.

Compensation scale and Macron caps#

Article L1235-3 of the Labour Code sets the range by seniority bracket: 1 year = 1 to 2 months; 2 years = 3 to 3.5 months; 5 years = 3 to 6 months; 10 years = 3 to 10 months; 20 years = 3 to 15.5 months; 30 years and above = 3 to 20 months. This grid was validated by the Court of Cassation in May 2022 and confirmed by the European Court of Human Rights in 2024. The Macron cap now offers visibility on the maximum risk — but does not eliminate the risk. Our piece on the 2026 mutual termination framework revisits upstream securing.

Article L1237-19 of the Labour Code — company collective agreement#

Collective mutual termination (RCC) introduced by the 2017 Macron Ordinances and codified in Article L1237-19 of the Labour Code allows a company to propose a voluntary departure scheme without having to justify an individual economic cause. RCC rests on a majority collective agreement negotiated with representative trade unions. The agreement must define the maximum number of departures, eligibility conditions, the specific indemnity, redeployment measures, and must be validated by the DREETS.

Voluntary departures without individual economic grounds#

The RCC advantage for the employer: it removes the obligation to prove economic grounds case by case. It also avoids individual litigation on the order of dismissals. The employee, in turn, exits with an indemnity often above the statutory floor, and retains ARE entitlements under ordinary conditions.

Use cases and limits#

RCC suits partial restructurings, controlled site closures, volume reorganisations without characterisable economic difficulties. It assumes a mature and structured social dialogue. For SMEs without union representation, the option remains out of reach. For Paris-based mid-caps, it is an alternative worth serious consideration before pivoting to a PSE. Our file on HR and payroll obligations of the employer in 2026 covers the related payroll and reporting layers.

The trade-off — accounting cost vs legal security#

In the files we handle in Paris, the RCI vs LE trade-off never boils down to a simple envelope calculation. Three lenses coexist:

1. Single negotiated exit, calm climate → RCI is faster (one month), no risk of economic-cause challenge, 30% social levy to factor in.
2. Real and documented economic difficulties, several departures over 30 days → individual or collective economic dismissal with PSE depending on volume; potentially lower accounting cost but labour-court risk to provision for.
3. Deep disagreement without provable economic cause → RCI with assumed supra-statutory negotiation, or dismissal on personal grounds (a separate subject) depending on context.

The underestimated risk — 30% social levy and indemnity above the cap#