Economic dismissal in an SME: grounds, procedure and redeployment

Quick answer. An economic dismissal rests on a ground not inherent to the employee, defined in article L1233-3: economic difficulties, technological change, reorganisation needed to safeguard competitiveness, or cessation of activity. For an SME (fewer than 10 dismissals over 30 days, outside a job-protection plan), the procedure follows precise steps: justifying the grounds, a prior redeployment search, setting the order of dismissals, the preliminary meeting, proposing the professional securisation contract (mandatory below 1,000 employees) and a reasoned notification. The priority rehiring right applies for one year.

Economic dismissal remains one of the most scrutinised acts in labour law. Unlike a dismissal for gross misconduct or for unfitness, it relates not to the employee but to the company's situation. The court checks two things: the reality of the grounds and compliance with the procedure, in particular the redeployment effort.

This article covers the most common case in small and mid-sized companies: the individual dismissal, or fewer than 10 dismissals over 30 days, which does not trigger a job-protection plan (PSE). A PSE is only required from 10 dismissals over 30 days in a company of at least 50 employees. If you are still weighing the termination tools, our comparison of economic dismissal versus mutual termination informs the upstream choice; this guide describes the procedure once the economic route is chosen.

Article L1233-3 defines economic dismissal as a suppression or transformation of a job, or a refused modification of an essential element of the contract, resulting in particular from:

• economic difficulties, shown by a significant change in at least one indicator (a drop in orders or turnover, operating losses, deterioration of cash position or gross operating surplus);
• technological change;
• a reorganisation needed to safeguard competitiveness;
• the cessation of the company's activity.

For difficulties tied to a drop in orders or turnover, the law sets a minimum duration of decline, assessed against the same period of the previous year, by headcount:

The grounds are assessed at the date of the dismissal. A suppressed role cannot be filled again straight away without weakening the cause. Documenting the economic reality upstream is decisive: this is where an outsourced finance function provides solid indicators.

The dismissal can only occur after a serious redeployment search has failed. The employer must:

1. Make every training and adaptation effort to keep the employee in employment.
2. Search for redeployment into a role of the same category or equivalent, with equivalent pay; failing that, and with the employee's agreement, into a lower-category role.
3. Limit the search to the national territory, within the company and the other group companies located in France.
4. Make offers in writing, on a personalised basis, or by circulating a list accessible to all, stating the tie-break criteria for multiple applications. The employee has at least 15 days to apply (4 days in receivership or liquidation).

This is an enhanced best-efforts obligation: what counts is the real, documented effort. An unsought redeployment is one of the leading causes of reclassification into a dismissal without real and serious cause.

Where not all roles are affected, the employer sets the order of dismissals using criteria (family responsibilities, length of service, situations making re-entry difficult such as disability or age, professional qualities), after consulting the works council where one exists.

The individual procedure (fewer than 10 dismissals over 30 days) runs as follows:

1. Summons to the preliminary meeting by registered letter or hand delivery, respecting a 5-working-day period after presentation before the meeting.
2. Preliminary meeting: statement of the economic grounds and the offer of the professional securisation contract.
3. Notification of dismissal by registered letter, at least 7 working days after the meeting (15 days for a manager). The letter precisely states the economic grounds, the impossibility of redeployment, the CSP and the priority rehiring right.
4. Information to the Dreets within 8 days of sending the letter.

In companies with fewer than 1,000 employees (and those in receivership or liquidation), the employer must offer the CSP to any employee facing economic dismissal. This scheme, run by France Travail and extended to 31 December 2026, grants a securisation allowance equal to 75% of the reference daily wage for an employee with at least one year of service, plus enhanced support back to work. The employee has a 21-day reflection period. Above 1,000 employees, the redeployment leave applies instead.

After termination, the employee may claim unemployment benefit: our pointers on unemployment rights explain how it dovetails with the allowance.

• Protected employees. The economic dismissal of an employee representative requires prior authorisation from the labour inspectorate.
• Company without a works council. Below 11 employees there is no works council to consult; the employer remains bound by redeployment and the order of dismissals.
• Group scope. Where the company belongs to a group, redeployment is assessed across the group companies located in France.
• Severance pay. An employee dismissed on economic grounds receives the statutory or contractual severance pay: unlike gross misconduct, economic grounds do not remove it.

• Poorly documented grounds. Without proof of the reality and duration of the difficulties, the dismissal is fragile.
• Neglected redeployment. The absence of a serious search often leads to reclassification.
• Refilling the suppressed role. Filling the role again after termination contradicts the grounds.
• Forgetting priority rehiring. For one year, an employee who asks gets priority on available compatible roles.
• Procedural deadlines. Missing the deadlines (5 working days, 7 working days, Dreets information) exposes you to irregularities.

Recently, the owner of a services SME came to us after two quarters of a sharp drop in turnover. His instinct was to move fast. We helped him structure the file in the reverse order of his instinct: first establish and document the economic reality over the duration required for his headcount, then map the roles and genuinely search for redeployment, and only then start the individual procedure. That method turned a risky project into a defensible operation.

Our conviction, as chartered accountants and statutory auditors, is that the strength of an economic dismissal is decided before the first letter. Litigation rarely turns on form: it turns on the reality of the grounds and the sincerity of the redeployment effort. The company's figures are our trade; mobilising them to demonstrate the real and serious cause is what separates a defensible procedure from a labour-court conviction.

Hayot Expertise tip. Build the economic file first: indicators, compared periods, trajectory. Search for and record redeployment in writing, even unsuccessfully. Respect the deadlines scrupulously and offer the CSP at the meeting. And note the priority rehiring right in advance: it is the most common omission, and the easiest to avoid.