Retirement at the employer's initiative: conditions and procedure 2026

Quick answer. The employer can automatically retire an employee from their 70th birthday, without obtaining their agreement and without a prior enquiry, but while respecting a notice period. Between 67 and 70, only with the employee's agreement, obtained through a written enquiry renewed each year. Before 67, it is impossible. The employee receives an indemnity at least equal to the legal severance pay, and a 40% employer contribution applies to any retirement taking effect on or after 1 January 2026.

Retirement at the employer's initiative is a termination of the contract by the employer, distinct from dismissal and from the employee's voluntary departure. It follows strict age rules, set by article L1237-5 of the Labour Code, and a precise procedure depending on whether the employee is over or under 70. Confusing these regimes, or anticipating a departure, exposes the employer to a costly reclassification. Here is the framework applicable in 2026, with its full costing, social and tax.

Three modes of separation can occur at the end of a career, and they share neither the same initiator nor the same regime. Retirement at the employer's initiative is decided by the employer. Voluntary retirement is decided by the employee, who chooses to leave to draw their pension. Dismissal requires a personal or economic ground: age or pension rights are never a valid ground for dismissal.

This distinction is not theoretical. The indemnity regime, the social regime and the cost for the employer differ markedly from one mode to the next. Wanting to retire an employee when the conditions are not met most often amounts, in reality, to a disguised dismissal, reclassified and sanctioned as such. For the employee who, conversely, wishes to leave of their own accord, the framework follows the broad lines of the pension reform on the employer side, which condition the age and the full rate.

The employee's age entirely governs the possibility of retiring them.

From 70, the employer can carry out an automatic retirement, without obtaining the employee's agreement and without the annual enquiry procedure. This does not, however, exempt them from respecting a notice period, equivalent to that of dismissal (article L1234-1 of the Labour Code), or from paying the indemnity. Between 67 and 70, retirement is only possible with the employee's express agreement, and only after an annual enquiry. Before 67, it is simply forbidden: the employer cannot impose the departure, whatever the employee's situation regarding their pension rights, even if they already hold the full rate.

This gradation protects the employee against retirement imposed too early, and reserves automatic retirement for employees who have reached 70. It is assessed strictly, at the effective date of the termination.

Between 67 and 70, the employer must follow a formalised annual procedure, failing which the termination is irregular.

At least three months before each anniversary of the employee's 67th, 68th and 69th birthday, the employer can ask them in writing about their intention to retire voluntarily. The employee has one month to reply. If they refuse, or do not reply, the employer cannot retire them during the following year. The procedure must then be renewed the next year, until the employee turns 70, the age from which automatic retirement becomes possible again.

Two traps recur in our files. First, the employer who fails to ask the employee loses the option to retire them for the year concerned, just as a refusal does: forgetting equals a block. Second, an obtained agreement does not waive the notice or the indemnity. This mechanism gives the employee control of their departure until 70: without their agreement, the employer stays bound.

Retirement gives the right to an indemnity, calculated as for dismissal (article L1237-7 of the Labour Code).

The employee receives a retirement indemnity at least equal to the legal severance pay, that is, under the ordinary regime, a quarter of a month's salary per year of seniority up to ten years, then a third of a month beyond ten years. The collective agreement, a company agreement or the contract may provide a more favourable indemnity, which then applies. A notice period, equivalent to that of dismissal, is also due.

The calculation of seniority and reference salary follows the same rules as for dismissal, which brings the two arrangements closer on the indemnity side. This is a feature shared with the other separation routes we document, such as mutual termination and its procedure: the calculation base is identical, but the social cost diverges sharply, as shown below.

The social treatment of the indemnity has changed and clearly increases the cost for the employer in 2026.

The fraction of the indemnity exempt from income tax is also exempt from social security contributions, within the limit of twice the annual social security ceiling, that is 96,120 euros in 2026 (the annual ceiling standing at 48,060 euros). Beyond that, the excess fraction is subject to contributions. And when the total indemnity exceeds ten times the annual ceiling, that is 480,600 euros in 2026, it is subject to contributions from the first euro: this limit is lowered to five ceilings for a corporate officer. CSG and CRDS follow their own threshold.

But the major change lies elsewhere. For any retirement taking effect on or after 1 January 2026, a specific employer contribution applies, at the rate of 40%, on the fraction of the indemnity otherwise exempt from social contributions. This contribution, provided for by article L137-12 of the Social Security Code, had been set at 30% since 1 September 2023 (amending social security financing act for 2023, which had itself lowered the previous 50% rate). It was raised to 40% by article 15 of the social security financing act for 2026 (act of 30 December 2025). It is reported in payroll under personnel code (CTP) 719, already used for the 30% rate. This surcharge significantly increases the cost of the operation and must be factored into the costing before any decision.

Which rate by effective date? The 2025 / 2026 switch rule#

The applicable rate is determined by the effective date of the termination, that is the date on which the retirement takes effect, and not by the date the notification was sent or the indemnity paid.

In practice, a retirement taking effect on or after 1 January 2026 bears the 40% contribution, even if the decision was notified in 2025. Conversely, a retirement whose effective date falls in December 2025 remains subject to the 30% rate, even if the indemnity is paid in January 2026. This is a watch point for files straddling the two years: shifting the effective date by a few days changes the contribution rate, and therefore the employer cost. We systematically check this timing before finalising the final settlement.

The social regime says nothing about the net amount the employee will actually receive: the tax treatment falls under article 80 duodecies of the General Tax Code.

The fraction of the indemnity corresponding to the legal or collective minimum is exempt from income tax for the employee. Beyond that, the so-called supra-legal fraction is exempt only within certain limits (notably twice the gross annual salary of the previous year, or half of the indemnity, within the limit of five PASS), and the part exceeding these caps is subject to income tax. This distinction is essential for the employee: a comfortable gross indemnity can translate into a clearly lower net after tax if a significant part is supra-legal.

In practice, two questions recur. On the employer side, the main additional cost remains the 40% contribution. On the employee side, what matters is the net after tax, which depends on the exempt legal or collective fraction. When the stakes are significant, we cost both sides of the operation, employer charge and employee net, so the decision is made with full information.

Our view: legal security takes precedence over apparent savings#

Retirement at the employer's initiative is a legitimate but framed tool, to be handled with precision. In our payroll files, the most serious mistake is to impose a departure before 70 without the employee's agreement: the termination is then reclassified as dismissal without real and serious cause, with the corresponding compensation, and none of the expected savings.

Our advice is to map the employee's age and seniority, scrupulously respect the enquiry procedure between 67 and 70, and cost the full amount, indemnity, notice and 40% contribution included, before deciding. The rise from 30 to 40% changes the equation: on an indemnity of several tens of thousands of euros, the contribution surcharge is not marginal. When the employee is not yet 70 and refuses to leave, it is better to explore a negotiated separation, articulated with your legal advisory, than to force an irregular retirement.

The underestimated risk: the 40% contribution left out of the budget#

Many employers cost the gross indemnity and the notice, but overlook the specific employer contribution. Yet it is calculated on the fraction exempt from contributions, which is often almost the entire indemnity in ordinary files. The table below compares two contribution-exempt indemnities, at 30% (regime until 31 December 2025) and 40% (from 1 January 2026), to visualise the surcharge borne solely by the employer.

On an indemnity of 50,000 euros fully exempt from contributions, the contribution thus rises from 15,000 to 20,000 euros, bringing the total cost of the operation to 70,000 euros for the employer. In some cases, a negotiated separation may prove less costly, but it falls under a different regime: this is precisely the arbitrage we examine file by file. It is also this line that derails the budget of a poorly anticipated end of career, and which we systematically include in the employer cost of a termination.

An employer wanted to retire a 68-year-old employee, productive but near the end of their career, thinking they could do it automatically. The analysis recalled that between 67 and 70, the employee's agreement is essential, obtained by written enquiry three months before the birthday. The employee having refused, any retirement was blocked for the following year.

Forcing the departure would have been reclassified as dismissal without real and serious cause. The employer gave up, then was able, as the 70th birthday approached, to carry out a regular automatic retirement. The final costing included the legal indemnity (the employee had eighteen years of seniority), the notice and the 40% employer contribution, which noticeably raised the cost compared with the initial estimate, but in full security. This kind of arbitrage echoes the questions of selling a business when the owner retires, where the timetable also drives the cost.

In practice: securing a retirement#

• Check the employee's exact age at the planned effective date and place them in the three cases (before 67, from 67 to 70, from 70).
• Between 67 and 70, send the written enquiry at least three months before the birthday and keep proof of dispatch and the reply.
• Obtain a written agreement from the employee where it is required: a verbal agreement secures nothing.
• Respect the notice period in every case, including for an automatic retirement at 70.
• Calculate the indemnity at the most favourable of the legal indemnity and the collective agreement, and check the applicable notice.
• Set the effective date: before 1 January 2026, 30% contribution; from that date, 40%.
• Cost the full employer amount: indemnity, notice, then the 40% employer contribution on the contribution-exempt share (code 719).
• Have the procedure and the final pay slip reviewed by your chartered accountant and payroll before the termination.

• Imposing a departure before 67, or before 70 without agreement, gets the termination reclassified as dismissal without real and serious cause.
• Forgetting the annual enquiry equals a block: the employer loses the option to retire for the year, just like a refusal.
• Even at 70, automatic retirement remains subject to the notice period: only the enquiry and the search for agreement disappear, not the other obligations.
• The 40% contribution is calculated on the contribution-exempt share and is often underestimated in the budget of the operation.
• The rate depends on the effective date: 30% until 31 December 2025, 40% from 1 January 2026, regardless of the payment date.
• Above 10 PASS (480,600 € in 2026), or 5 PASS for a corporate officer, the indemnity is subject to contributions from the first euro.
• The collective indemnity, if more favourable, prevails over the legal one: always check your collective agreement.
• The notice remains due and its omission gives the right to a compensatory indemnity: do not neglect it in the schedule or the costing.