Severance Pay 2026: the Rise of the Employer Contribution

Quick answer. As of 1 January 2026, the specific employer contribution on mutually agreed termination (rupture conventionnelle) and forced retirement indemnities rises from 30% to 40% (article L137-12 of the French Social Security Code, Law no. 2025-1403 of 30 December 2025). It remains payable by the employer alone, on the share of the indemnity exempt from social security contributions.

The 2026 Social Security Financing Act raises by 10 points the specific employer contribution on two types of indemnity: individual mutually agreed termination and employer-initiated forced retirement. The rate moves from 30% to 40%.

This contribution is not new. Since 1 September 2023, the social regime of severance and forced-retirement indemnities has been unified, with a 30% employer contribution paid to the French national old-age insurance fund (CNAV). The 2026 Act does not create a tax: it increases the rate.

The governing text is article L137-12 of the Social Security Code, which now states that the rate of this contribution is set at 40%. The measure appears in article 15 of Law no. 2025-1403 of 30 December 2025. The stated objective is to curb the growing use of mutually agreed termination, seen as a separation method that had become too advantageous.

For business owners, the message is simple: for the same indemnity, parting ways with an employee now costs more in 2026 than in 2025. Planning the timing and the figures becomes a management reflex. Our team handling payroll and HR administration in Paris already factors this new rate into the simulations provided to employers.

The employer contribution does not apply to the entire indemnity paid. It is due on the share of the indemnity exempt from social security contributions, within the meaning of article L242-1, 7° of the Social Security Code.

You therefore reason in two steps. First, you determine the share of the indemnity exempt from social contributions: for 2026, the exemption is capped at twice the annual social security ceiling (PASS), i.e. 96,120 euros (the 2026 PASS is 48,060 euros). Then you apply 40% to that exempt share.

The portion above this ceiling is reintegrated into the ordinary social contribution base: it is no longer subject to the specific contribution, but to standard employer and employee contributions. The CSG and CRDS follow their own logic: the indemnity is liable to them once it exceeds the statutory or contractual amount, without the deduction for professional expenses.

This mechanism often surprises employers: the heaviest contribution hits precisely the part that seemed contribution-free. The share exempt from social contributions is never free for the company.

The 10-point increase is easy to measure. The table below compares the previous and the new cost of the contribution, for indemnities entirely within the 2-PASS exemption limit.

For a mutually agreed termination negotiated at 30,000 euros of exempt indemnity, the company now pays 12,000 euros of contribution, against 9,000 euros before. The net extra cost is 3,000 euros, the equivalent of one month of fully loaded salary for many small businesses. On executive departures, where supra-statutory indemnities are common, the bill rises fast.

This cost is on top of the indemnity itself and any final settlement. It weighs on cash flow in the month of the termination, with no possible spreading. For owners managing their payroll, it is a line item to provision in advance, just like the exceptional corporate income tax surcharge in 2026 for the companies concerned.

Yes. Article L137-12 expressly covers two situations: individual mutually agreed termination (articles L1237-11 to L1237-15 of the Labour Code) and employer-initiated forced retirement (article L1237-5 of the Labour Code). Both indemnities bear the same 40% rate since 1 January 2026.

The stakes are particularly high for companies managing end-of-career situations. A forced retirement, where legally possible, generates a often significant indemnity, and the 40% contribution adds to the cost.

Note a tax subtlety specific to the employee: where the employee is entitled to a pension from a legally mandatory scheme, the mutually agreed termination indemnity is subject to income tax from the first euro. The social exemption regime still applies up to 2 PASS, but the beneficiary's personal taxation changes.

This is where most payroll errors occur. The applicable rate is set at the date of termination of the employment contract, that is, the contract end date, not the date the agreement is signed nor the date the indemnity is paid.

Here is the procedure to apply the correct rate:

1. Identify the contract end date stated in the termination agreement (after approval).
2. If that end date is on or before 31 December 2025, apply the former 30% rate.
3. If it falls on or after 1 January 2026, apply the new 40% rate.
4. Do not rely on the signature date: an agreement signed in November 2025 whose contract ends in January 2026 falls under the 40% rate.
5. Document the date retained in the payroll file, as this is what the URSSAF will check.

Terminations negotiated in late 2025 but approved and executed in early 2026 are therefore affected by the increase. In our files, several employers thought they had locked in the 30% rate by signing before 31 December: it is the effective exit date that counts.

Several situations deserve close reading before any costing.

• Indemnity above 2 PASS (96,120 €): the portion beyond is no longer subject to the 40% specific contribution, but reintegrated into the ordinary social contribution base, which can be heavier still.
• Employee able to claim a pension: the indemnity remains exempt from contributions up to 2 PASS, but becomes taxable for income tax from the first euro for the employee.
• Collective mutually agreed termination and departure plans: the regime may differ; a case-by-case review is required, especially regarding the interaction with redundancy indemnities.
• Settlement signed after the termination: amounts paid under a settlement follow their own rules, distinct from the termination indemnity itself.
• CSG and CRDS: they apply to the share exceeding the statutory or contractual amount, without the 1.75% allowance for professional expenses on that part.

The underestimated risk lies in the gap between the decision and its cost. Many employers still reason on the net indemnity paid to the employee, without including the employer contribution that weighs on the company. The total cost of an amicable separation is now calculated with a 40% coefficient on the exempt share.

What the authorities check first is the consistency between the contract end date declared in the DSN (the French monthly social declaration) and the contribution rate applied. A termination carried out in 2026 but declared at 30% exposes the employer to a URSSAF reassessment, plus late penalties.

A second watch point: do not confuse this specific contribution with ordinary contributions. They do not stack on the same base. The exempt share bears the 40%; the reintegrated share bears the standard contributions. Reversing the logic distorts the whole payslip and the employer cost.

Our reading is that this increase marks a lasting change of direction. The legislator is not fixing a technical detail: it deliberately makes mutually agreed termination more expensive to limit its use. We expect this rate not to come back down, and that further tightening could follow in upcoming financing acts.

The trade-off to consider is no longer only mutually agreed termination versus dismissal, but mutually agreed termination, dismissal or keeping the employee with support measures. Dismissal remains legally riskier, but the social cost gap has narrowed. Each situation is decided case by case, weighing litigation risk, social cost and timing.

Recently, a managing director of a services SME asked us to formalise the departure of two staff members before year-end. By recalculating the cost with the 40% rate and adjusting the contract end date, we secured the budget and avoided an unpleasant cash-flow surprise in the first quarter. This example shows the value of running the figures before signing, not after.

Our firm, registered with the French Institute of Chartered Accountants, systematically includes this parameter in payroll forecasts. A reliable payroll tool, such as the PayFit payroll software, helps monitoring, but does not replace human judgement on the choice of termination method and the exit date.

Hayot Expertise advice. Before signing any mutually agreed termination or forced retirement in 2026, request a full costing including the 40% employer contribution. Check the contract end date, provision the cost in the relevant month and keep a record of the rate applied to secure your DSN against the URSSAF.