The Indemnité de Licenciement (statutory severance payment) is the mandatory payment an employer must make to an employee on a CDI who is dismissed for personal or economic reasons, provided the employee has completed at least eight months of continuous service with the company. Dismissal for serious misconduct (faute grave) or gross misconduct (faute lourde) extinguishes the right to this indemnity.
The statutory formula, set by Decree, calculates the indemnity as one quarter of a month's reference salary per year of service for the first ten years, and one third of a month's reference salary per year beyond ten years. The reference salary is the higher of the monthly average of the last twelve months or the monthly average of the last three months, with any variable pay prorated. Partial years are included pro rata.
Many conventions collectives provide a more generous indemnity formula than the statutory minimum, and that higher amount must be applied. Where an employee is awarded damages for unfair dismissal by the Conseil de Prud'hommes, these are calculated separately under a scale (barème Macron) introduced in 2017, and are in addition to the indemnité de licenciement. International employers must budget for the indemnity as a defined cost at the point of hiring under a French CDI.