Law No. 2023-270 of April 14th, 2023 on corrective financing of social security for 2023, relating to pension reform, modified the tax and social regime of conventional termination compensation.
The law replaces the 20% social package applicable to conventional termination compensation with an employer contribution to the National Old Age Insurance Fund of 30%.
The conventional termination will therefore be more costly for the employer.
This change will be applicable for any specific contractual termination compensation paid from September 1, 2023, even if the termination agreement was signed before this date.
The objective of this modification is to make the conventional termination more costly for employers so that the conventional termination compensation is not more advantageous than retirement and thus prevent employees from falling into unemployment before liquidating. their retirement.
The law has therefore also modified the system of compensation paid to an employee in the event of retirement, which will also be subject to an employer contribution of 30% (instead of 50% currently).
I- Regime applicable for conventional terminations (ruptures conventionnelles) until August 31st, 2023
The social and tax regime of the specific contractual termination compensation depends on the employee's retirement situation.
If the employee can benefit from a retirement pension (at full rate or not) at the time of the effective termination of the employment contract, the conventional termination compensation is subject in full to social security contributions and CSG-CRDS.
The tax regime is the same as that for employees who cannot benefit from a retirement pension, as explained below.
If the employee cannot benefit from a retirement pension, at full rate or not, the conventional termination compensation is exempt, within a certain limit, from income tax, social security contributions and CSG-CRDS, but is subject to a social package of 20%, the sole responsibility of the employer.
. The compensation is exempt from income tax up to the highest of the following amounts:
- The amount of conventional or legal dismissal compensation;
- Half of the total amount of severance pay received, up to six times the annual Social Security ceiling;
- Twice the amount of the gross annual remuneration received by the employee during the calendar year preceding the termination of the employment contract, within the limit of six times the annual Social Security ceiling.
. The compensation is exempt from social security contributions up to the highest of the above-mentioned amounts, up to twice the annual Social Security ceiling (in 2023, 2 PASS = 87,984 euros).
. The compensation is exempt from CSG-CRDS up to the amount of the conventional or legal severance compensation, up to twice the annual Social Security ceiling.
However, termination compensation greater than 10 times the annual Social Security ceiling is fully subject to social contributions and the CSG-CRDS.
II- Regime applicable to conventional terminations (ruptures conventionnelles) of employment contracts occurring from September 1st, 2023
From September 1st, 2023, for employees who can benefit from a retirement pension as well as those who cannot benefit from it, the conventional termination compensation is exempt, within a certain limit, from income taxes, contributions social security, and CSG-CRDS but is subject to a specific employer contribution of 30% (for the portion excluded from social security contributions).
. Unless there is a subsequent legislative or regulatory modification, the current tax regime remains applicable even from September 1st, 2023;
. The conventional termination compensation paid to the employee will be exempt from social security contributions, up to twice the annual Social Security ceiling, up to the highest of the following amounts:
- The amount of legal or conventional compensation;
- Twice the amount of gross annual remuneration received by the employee during the calendar year preceding the termination of the employment contract;
- Half of the compensation paid.
However, as before, termination compensation greater than 10 times the annual Social Security ceiling is fully subject to social contributions and the CSG-CRDS.
The 20% social package, applicable for employees who cannot benefit from a retirement pension, is therefore abolished and replaced by a single contribution of 30% payable by the employer and for the benefit of the National Fund. old age insurance, whatever the employee's situation.
The retirement indemnity will, for its part, be subject to the single employer contribution of 30% for its portion excluded from contributions and no longer 50% on its entire amount.
In the event of a conventional termination, the social system is therefore unified for all employees, regardless of whether or not they can benefit from a retirement pension at the time of this termination.
This could, in particular, encourage companies to “leave” through a “conventional termination” (rather than through a dismissal procedure) senior employees who can benefit from a retirement pension (at full rate or not).
The latter must be vigilant (see Employees, executives, senior executives: how much to negotiate your conventional termination after the Macron orders?
Sources :
. Law No. 2023-270 of April 14, 2023 on corrective financing of social security for 2023
https://www.legifrance.gouv.fr/jorf/id/JORFTEXT000047445077
. L. 242-1 of the social security code https://www.legifrance.gouv.fr/codes/article_lc/LEGIARTI000033712583/2017-01-01
. Lamyline, Everyday labor law, Part 1, Title 3 Termination of the employment contract, Theme 185 – Conventional termination
. Senior employees: do not confuse retirement compensation with retirement compensation https://www.village-justice.com/articles/salaries-seniors-pas-confondre-indemnite-depart-retraite-avec-indemnite-mise,44332.html
Frédéric CHHUM avocat et ancien membre du conseil de l’ordre des avocats de Paris (mandat 2019-2021)
CHHUM AVOCATS (Paris, Nantes, Lille)
e-mail: chhum@chhum-avocats.com
https://www.instagram.com/fredericchhum/?hl=fr
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