French Severance Pay: Social Security Rules Employers Must Apply (BOSS)

The Bulletin officiel de la Sécurité sociale (BOSS — the official Social Security bulletin) sets out the social security treatment of the severance payments you make: exemption from social contributions within certain limits, liability to CSG/CRDS (French social levies), and reintegration into the contribution base above ceilings indexed to the Plafond annuel de la Sécurité sociale (PASS — the annual Social Security ceiling). In practice, statutory severance pay (indemnité de licenciement) is exempt from social contributions up to 2 PASS (i.e. €94,200 for 2025), subject to conditions, but becomes fully subject to contributions if it exceeds 10 PASS.

This article is intended for HR directors and executives who manage the payroll of employment terminations. The BOSS has been binding on the administration since 1 April 2021: you may rely on it, but the URSSAF (the French social security collection agency) also uses it during an audit. Mastering these rules is essential to the safety of your employer account.

What the BOSS Governs for Severance Payments

In its dedicated section on severance payments, the BOSS consolidates the administrative doctrine applicable to the social security treatment of sums paid on termination of the employment contract. It is built around the French Social Security Code, in particular Article L.242-1, which establishes the principle that any remuneration paid in consideration of, or in connection with, work is subject to contributions, together with the exemptions from that principle.

The analysis to be carried out for each payment involves three steps:

Characterise the payment: statutory or collectively-agreed severance pay (indemnité légale ou conventionnelle de licenciement), mutually-agreed termination indemnity (indemnité de rupture conventionnelle), settlement indemnity (indemnité transactionnelle), compulsory retirement indemnity (indemnité de mise à la retraite), damages for dismissal without real and serious cause, etc. Each type follows its own regime.
Determine whether the sum is indemnity-based or salary-based: sums that are salary in nature (indemnity in lieu of notice, indemnity for accrued paid leave, salary arrears) are always subject to contributions, with no exemption limit.
Apply the exemption thresholds for social contributions, for CSG/CRDS and, where applicable, for the forfait social (a specific employer social charge).

The BOSS specifies that these rules are assessed payment by payment for CSG/CRDS purposes, but that the 2-PASS ceiling for contributions is assessed on the overall amount of severance payments made to the same employee in respect of the same termination.

The Contribution Exemption Thresholds You Must Observe

The social security treatment depends on the nature of the payment. Below are the operational rules to build into your payroll settings.

Severance Pay (Outside a Redundancy Plan / PSE)

The fraction exempt from social contributions equals the highest of the following amounts, up to a limit of 2 PASS:

the amount of statutory or collectively-agreed severance pay;
50% of the total indemnity paid;
twice the gross annual remuneration received in the calendar year preceding the termination.

Warning: if the total indemnity exceeds 10 PASS (€471,000 in 2025), it is fully subject to contributions from the first euro. This “cliff-edge threshold” mechanism is a frequent source of reassessment.

Mutually-Agreed Termination Indemnity (Rupture Conventionnelle)

For an employee who cannot claim a pension under a legally mandatory scheme, the approved mutually-agreed termination indemnity follows the same exemption regime as severance pay (2-PASS limit, 10-PASS threshold). Since the Social Security Financing Act for 2023, the employer owes a single 30% contribution on the portion exempt from social contributions, which replaces the former 20% forfait social.

Compulsory Retirement Indemnity

It is exempt up to 2 PASS on the same terms, but remains subject to a specific 50% employer contribution on its entire amount, provided for by Article L.137-12 of the French Social Security Code.

Settlement Indemnity

The BOSS provides that the indemnity portion of a settlement — the part compensating for a loss rather than a component of salary — follows the regime of the severance payment to which it relates. You must therefore be able to demonstrate, with supporting evidence, the compensatory nature of the sums paid. Failing that, the URSSAF will reclassify them as salary.

Even where exempt from contributions, a severance payment does not necessarily escape CSG and CRDS. This regime, which is more restrictive, follows its own rules.

CSG/CRDS taxable base: severance payments are subject to CSG (9.20%) and CRDS (0.50%) on the fraction exceeding the amount of statutory or collectively-agreed severance pay. In other words, the collectively-agreed amount is exempt from CSG/CRDS, but the portion above it is subject to it. This fraction subject to CSG/CRDS does not benefit from the professional-expenses allowance.

A key point of vigilance for your payroll: the indemnity can never be exempt from CSG/CRDS for an amount higher than the amount exempt from contributions. The BOSS requires you to apply the limit most favourable to collection.

Forfait social and the 30% contribution: for mutually-agreed terminations, the 30% employer contribution applies to the portion exempt from contributions. You must report it on the DSN (the French unified social declaration) under the correct staff category code to avoid any reassessment.

The URSSAF Audit Points to Secure Within Your Company

Severance payments are among the most heavily audited items. To secure your employer account, DAIRIA Avocats recommends systematically checking:

The precise characterisation of each sum: rigorously distinguish salary-based items (notice, paid leave, bonuses) from compensatory indemnities. A confusion leads to a contribution reassessment together with surcharges.
The calculation of the three exemption branches: keep the details of the calculation (collectively-agreed indemnity, 50% of the indemnity, twice the remuneration) to justify the exempt fraction applied.
Compliance with the 10-PASS threshold: above it, no exemption is possible. This point is decisive for senior executives.
The treatment of settlements: document the compensatory nature of the sums in the settlement agreement. A poorly drafted agreement undermines the exemption.
Consistency between CSG/CRDS and contributions: always apply the lower limit between the two regimes.

A poorly configured termination exposes your company to a reassessment covering three years, including surcharges and penalties. The firm intervenes upstream to audit your calculations and secure the settings of your payroll software.

Frequently Asked Questions

What exactly does the BOSS say about the mutually-agreed termination indemnity?

The BOSS confirms that the mutually-agreed termination indemnity paid to an employee who cannot draw a pension is exempt from contributions up to 2 PASS, under the same rules as severance pay. The exempt portion is, however, subject to the 30% employer contribution. If the employee can claim a pension, the indemnity is fully subject to contributions.

Is the 2-PASS ceiling assessed per payment or on an overall basis?

For social contributions, the 2-PASS limit is assessed on the overall amount of all severance payments made to the same employee in respect of the same termination. You therefore cannot combine several 2-PASS ceilings for separate payments linked to the same termination.

Is the indemnity in lieu of notice exempt?

No. The indemnity in lieu of notice, like the indemnity for accrued paid leave, is salary in nature. It is fully subject to contributions, CSG and CRDS, without benefiting from any exemption threshold. It must never be included in the calculation of the exempt fraction.

How should a settlement indemnity be handled in payroll?

Only the portion compensating for a loss follows the social security regime for severance payments. The portion corresponding to salary components is subject to contributions. You must document the breakdown in the settlement agreement. In the event of an audit, the burden of proving the compensatory nature rests on the employer.

What happens if the indemnity exceeds 10 PASS?

Once the total amount of severance payments exceeds 10 times the PASS (€471,000 in 2025), the exemption disappears entirely: the indemnity is subject to contributions, CSG and CRDS on its full amount, from the first euro. This mechanism mainly concerns indemnities for executives and highly-paid senior staff.

The social security regime for severance payments combines several thresholds indexed to the PASS, distinct rules depending on the nature of each sum, and a BOSS doctrine that is binding but evolving. A single characterisation or calculation error is enough to trigger a three-year URSSAF reassessment.

DAIRIA Avocats assists HR directors and executives of mid-sized companies in auditing and securing their terminations: reviewing the calculation of exempt fractions, drafting enforceable settlement agreements, configuring payroll and providing assistance in the event of a URSSAF audit. Contact us to ensure the reliability of the social security treatment of your upcoming terminations.