Introduction: End-of-Contract Indemnity, a Fundamental Right for Temporary Employees

The end-of-contract indemnity, commonly referred to as the “prime de précarité,” is an essential component of the compensation for employees on fixed-term contracts (CDD). Provided for by Article L.1243-8 of the French Labour Code, it aims to compensate for the precarious situation of employees at the end of their contract. In 2025, the calculation rules, exclusion cases, and social regime of this indemnity remain governed by the Official Bulletin of Social Security (BOSS, boss.gouv.fr) and the jurisprudence of the Court of Cassation.

This comprehensive guide is aimed at payroll managers, HR directors, and HR managers. It covers the entire subject: calculation of the indemnity (base, rate), exclusion cases, social and tax regime, renewal and succession of CDD, early termination, and the specific case of the CDD with a defined purpose.

What is the End-of-Contract Indemnity?

Legal Basis

The end-of-contract indemnity is stipulated in Articles L.1243-8 to L.1243-10 of the French Labour Code. It is owed to the employee at the end of a CDD when the contractual relationship does not continue with an indefinite-term contract (CDI). Its purpose is to compensate for the job instability inherent in the CDD.

Mandatory Nature

The payment of this indemnity is mandatory. The employer cannot exempt themselves from it through a clause in the contract or by a collective agreement (except in the case of the reduced rate of 6% provided for by a sector-wide agreement). Any contractual clause providing for the employee’s waiver of this indemnity is deemed unwritten.

Calculation of the End-of-Contract Indemnity

Common Rate: 10%

The rate of the end-of-contract indemnity is set at 10% of the total gross remuneration received by the employee during the term of the contract, including renewals. This rate of 10% constitutes the legal minimum.

Reduced Conventional Rate: 6%

A sector-wide agreement may provide for a reduced rate of 6%, provided that the employee is offered compensatory measures regarding professional training (preferential access to training actions, skills assessment, etc.). In the absence of effective compensatory measures, the rate of 10% applies automatically.

Calculation Base

The calculation base for the end-of-contract indemnity includes all gross remuneration received during the contract, specifically:

Base salary
Bonuses (seniority, performance, targets, prorated 13th month, etc.)
Fringe benefits (housing, vehicle, meals, etc.)
Overtime and additional hours
Compensatory paid leave indemnity
Various increases (night work, Sunday, public holidays)

Note: The end-of-contract indemnity itself is not included in its own calculation base. Also, reimbursements of professional expenses are excluded.

Example of Complete Calculation

An employee on a 6-month fixed-term contract received the following gross remuneration:

Base salary: €2,200 × 6 = €13,200
Performance bonus: €500
Overtime: €1,800
Vehicle fringe benefit: €200 × 6 = €1,200
Compensatory paid leave indemnity: €1,670

Total gross remuneration: €13,200 + €500 + €1,800 + €1,200 + €1,670 = €18,370

End-of-contract indemnity (10%): €18,370 × 10% = €1,837

End-of-contract indemnity (6% if sector agreement applies): €18,370 × 6% = €1,102.20

Exclusion Cases for the End-of-Contract Indemnity

CDI Proposal by the Employer

The indemnity is not owed when the employer offers the employee a CDI to occupy the same or a similar position, with remuneration that is at least equivalent, and the employee refuses this offer. It is essential for the employer to formalize this proposal in writing and keep proof of the employee’s refusal.

Seasonal CDD

Seasonal contracts (harvests, tourism, ski resorts, etc.) are excluded from the benefit of the end-of-contract indemnity, in accordance with Article L.1243-10 of the French Labour Code. However, a convention or collective agreement may provide for the payment of an indemnity in this case.

Usage CDD

Usage CDDs (sectors listed by decree: hospitality, entertainment, audiovisual, teaching, professional sports, etc.) are excluded from the precariousness indemnity if the applicable collective agreement expressly provides for it.

Subsidized Contracts

CDDs concluded under employment policy (subsidized contracts, skills pathway, etc.) do not qualify for the end-of-contract indemnity.

Students During School Holidays

CDDs concluded with young people during the school or university holidays are excluded from the scheme, provided that the contract is entirely executed during the holiday period.

Early Termination by the Employee

When the employee terminates the contract early (resignation), the end-of-contract indemnity is not owed. This also applies in cases of gross misconduct by the employee or force majeure.

Refusal of CDI by the Employee

Since the “Labor Market” law of December 2022, an employee’s refusal of a CDI offered by the employer at the end of the CDD results in the loss of the right to the precariousness indemnity, provided that the CDI offer pertains to the same position or a similar one and that the remuneration conditions are at least equivalent.

The end-of-contract indemnity is subject to the same social regime as wages. It is included in the base for all social contributions (BOSS, boss.gouv.fr):

Social security contributions (health, old age, family benefits, workplace accidents)
Unemployment and AGS contributions
AGIRC-ARRCO supplementary retirement contributions
CSG (9.20%) and CRDS (0.50%) calculated on 98.25% of the amount
Professional training contribution, apprenticeship tax

Since the end-of-contract indemnity is subject to contributions, it is included in the capped base. For the calculation of capped contributions (basic retirement, FNAL in certain cases), it adds to the remuneration of the last month and may lead to exceeding the monthly ceiling.

Example of Payroll Treatment

For an end-of-contract indemnity of €1,837 paid on the last payslip:

Contribution base: month’s salary + €1,837
CSG/CRDS: €1,837 × 98.25% = €1,804.84 × 9.70% = €175.07
The entire indemnity is subject to income tax and falls within the taxable net income

Tax Regime of the End-of-Contract Indemnity

The end-of-contract indemnity is fully subject to income tax. It is included in the employee’s taxable net income and is subject to withholding tax (PAS) at the applicable rate for the employee. There is no tax exemption for this indemnity.

Renewal and Succession of CDD

Renewal of CDD

A CDD may be renewed twice, within the limit of the total maximum duration (18 months in general). The end-of-contract indemnity is calculated on the entire duration of the contract, including renewals. It is only paid at the end of the last renewal.

Succession of Distinct CDD

In the case of succession of distinct CDDs (with respect for the break period), each contract entitles the employee to a separate end-of-contract indemnity, calculated based on the gross remuneration of the concerned contract. If contracts are reclassified as CDI by a judge, the end-of-contract indemnity is no longer due, but the employee may claim severance pay from the CDI.

Break Period Between Two CDD

The break period between two CDDs for the same position is equal to one-third of the duration of the previous contract (including renewals) if the contract lasted 14 days or more, or half the duration if the contract lasted less than 14 days. Non-compliance with the break period may lead to reclassification as CDI.

Early Termination of the CDD

Termination by the Employer

Outside of gross misconduct, force majeure, or unfitness, the early termination of a CDD by the employer entitles the employee to damages at least equal to the remuneration owed until the term of the contract, to which is added the end-of-contract indemnity calculated on the total remuneration received (including damages).

Termination by the Employee

The employee can only terminate the CDD early in the following cases:

Hiring in CDI (proof required)
Gross misconduct by the employer
Force majeure
Unfitness established by the occupational physician

In the case of early termination for hiring in a CDI, the employee must observe a notice period calculated at a rate of one day per week of contract duration (including renewals), limited to 2 weeks. The end-of-contract indemnity remains due in this case.

Mutual Agreement Termination

The parties may agree to terminate the CDD by mutual consent. In this case, the end-of-contract indemnity remains due, unless the parties agree otherwise in the termination agreement (which is, however, legally risky).

CDD with a Defined Purpose

Specificities

The CDD with a defined purpose (or mission CDD), reserved for engineers and executives, has a duration of 18 to 36 months. It ends with the completion of the purpose for which it was concluded, after a minimum notice period of 2 months.

Specific Indemnity

At the end of the CDD with a defined purpose, the employee receives an indemnity equal to 10% of the total gross remuneration. This indemnity has the same nature and social regime as the standard end-of-contract indemnity. It is not owed if the contract continues in CDI.

Treatment in DSN

Declaration of the Indemnity

The end-of-contract indemnity is declared in the DSN in the remuneration block (S21.G00.51) with the remuneration type code “002 – Uncapped gross remuneration.” It must appear in the gross remuneration of the last month of the contract.

Reporting End of Contract

The end of the CDD triggers a reporting event (block S21.G00.62) with the appropriate reason for ending the contract. The amount of the end-of-contract indemnity must appear in the remuneration elements of the last month.

Points of Vigilance for the Payroll Manager

Systematic Verification of the Right to Indemnity

Before each end of CDD, the payroll manager must verify whether the employee is entitled to the precariousness indemnity by checking:

The type of CDD (standard, seasonal, usage, subsidized, student)
The existence or not of a CDI proposal
The circumstances of the end of the contract (normal term, early termination, reason)
The applicable conventional provisions (rate of 6% or 10%)

Retention of Supporting Documents

The employer must retain supporting documents for at least 3 years (the limitation period for wage claims): employment contract, renewal amendments, CDI proposal letter if applicable, acknowledgment of receipt of the employee’s refusal.

Risks in Case of URSSAF Audit

Failure to pay the end-of-contract indemnity or incorrect calculation may lead to a URSSAF adjustment regarding unpaid contributions, along with penalties. Moreover, the employee may take the matter to the employment tribunal to demand payment of the indemnity, along with damages.

FAQ: End-of-Contract Indemnity in Payroll

Is the end-of-contract indemnity due if the CDD is converted into CDI?

No. If the CDD continues immediately as a CDI, the end-of-contract indemnity is not due. Continuing the employment relationship in CDI eliminates the precariousness situation that the indemnity aims to compensate. Note: There must be continuity in the employment relationship, without interruption.

Is the precariousness indemnity cumulative with the compensatory paid leave indemnity?

Yes, both indemnities are cumulative. The compensatory paid leave indemnity is even included in the calculation base for the end-of-contract indemnity. The employee thus receives both at the time of the final settlement.

What is the limitation period to claim the end-of-contract indemnity?

The employee has a period of 3 years from the end of the contract to claim the payment of the end-of-contract indemnity before the employment tribunal (Article L.3245-1 of the Labour Code, limitation of salary claims).

Does the end-of-contract indemnity count towards unemployment rights?

Yes. The end-of-contract indemnity being subject to unemployment contributions, it counts towards the reference salary used to calculate the unemployment benefits (ARE). It is considered in determining the daily reference salary (SJR).

Is the end-of-contract indemnity owed in the case of early termination for gross misconduct?

No. Early termination of the CDD for gross misconduct by the employee deprives them of the benefit of the end-of-contract indemnity, in accordance with Article L.1243-10 of the Labour Code. However, the employer must prove the reality of the gross misconduct (conduct attributable to the employee making it impossible to maintain the contract).

How to Calculate the End-of-Contract Indemnity for Fixed-Term Contracts in Payroll for 2025: A Comprehensive Guide