New rules on French unemployment benefits may affect negotiated terminations
New rules for the payment of French unemployment benefits, which were introduced from 1 July 2014, may have an impact on the ability of French employers to negotiate termination packages.
Waiting period for benefit payment changed
Before the new rules came into force, payment of unemployment benefits could be delayed for two main reasons: where payments were made in lieu of paid holidays or in the case of extra-statutory termination payments. A waiting period applied each time an employee received, upon termination of his employment contract, an amount higher than the legal minimum amount due. The waiting period was calculated according to the ratio between the amount paid and the daily reference salary of the employee, capped at 75 days.
Under the new rules, the waiting period is calculated according to the value of the extra-legal indemnities divided by 90 (the reference salary is therefore no longer taken into account), and the cap has been increased up to 180 days.
Most executives who negotiate a termination package will now have to wait at least six months before being able to benefit from unemployment benefits. Despite the advantageous tax and social security regime for termination indemnities in France, which remains a strong incentive for employees to negotiate upon termination, executives may in the future want to change the balance of the indemnities and salary they receive, in order to reduce the waiting period for unemployment benefit.
Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.
Circular 230 disclosure
To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.