The final settlement upon retirement does not only include the severance pay. This document summarizes all amounts owed by the employer to the employee upon termination of the employment contract: remaining salary, unused paid leave, bonuses, and departure indemnity. Each line can be subject to errors or omissions, which can have significant financial consequences for the employee.
Reference salary for the final settlement upon retirement: the most common point of contention
The calculation of the departure indemnity is based on a reference salary. The Labor Code provides for two calculation methods, and the one most favorable to the employee must be retained: either the average of the last twelve months of gross salary, or one-third of the last three months.
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For employees who have experienced a phased retirement (senior part-time, professional transition leave), the reference salary may be artificially low if the last months worked at reduced hours are considered. Some company agreements provide for a reconstruction of the full-time salary for the calculation of the indemnity, but this is not systematic.
Accounting firms and HR advisors report significant discrepancies to the detriment of the employee when this verification is not done. Before signing anything, it is essential to compare the two calculation bases and check if the applicable collective agreement provides for more favorable provisions than the legal minimum. A detailed guide on the final settlement upon retirement on Athomedia helps structure this verification step by step.
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Variable elements overlooked in the calculation of the final settlement
The retirement indemnity draws attention, but the final settlement includes other lines that are often underestimated or omitted. Feedback from HR professionals shows an increase in labor disputes on this subject.
Here are the most frequently contested elements:
- Exceptional bonuses and the 13th month prorated for the time of presence during the calendar year, which some employers do not include in the final calculation
- Overtime worked but not yet paid at the time of contract termination
- The compensatory indemnity for paid leave, which must cover all accrued and unused days, including those carried over from previous years
- The compensatory indemnity for notice, if the employer exempts the employee from serving their retirement notice
A receipt for the final settlement signed without verifying these lines can be contested within six months. After this period, the document becomes liberating for the employer. Each line of the receipt must be verified before signing, and the employee has the right to request a reflection period.
Seniority and legal retirement departure indemnity: applicable scale
The legal indemnity for voluntary retirement departure is conditioned on a minimum seniority of ten years in the company. The legal scale sets the amount based on the duration of presence:
| Seniority | Legal indemnity (in months of reference salary) |
|---|---|
| 10 to 14 years | 0.5 months |
| 15 to 19 years | 1 month |
| 20 to 29 years | 1.5 months |
| 30 years and more | 2 months |
This scale constitutes a minimum. The collective agreement or a company agreement may provide for higher amounts, sometimes significantly so. It is essential to systematically compare the legal scale with that of the professional branch. In the case of retirement initiated by the employer, the minimum indemnity is that of the legal dismissal indemnity, which is generally more advantageous.
Voluntary departure or retirement initiated by the employer: a distinction that changes everything
The nature of the departure modifies both the minimum amount of the indemnity and its tax regime. A voluntary departure entitles the employee to the departure indemnity, which is subject to social contributions and income tax. A retirement initiated by the employer entitles the employee to an indemnity at least equal to the legal dismissal indemnity, with a regime of partial exemption from contributions and tax.
The confusion between these two regimes is common and can be costly for the employee who does not claim the correct amount.
Taxation of the final settlement and retirement departure date
Since the pension reform of 2023, the choice of the exact departure date has a direct tax impact on the final settlement. The amounts received (indemnity, paid leave, bonuses) are added to the income of the calendar year of payment. An employee leaving in December accumulates these amounts with eleven months of salary, which can cause a jump in the tax bracket.
Delaying the departure by a few weeks, for example to January, allows the departure indemnity and paid leave to be shifted to the following calendar year, where salary income will be zero or very low. Tax experts illustrate this mechanism with concrete cases where a few days of difference represent several thousand euros less in tax.
Social contributions on voluntary departure indemnity
The voluntary retirement departure indemnity is fully subject to social contributions (CSG, CRDS, social security contributions) from the first euro. It is also included in the taxable income base. The employee can request the quotient system to mitigate the progressivity of the tax, provided that the amount exceeds the average of the taxable net income of the previous three years.
In the case of retirement initiated by the employer, a portion of the indemnity is exempt from contributions and tax, within the limits set by current legislation.
The final settlement upon retirement deserves a line-by-line reading. The most costly errors rarely concern the indemnity itself but rather the overlooked variable elements and the tax timing of the payment. Verifying the reference salary retained, checking each component of the receipt, and anticipating the departure date remain the three concrete levers to avoid leaving money on the table.