Question 1

What is the legal severance pay formula?

Accepted Answer

Legal severance pay is calculated as follows: 1/4 month's salary per year of seniority for the first 10 years, then 1/3 month's salary per year beyond 10 years. The reference salary is the more favorable between the average of the last 12 months and the average of the last 3 months (including prorated bonuses). Minimum seniority required is 8 months of uninterrupted service. This severance is a legal minimum; the collective agreement may provide for higher amounts.

Question 2

Is severance pay taxable?

Accepted Answer

Legal severance pay is exempt from income tax up to the legal or conventional amount. Beyond that, it is exempt up to the higher of: 2 times the gross annual salary of the previous year, or 50% of total severance, or the legal or conventional severance amount. For social contributions, severance is exempt up to 2 times the annual Social Security ceiling (PASS).

Question 3

What types of dismissal entitle to severance pay?

Accepted Answer

Legal severance pay is due for any dismissal except gross or serious misconduct: economic dismissal, personal dismissal (professional insufficiency, unfitness), mutual termination agreement. In case of gross misconduct, the employee loses the right to severance pay but retains the right to paid leave compensation. Serious misconduct also results in loss of severance. Fixed-term contract employees are not entitled to severance pay but to an end-of-contract bonus (precariousness premium).

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