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Retirement indemnities
Retirement indemnities: a debt your company already owes, and one it can fund in advance.
Every employee who retires is entitled to an indemnity set by law or by the collective agreement. Booked as a provision on the balance sheet, it is not deductible from profit. Funded through an insurance contract, the premiums are deductible, and on the day of departure, the insurer pays.
The legal minimum
What the law requires, by length of service.
| Length of service with the company | Minimum indemnity on voluntary retirement |
|---|---|
| 10 years | Half a month's salary |
| 15 years | 1 month's salary |
| 20 years | One and a half months' salary |
| 30 years | 2 months' salary |
The collective agreement or employment contract often provides for more: the most favourable amount is the one due, and the one to fund. Retirement at the employer's initiative, possible from age 70, gives entitlement to at least the dismissal indemnity (Article L1237-7 of the Labour Code).
Provision or contract
The same debt, two ways to meet it.
| What changes | Provision on the balance sheet | Insurance contract |
|---|---|---|
| Taxable profit | No deduction until the indemnity is paid (Article 39, 1-5° of the French Tax Code) | Premiums deductible, if the indemnity is provided for by the collective agreement or a company agreement |
| On the day of departure | The company pays the indemnity out of its cash | The insurer pays it, out of the contract |
| On the balance sheet | A provision, or a disclosure in the notes (Article L123-13 of the Commercial Code) | The contract's assets are offset against the liability |
The contract is sized on the basis of the collective agreement, salaries and the age pyramid: first, we cost the departures expected over the coming years.
For the employee
What the departing employee receives.
The indemnity is taxable and subject to social security contributions, like a salary. Only departures under a job-protection plan (PSE) are exempt (Article 80 duodecies of the French Tax Code).
Exempt from income tax up to the highest of three amounts: the statutory or collectively agreed amount, twice the previous year's pay, or 50% of the indemnity, within the limit of €240,300 in 2026 (Article 80 duodecies of the French Tax Code).
Frequently asked questions
What clients ask us.
Must my company record this liability on its balance sheet?
Not necessarily in the individual accounts: a provision is the recommended method, failing which the liability is disclosed in the notes (Article L123-13 of the Commercial Code). It is calculated employee by employee, based on length of service, salary and the probability of still being with the company at retirement (ANC recommendation no. 2013-02).
Voluntary retirement or retirement at the employer's initiative: which costs the company more?
Retirement at the employer's initiative. The indemnity is at least the dismissal indemnity, and the employer pays a 40% contribution on the portion exempt from social security contributions, for departures since 1 January 2026 (Article L137-12 of the Social Security Code). Voluntary retirement costs the indemnity set by the collective agreement, plus the social security contributions due on a salary.
How much should be set aside?
An employee leaving after 30 years' service on a salary of €4,000 receives at least €8,000 under the legal minimum, more if the collective agreement provides for it. Added up over the departures of the next ten years, this is the amount the contract must cover. The simulator gives a first order of magnitude.
