The new social regime for the mutual termination indemnity took effect on September 1, 2023

Since September 1, 2023, a new social regime applies to the mutual termination indemnity.

The mutual termination indemnity is no longer subject to the 20% flat-rate contribution but to a single contribution of 30%.

The social regime applicable to the mutual termination indemnity has been modified, effective as from September 1, 2023.

Previously, the mutual termination indemnity was subject to two different regimes depending on whether or not the relevant employee was entitled to a retirement pension:

• For employees not entitled to a retirement pension, the mutual termination indemnity was exempt from social security contributions for the non-taxable portion of this indemnity, up to a limit set at 2 times the annual Social Security ceiling, but it was subject to the so-called general social contribution (Contribution Sociale Généralisé or “CSG”) and social debt repayment contribution (Remboursement de la Dette Sociale or “CSG”), as well as to the 20% flat-rate contribution (forfait social) paid exclusively by the employer.

• For employees entitled to a retirement pension, the mutual termination indemnity was fully subject to social security contributions, CSG and CRDS, but not to the 20% flat-rate contribution.

Effective from September 1, 2023, employers who sign a mutual termination agreement will be required to pay a so-called single contribution (contribution unique) of 30%, irrespective of whether or not the relevant employee is entitled to a retirement pension.

In addition, the employer’s contribution paid when an employee retires will be reduced from 50% to 30%. For employers, the cost of a mutual termination is now the same as the cost of retirement.