The final settlement upon retirement includes all the amounts that the employer must pay to the employee upon the definitive termination of the employment contract. This document details each line: last salary, departure indemnity, unused paid leave, prorated bonuses. Calculating it correctly requires mastering the reference salary base, seniority rules, and specifics related to the end of the career.
Reference salary and seniority: the two variables that determine everything
Before applying any formula, two parameters must be established. The first is the reference salary. Two calculation methods coexist: the average of the last twelve months of gross salary, or the average of the last three months (including prorated annual or exceptional bonuses). The method most favorable to the employee applies.
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The second parameter is seniority. It runs from the date of entry into the company until the end of the notice period, whether it is served or not. Periods of suspension of the contract (sickness, parental leave) count according to the rules of the Labor Code or the applicable collective agreement.
A common trap concerns employees who have transitioned to part-time work at the end of their careers, particularly in the context of a gradual retirement. The reference salary calculated over the last three or twelve months then reflects a reduced part-time salary. To avoid an abnormally low indemnity, the collective agreement may impose a prorated calculation between full-time and part-time periods. Checking this point in the applicable branch agreement remains the first step before any calculation.
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To calculate the retirement final settlement accurately, this distinction between actual salary received and reconstructed reference salary can sometimes significantly change the final amount.
Retirement indemnity: voluntary departure or employer-initiated retirement
The end-of-career indemnity does not follow the same rules depending on whether the employee leaves voluntarily or is retired by the employer. This distinction alters both the scale and the tax treatment.
Voluntary departure of the employee
When the employee requests to leave, the minimum legal indemnity depends on seniority. The Labor Code sets a progressive scale: half a month’s salary after ten years, one month after fifteen years, one and a half months after twenty years, and two months after thirty years. The collective agreement or a company agreement may provide for higher amounts.
This indemnity is subject to income tax and social contributions in its entirety.
Employer-initiated retirement
The employer can only retire an employee involuntarily from a certain age, under certain conditions. In this case, the indemnity cannot be less than the legal dismissal indemnity, calculated based on a quarter of a month’s salary per year of seniority for the first ten years, then a third of a month per year thereafter.
The tax regime is more favorable: part of the retirement indemnity may benefit from exemptions from income tax and social contributions, within certain limits.
Other items in the retirement final settlement
The departure indemnity constitutes only a fraction of the settlement. Several other items are added, and forgetting them leads to underestimating the amount due.
- The compensatory indemnity for paid leave covers the days of leave accrued but not taken by the termination date. It is calculated using the most advantageous method between one-tenth of the total gross remuneration received during the reference period and the maintenance of salary.
- The prorated bonuses (thirteenth month, seniority bonus, vacation bonus) are calculated to the day up to the contract end date. Each bonus must appear on a separate line of the receipt.
- The balance of the last salary covers the period worked between the last payday and the actual departure date, including the notice period.
- Unpaid overtime or additional hours, unused compensatory rest, and any adjustments to contributions are also included in the calculation.
Monetization of the time savings account at the time of departure
Employees with a time savings account (CET) face a choice at retirement: use the saved rights to finance a career end leave or request their conversion into cash. In the latter case, the amount is included in the final settlement.
The social and tax regime of this monetization depends on the nature of the saved days. Some days (beyond the legal minimum of leave) may benefit from partial exemptions from contributions within limits set by URSSAF. Branch agreements concluded after the 2023 pension reform, particularly in metallurgy, explicitly provide for this payment at the end of the career and its inclusion in the final settlement slip.
Ignoring this line can represent a significant loss for employees who have accumulated CET rights over several years.
Dispute period and legal value of the receipt
The receipt for the final settlement is a document that the employee signs to acknowledge receipt of the amounts paid. Its signature is not mandatory for the termination to be valid, but it triggers a six-month period during which the employee can contest the receipt by registered letter.
After this period, the receipt becomes liberating for the employer only for the amounts mentioned therein. An item omitted from the receipt (unlisted bonus, unconverted CET days) remains contestable beyond six months, within the limits of the common law prescription period applicable to wage claims.
Detailing each line of the receipt thus protects both parties. A global receipt mentioning a single amount without itemization does not produce the same liberating effect as a document itemized line by line.
The employee also receives the work certificate and the France Travail certificate, two documents distinct from the receipt but provided at the same time. The absence of one of these three documents may engage the employer’s liability.