Termination packages could become more expensive in 2027 

The draft Social Security Financing Bill for 2027 plans to substantially increase the cost of mutually agreed terminations. 

Under French law, the amount of social security contributions and taxes due on amounts paid upon termination depends on the type of indemnity paid, the type of termination and the amount paid. 

Whereas statutory severance indemnities are mostly exempt from social security contributions and tax, amounts paid in addition to such severance, whether in a mutual termination agreement or a settlement agreement signed to end a dispute, could also enjoy such exemption up to a certain amount. 

The bill presented to Parliament on 1 October 2026 aims to substantially reduce the amounts which could benefit from such exemptions. Currently, the exemption from contributions can reach twice the annual social security ceiling (PASS), a reference figure used to calculate many contributions. The tax treatment varies with the type of termination but can go up to 6 times PASS. The draft bill proposes to limit such exemptions to 1 PASS for 2027, i.e. around €48,900. 

This bill is being challenged in Parliament and may evolve before the final vote. 

Key Action Points for Human Resources and In-house Counsel 

To avoid uncertainty, try to ensure that all ongoing mutual terminations and/or settlement negotiations are finalised before the end of the year.