How much does a negotiated termination cost the employer in 2026?

Minimum severance pay, employer contribution increased to 40%, potential social security contributions, and negotiation costs: since January 1, 2026, employers must more carefully examine the overall budget of a negotiated termination agreement. The severance pay alone is therefore insufficient to measure the cost of the negotiated termination for the company.

A negotiated termination agreement allows an employer and an employee with a permanent contract to mutually agree on the termination of the employment contract. It offers well-known advantages: it does not require a reason for dismissal, allows for negotiation of the terms of departure, and generally entitles the employee to unemployment benefits.

However, it is neither free nor risk-free. Its cost even increased significantly in 2026. The specific employer contribution applicable to the portion of the compensation excluded from the social security contribution base rose from 30% to 40%.

This increase does not mean that every negotiated termination automatically costs the employer "the severance pay plus 40%". The basis for the contribution, the amount potentially subject to social security contributions, and the terms of the negotiation must be examined in each case.

1. How to calculate the minimum severance pay for a negotiated termination agreement?

The employee must receive a specific severance payment. Its amount is freely negotiated, but it cannot be less than the applicable minimum.

This minimum corresponds, depending on the situation, to the statutory severance pay or the more favorable amount stipulated in the applicable collective bargaining agreement. It is therefore important not to rely solely on the calculation provided by the Labor Code: the collective bargaining agreement, a company agreement, the employment contract, or, in some cases, customary practice may provide for a higher severance payment.

As a general rule, the statutory severance pay is calculated based on the employee's reference salary and length of service:

– a quarter of a month's salary per year of seniority up to ten years;

– one third of a month's salary per year of seniority beyond ten years.

The reference salary is determined according to the formula most favorable to the employee, taking into account in particular the monthly average of the last twelve months or one-third of the last three months, with the pro-rata consideration of annual or exceptional bonuses.

Seniority must be assessed on the effective date of termination of the contract, not on the date the agreement was signed. When a year of seniority is incomplete, the severance pay is calculated proportionally to the number of full months.

The online Labor Code simulator can provide an initial estimate of the cost of a negotiated termination agreement. However, it does not replace the need to verify the collective bargaining agreement and the specific details of the employee's compensation. The collective bargaining agreement must be carefully examined: it may provide for a more favorable severance payment, the application of which is not always straightforward based solely on the general formula contained in the agreement.

2. Minimum compensation and negotiated compensation: two amounts to distinguish in the cost of a mutually agreed termination for the employer in 2026

The minimum severance pay is a floor, not a set amount for a negotiated termination. Employer and employee can agree on a higher amount, often referred to as "above-legal" or "above-contractual" severance pay.

This supplement may depend on, among other things:

– the initiative for the break;

– the employee's seniority and level of responsibility;

– circumstances preceding the negotiation;

– the existence of a dispute or a risk of litigation;

– the length of time the employee will remain on the payroll;

– reciprocal concessions obtained within the framework of a broader negotiation.

The negotiated sum should therefore never be fixed without first assessing its social security and tax implications. A €10,000 increase in compensation does not necessarily represent an additional cost limited to €10,000 for the company.

It is also important to distinguish severance pay from other sums due upon departure: last month's salary, compensation for accrued vacation time, bonuses earned, non-compete clause payments, or back pay. These sums are subject to their own rules and must be included in the exit budget.

3. The specific employer contribution is increased to 40% in 2026

Since January 1, 2026, the employer's contribution rate has been set at 40%, compared to 30% previously. This new rate applies to severance payments made under negotiated terminations where the contract ends after January 1, 2026, regardless of when the agreement was signed or approved.

This contribution is provided for by ArticleL. 137-12 of the Social Security Code. It applies to the portion of the negotiated termination payment excluded from the social security contribution base. It is payable by the employer, even when the employee is entitled to a retirement pension.

The increase is significant. For a social security contribution-exempt base of €20,000:

– the contribution represented 6,000 euros at a rate of 30%;

– it now represents 8,000 euros at a rate of 40%;

– the additional cost resulting from the reform therefore amounts to 2,000 euros.

The reform directly increases the cost of negotiated departures. However, it does not, on its own, call into question the value of mutually agreed terminations: this must be assessed in light of the cost and risks of alternative solutions.

This increase must now be taken into account from the outset of negotiations, as it directly alters the cost of the negotiated termination borne by the employer.

4. How to determine the cost of the negotiated termination and the basis for the 40% contribution?

The contribution does not apply indiscriminately to all sums paid to the employee. Its basis corresponds to the portion of the negotiated termination indemnity that is excluded from the social security contribution base.

In 2026, the exemption from social security contributions is regulated. When the compensation exceeds the legal or contractual minimum, the exempt portion is determined in particular with regard to the portion exempt from income tax, up to a limit of twice the annual social security ceiling, i.e. 96,120 euros in 2026.

The portion not exempted is subject to social security contributions according to the applicable rules. The CSG (General Social Contribution) and CRDS (Contribution to the Repayment of the Social Debt) are also subject to their own limits. Finally, when the compensation reaches ten times the annual social security ceiling, i.e., €480,600 in 2026, it is subject to social security contributions from the first euro.

It follows that a reliable calculation requires distinguishing at least three compartments:

1. the portion exempt from social security contributions, subject to the employer's contribution of 40%;
2. the portion possibly subject to social security contributions;
3. the other sums paid upon termination, subject to their own specific rules.

The employee's situation with regard to retirement, income tax, CSG (General Social Contribution), and CRDS (Contribution to the Repayment of the Social Debt) must also be verified. This determines the amount actually received by the employee and can, therefore, influence the terms of the negotiation.

5. Three examples of the cost of a negotiated termination for the employer in 2026

The following examples are intentionally simplified. They assume that the entire allowance shown is excluded from the social security contribution base and is therefore subject to the employer's 40% contribution. They do not take into account paid leave, bonuses, outstanding wages, or consulting fees.

Examples of calculating the cost of a negotiated termination in 2026

Example 1: compensation of 5,000 euros

– compensation paid to the employee: 5,000 euros;

– Employer contribution of 40%: 2,000 euros;

– minimum total cost to the employer: 7,000 euros.

At the previous rate of 30%, the cost would have been 6,500 euros. The 2026 increase results in an additional cost of 500 euros.

Example 2: compensation of 20,000 euros

– compensation paid to the employee: 20,000 euros;

– Employer contribution of 40%: 8,000 euros;

– minimum total cost to the employer: 28,000 euros.

The additional cost compared to the 30% rate amounts to 2,000 euros.

Example 3: compensation of 50,000 euros

– compensation paid to the employee: 50,000 euros;

– Employer contribution of 40%: 20,000 euros;

– minimum total cost to the employer: 70,000 euros.

The additional cost resulting from the increase from 30% to 40% amounts to 5,000 euros.

These simulations illustrate a simple formula when the compensation is fully exempt from contributions: Assuming the compensation is fully exempt from social security contributions: cost of the compensation for the employer = compensation paid × 1.40.

However, this formula should not be applied mechanically when only part of the compensation is exempt or when other sums are paid to the employee.

6. Can the cost of a negotiated termination for the employer be compared with that of a dismissal?

The increased cost of a negotiated termination agreement may lead employers to question the comparative advantages of this method of departure versus dismissal. However, the comparison cannot be limited to the amount of compensation.

Dismissal requires a genuine and serious reason and adherence to a specific procedure. Depending on the reason given, it may entitle the employee to severance pay, notice pay, or compensation in lieu of notice, as well as other sums. It also exposes the company to the risk of legal action before the labor court.

A negotiated termination agreement, on the other hand, requires the free agreement of both parties. It often allows for the establishment of a negotiated departure date and terms, without the need for a statutory notice period. However, it does not preclude all disputes, particularly when the employee's consent is contested or when the agreement was reached in a contentious context.

The right approach to arbitration therefore consists of comparing:

– the immediate cost of each solution;

– the cost of maintaining the employee during the procedure and, where applicable, during the notice period;

– the amount requested to reach an agreement;

– the strength of the reason that could potentially justify a dismissal;

– the risk and foreseeable cost of litigation;

– the operational consequences of the departure schedule.

A negotiated termination agreement, while more expensive in the short term, can still be economically rational if it secures and organizes the departure. Conversely, it should not be used to buy, at any cost, the disappearance of a managerial or legal difficulty that has not been adequately analyzed.

7. In what situations does the 2026 increase actually change the arbitrage?

The impact of the reform is limited when the compensation is low. It becomes significantly more noticeable for employees with long service, high salaries, or strong negotiating power.

It must be anticipated, in particular:

– when a negotiated departure involves several tens of thousands of euros;

– when a company is considering several individual terminations over a short period;

– when the negotiation envelope has been calculated as a gross amount paid to the employee, without including the employer's cost;

– when a negotiated termination is envisaged close to retirement age;

– when several modes of termination are legally conceivable;

– when the departure is part of a broader reorganization of the company.

For ten negotiated terminations, each with a tax-exempt severance payment of €20,000, the employer's contribution now reaches €80,000, compared to €60,000 under the previous rate. The rate change alone thus represents an overall additional cost of €20,000.

Furthermore, a series of negotiated terminations must not be used to circumvent the rules applicable to collective redundancies or collective negotiated terminations. The context and purpose of the operation must be examined before initiating individual negotiations.

8. What precautions should be taken before proposing or accepting a negotiated termination agreement?

Before making any proposal, the employer should establish a complete simulation and define a negotiation strategy.

In particular, it is necessary to:

1. verify that the employee has a permanent employment contract and that the individual negotiated termination is legally appropriate;
2. determine the minimum compensation by checking the collective agreement;
3. calculate the social security and tax treatment of the envisaged compensation;
4. integrate the employer's 40% contribution into the overall budget;
5. inventory any other sums due as of the departure date;
6. analyze potential disputes and employment tribunal risks;
7. preserve the freedom of consent of the employee and the traceability of the negotiation;
8. respect the interviews, the withdrawal period and the approval procedure;
9. examine separately, where necessary, concessions intended to end a separate dispute and the advisability of a settlement agreement;
10. check the specific situation of protected employees, for whom administrative authorization is required.

After signing the agreement, each party has a 15-day cooling-off period. The application for approval can only be submitted after this period has expired. The administration then has 15 working days to process the application; its silence constitutes approval. The termination date stipulated in the agreement cannot be before the day after approval.

When the parties also wish to resolve a separate dispute concerning the performance of the employment contract, the possibility of a separate settlement agreement should be considered. However, a settlement reached after the approval of the negotiated termination agreement cannot be intended to render the termination itself uncontested.

The termination agreement should not be signed hastily. An error regarding the minimum severance pay can prevent its approval or jeopardize the termination. Pressure exerted on the employee, fraud, or a vitiation of consent can also lead to its invalidation.

Anticipate the cost rather than discovering it after signing

In 2026, a negotiated termination agreement remains a useful tool for organizing a mutually agreed separation. However, the increase in the employer's contribution to 40% necessitates considering the overall employer cost, rather than solely the net severance pay offered to the employee.

The assessment of the cost of the negotiated termination must therefore precede any quantified proposal sent to the employee.

Each transaction must involve three analyses: calculating the minimum severance pay, precisely determining its social security implications, and assessing the legal risks associated with the negotiation. This allows for an accurate determination of the cost of the negotiated termination for the employer.

ARST Avocats' social law department assists companies in assessing the cost of a negotiated termination, defining their negotiation strategy and securing the procedure until its approval.

Useful references

– Article L. 137-12 of the Social Security Code.

– Articles L. 1237-11 to L. 1237-16 of the Labour Code.

– Articles R. 1234-1 to R. 1234-5 of the Labour Code.

– Official Social Security Bulletin, section “Severance pay”.

– Urssaf, “Compensation for negotiated terminations”.

– Service-public.fr, “How to calculate the specific severance payment for a negotiated termination agreement?”.

– Digital labor code, simulator for severance pay.