34. Fixed-term contracts: severance pay

Employees on fixed-term contracts are entitled to specific payments at the end of their employment contract, subject to certain conditions. What are these conditions? What calculation method should be used? Can a collective agreement set a rate lower than the statutory rate for end-of-contract compensation? How do periods of absence affect the amount of end-of-contract compensation?

The circumstances in which end-of-contract compensation (or precarious employment compensation) is not payable are set out exhaustively. Therefore, you will not be required to pay this compensation where the fixed-term contract was entered into:

• For seasonal work or customary employment;
• As part of an employment policy or to provide additional training, such as a professional development contract. As an exception, the end-of-contract payment must be paid at the end of a senior fixed-term contract, a standard fixed-term contract, a replacement fixed-term contract or a project-based fixed-term contract.

Nor do you have to pay the compensation in the following situations, regardless of the reason for using the fixed-term contract:

• Recruitment on a permanent contract (CDI) at the end of the fixed-term contract;
• Termination of the fixed-term contract during the probationary period. Please note that fixed-term contracts do not have a probationary period in certain cases; 
• A fixed-term contract entered into with a young person during school or university holidays;
• Refusal by the employee to accept a permanent contract (CDI) for the same or a similar post with at least equivalent pay. The offer of a permanent contract must be made before the end of the fixed-term contract to result in the loss of the precarious employment allowance;
• Early termination of the fixed-term contract by the employer due to serious misconduct on the part of the employee;
• Early termination of the fixed-term contract at the employee’s initiative;
• Termination of the fixed-term contract due to force majeure;
• Continuation of the employment relationship under a permanent contract following the reclassification of the fixed-term contract.

Unless one of these scenarios applies, you must calculate the precariousness allowance at the end of the fixed-term contract.

Please note: In the event of recruitment on a permanent contract, the precariousness allowance will be payable if the fixed-term contract and the permanent contract are separated by a period of interruption, even if only for a few days.

In the event of early termination of the fixed-term contract due to the employee’s incapacity and the impossibility of redeployment, the employee is entitled to the precariousness allowance. However, they are also entitled to compensation equal to the statutory redundancy payment (or double the statutory redundancy payment in the event of incapacity resulting from an accident at work or an occupational illness), proportional to the duration of the contract already served where the period of service is less than one year.

Finally, in the event of early termination of a fixed-term contract by mutual agreement, the compensation must be paid if the termination agreement specifies that the employer initiated the termination. If the agreement specifies that the employee is the party responsible, the compensation may not be paid; however, please note that this position may be challenged in court. In any event, the employer and the employee cannot exclude the payment of the compensation in the termination agreement.

When calculating the end-of-contract payment for a fixed-term contract, you must exclude any sums that do not constitute remuneration.

In the event of the employment contract being suspended due to sickness or maternity leave, the end-of-contract compensation must be calculated solely on the basis of the remuneration actually received during the term of the contract: if you pay a salary supplement, this is included in the calculation basis.

The approach differs in the case of an accident at work or an occupational illness: an employee who suffers a work-related accident whilst carrying out their fixed-term contract is entitled to severance pay calculated on the basis of the remuneration already received and that which they would have received until the end of their contract. You will therefore need to reconstruct their salary.

It is therefore essential that you check the collective agreement provisions applicable to your company.

To pay the end-of-contract compensation, the employer is required to pay the compensation at the end of the contract and to include it on the payslip.

Where a new fixed-term contract has been lawfully entered into following the expiry of an initial contract, the end-of-contract compensation is payable for each fixed-term contract. This compensation must then be paid at the end of each fixed-term contract.

However, if the fixed-term contract has been renewed, you will only pay the compensation at the end of the renewal period.

If two successive fixed-term contracts precede the appointment under a permanent contract (CDI), only the end-of-contract payment relating to the first fixed-term contract must be paid.

As part of remuneration, the payment is subject to all contributions and deductions based on wages.

It is also fully taxable.

If, on leaving, an employee on a fixed-term contract has not taken all their paid annual leave, you must pay them compensation for the unused paid annual leave based on the gross remuneration received during the term of the contract, including the precarious employment allowance.

If the employee has taken leave during their contract, this compensation must be calculated on a pro rata basis, taking into account the number of days of paid leave remaining to be paid in relation to the number of days of paid leave accrued over the period.