Employment law · Dismissal · settlement
Settlement after dismissal in France: when to sign it and how the payment is treated in 2026
A French settlement agreement (transaction) can only be signed after the dismissal has been notified by registered letter with acknowledgment of receipt; signed before, or after a letter handed over in person, it is void. The settlement payment follows the rules for termination payments. In 2026, the exclusion from social contributions is capped at two annual social-security ceilings, 96,120 euros, and CSG is only exempt up to the statutory or agreed severance.
- Official texts cited
- Sources checked on
- Drafted with AI assistance, our method
General legal information with official references and dated checks. It is not personalised advice: for a decision that commits you, have your situation checked by a qualified professional.
Julie by AlphaDeep
Can you sign a settlement after a dismissal for gross misconduct?
A settlement can be signed after a dismissal for gross misconduct (faute grave), provided the registered letter was sent first. No severance is due for gross misconduct (article L1234-9 of the Labour Code). If the employer proves the settlement sums compensate a loss, they stay outside contributions (Cour de cassation, 21 June 2018, no. 17-19.773); otherwise they enter the contribution base.
Read the referencesYour employer is offering a settlement after your dismissal in France: I can check the timing, the content of the protocol and how the payment is taxed and charged.
3 free questions at signup. Avoid names and sensitive information.
When can a settlement be signed after a dismissal in France?
A French settlement agreement (transaction) can only be signed after the dismissal has been notified by registered letter with acknowledgment of receipt (lettre recommandée avec avis de réception). Article L1232-6 of the Labour Code requires this letter, which states the reasons and cannot be sent earlier than two working days after the date set for the preliminary meeting (entretien préalable). Since 2003 the Cour de cassation has held that a settlement of the consequences of a dismissal is valid only once that notification has been made (labour chamber, 18 February 2003, no. 00-42.948).
A letter handed over in person is not enough. On 10 October 2018 (no. 17-10.066), the court annulled a settlement signed after a hand-delivered letter, with no registered letter first, relying on article L1231-4: nobody can waive the dismissal rules in advance. Keep the acknowledgment of receipt and compare its date with the date on the protocol. A protocol dated the day of the meeting, or offered with the meeting invitation, fails this test.
Code du travail : article L1232-6Cour de cassation (French Supreme Court), labour chamber, 18 February 2003, no. 00-42.948Cour de cassation (French Supreme Court), labour chamber, 10 October 2018, no. 17-10.066Code du travail : article L1231-4
Where does your payment sit against the 2026 limits?
Enter the severance and the settlement payment offered: the worksheet places the total against the 2026 limits and shows which rule applies to each band. It does not compute your tax and does not say whether the offer is fair.
Fictional example · Your payments against the 2026 limits
The settlement can be signed after the registered letter. The total falls into the bands below: the part outside contributions never exceeds 2 PASS (96,120 euros), and CSG spares only the statutory or agreed amount (article L136-1-1 of the Social Security Code). Have the net amount checked before signing.
- Total termination payments
- €58,000.00
- Part at most excluded from contributions (2 PASS limit, 96,120 euros)
- €58,000.00
- Part subject to contributions above 2 PASS
- €0.00
- Part exempt from CSG and CRDS (statutory or agreed amount)
- €18,000.00
- Part subject to CSG and CRDS
- €40,000.00
- Part of the total under the 6 PASS tax cap (288,360 euros)
- €58,000.00
- Amount above 10 PASS (480,600 euros): if above 0, everything is charged
- €0.00
- Check that the date on the acknowledgment of receipt is earlier than the protocol date.
- Have the severance and the settlement payment (€40000) shown as separate amounts.
- Count CSG and CRDS on €40,000.00 to estimate the net amount.
- For income tax, compare €58,000.00 with twice last year’s gross pay and with half of the total.
This worksheet places the amounts in the 2026 legal bands. It does not compute your exact tax or contributions, which depend on your pay and the payment date.
Which amounts set the 2026 limits?
Every limit is a multiple of the annual social-security ceiling (PASS), revised each 1 January.
- Limit for excluding termination payments from contributions (2 PASS)
- €96,120
- 2026 · BOSS, termination payments
- Income-tax exemption cap (6 PASS), payments made in 2026
- €288,360
- 2026 · Service-public.fr, page F408
- Threshold above which everything bears contributions (10 PASS)
- €480,600
- 2026 · BOSS, termination payments
What must a French settlement protocol contain to be valid?
The settlement protocol (protocole transactionnel) must be in writing and record mutual concessions (concessions réciproques): the employer gives more than it already owes, and the employee gives up taking the settled matters to court (article 2044 of the Civil Code). A sum that merely repeats the severance already due is not a concession by the employer.
Check at least these points before signing:
- the date and method of notification of the dismissal (registered letter), both earlier than the signature;
- the dispute itself: the contested ground, the sums claimed and each side’s position;
- the settlement payment (indemnité transactionnelle), shown separately from the statutory or agreed severance;
- what the employee waives, in clear words, since the settlement bars any claim with the same subject (article 2052);
- the payment date and terms, and the dated signatures of both parties.
Code civil : article 2044Code civil : article 2052Code du travail : article L1232-6
Is a French settlement payment taxable in 2026?
Partly: the settlement payment is added to the severance payment, and the total is free of income tax only within the limits of article 80 duodecies of the French Tax Code (CGI). The statutory or agreed severance (indemnité légale ou conventionnelle) is fully exempt. Above it, the exemption is limited to the higher of two amounts: twice the gross annual pay of the calendar year before the termination, or half of the payment received.
That second limit is capped at six times the annual social-security ceiling (plafond annuel de la sécurité sociale, PASS) in force on the payment date. According to Service-public.fr (page checked 15 April 2026), the cap is 288,360 euros for payments made in 2026, against 282,600 euros for payments received in 2025.
Code général des impôts : article 80 duodeciesService-public.fr: income tax on end-of-contract, dismissal and retirement payments (F408, in French)
Settlement or mutual termination: what differs?
| Point | Settlement after dismissal | Mutual termination (rupture conventionnelle) |
|---|---|---|
| What ends the contract | The dismissal, already notified; the settlement deals with its consequences | The agreement signed by both parties |
| When it is signed | After the registered dismissal letter | Before any termination, during the contract |
| Outside review | None: a written deal with mutual concessions is enough | Approval (homologation) by the labour authority, 15 working days |
| Cooling-off period | No withdrawal period provided | 15 calendar days after signing |
| Minimum amount | No minimum, but a real concession from the employer | At least the statutory severance |
| Employer levy on the exempt part | No forfait social on the part excluded from contributions | 40 % employer contribution |
| Later claims | No claim on the same subject, unless the deal is void | Labour court claim within 12 months of approval |
Code civil : article 2044Code du travail : article L1232-6Code du travail : article L1237-13Code du travail : article L1237-14Code de la sécurité sociale : article L137-15Code de la sécurité sociale : article L137-12Code civil : article 2052
What does article 2044 of the French Civil Code say?
La transaction est un contrat par lequel les parties, par des concessions réciproques, terminent une contestation née, ou préviennent une contestation à naître.
Ce contrat doit être rédigé par écrit.
In plain English: A settlement is a written contract in which each side gives something up to close the dispute arising from the dismissal. If the employer pays only what it already owes, there is no concession and therefore no valid settlement.
Which social contributions and CSG apply to the payment?
Social contributions are not charged on the tax-exempt part of the payment, up to two PASS, 96,120 euros in 2026 (article L242-1, II, 7° of the Social Security Code). Above ten PASS, 480,600 euros, the whole payment is subject from the first euro. The official social-security guidance (BOSS) applies these limits to the total: the severance and the settlement payment are added together.
The general social contributions (CSG and CRDS) are stricter. Article L136-1-1 exempts only the lower of two amounts: the statutory or agreed severance, and the part excluded from contributions. Every euro of settlement above the statutory or agreed amount therefore bears CSG and CRDS. According to the BOSS 2026 example, with 50,000 euros of agreed severance and 115,000 euros of settlement payment, only 46,120 euros of the settlement part stay outside contributions.
Code de la sécurité sociale : article L242-1BOSS: termination payments, settlement section (in French)Code de la sécurité sociale : article L136-1-1
Can a signed French settlement be challenged?
Yes, but only on specific grounds: once valid, a settlement bars any court claim with the same subject (article 2052 of the Civil Code). The first ground is timing. A settlement signed before the dismissal was notified by registered letter, or after a letter handed over in person, is void (Cour de cassation, 10 October 2018, no. 17-10.066).
The second ground is content. An agreement with no real concession from one side does not meet the definition in article 2044. Nullity is claimed before the labour court (conseil de prud’hommes). Gather the dismissal letter and its acknowledgment of receipt, the dated protocol and the messages exchanged before signing.
Code civil : article 2052Cour de cassation (French Supreme Court), labour chamber, 10 October 2018, no. 17-10.066Code civil : article 2044
What else should you know about a French settlement payment?
Can you sign a settlement after a dismissal for gross misconduct?
A settlement can be signed after a dismissal for gross misconduct (faute grave), provided the registered letter was sent first. No severance is due for gross misconduct (article L1234-9 of the Labour Code). If the employer proves the settlement sums compensate a loss, they stay outside contributions (Cour de cassation, 21 June 2018, no. 17-19.773); otherwise they enter the contribution base.
Code du travail : article L1234-9Cour de cassation, 2nd civil chamber, 21 June 2018, no. 17-19.773Cour de cassation, 2nd civil chamber, 15 March 2018, no. 17-11.336
Does the employer pay the forfait social on a settlement payment?
The forfait social, an employer levy, does not apply to the part of a dismissal payment excluded from contributions (article L137-15, 3° of the Social Security Code), and the BOSS applies that treatment to the settlement payment that tops it up. The 40 % employer contribution in article L137-12 targets mutual termination and retirement, not a settlement after dismissal.
Code de la sécurité sociale : article L137-15BOSS: termination payments, settlement section (in French)Code de la sécurité sociale : article L137-12
Does a settlement stop you from going to the labour court?
A valid French settlement stops both the employee and the employer from bringing a court claim with the same subject (article 2052 of the Civil Code). The employee can still go to the labour court to have it declared void, for example if it was signed before the registered dismissal letter (Cour de cassation, 18 February 2003). What the waiver covers depends on how the protocol is worded.
Code civil : article 2052Cour de cassation (French Supreme Court), labour chamber, 18 February 2003, no. 00-42.948
What changes in 2027 for termination payments?
French limits on termination payments are expressed in PASS, revised every year (article L241-3 of the Social Security Code). For income tax, the 6 PASS cap uses the PASS in force on the payment date (article 80 duodecies CGI): a payment made in January 2027 follows the 2027 PASS. Also check the 2027 finance and social-security acts once published in the Journal officiel.
Code de la sécurité sociale : article L241-3Code général des impôts : article 80 duodecies
Which French texts does this settlement guide rely on?
- Code du travail : article L1232-6République française / DILA : Légifrance
- Cour de cassation (French Supreme Court), labour chamber, 18 February 2003, no. 00-42.948République française / DILA : Légifrance
- Cour de cassation (French Supreme Court), labour chamber, 10 October 2018, no. 17-10.066République française / DILA : Légifrance
- Code du travail : article L1231-4République française / DILA : Légifrance
- Code civil : article 2044République française / DILA : Légifrance
- Code civil : article 2052République française / DILA : Légifrance
- Code général des impôts : article 80 duodeciesRépublique française / DILA : Légifrance
- Service-public.fr: income tax on end-of-contract, dismissal and retirement payments (F408, in French)République française / DILA : Service-public.fr
- Code du travail : article L1237-13République française / DILA : Légifrance
- Code du travail : article L1237-14République française / DILA : Légifrance
- Code de la sécurité sociale : article L137-15République française / DILA : Légifrance
- Code de la sécurité sociale : article L137-12République française / DILA : Légifrance
- Code de la sécurité sociale : article L242-1République française / DILA : Légifrance
- BOSS: termination payments, settlement section (in French)Bulletin officiel de la sécurité sociale (BOSS)
- Code de la sécurité sociale : article L136-1-1République française / DILA : Légifrance
- Code du travail : article L1234-9République française / DILA : Légifrance
- Cour de cassation, 2nd civil chamber, 21 June 2018, no. 17-19.773République française / DILA : Légifrance
- Cour de cassation, 2nd civil chamber, 15 March 2018, no. 17-11.336République française / DILA : Légifrance
- Code de la sécurité sociale : article L241-3République française / DILA : Légifrance
Texts cited last checked: 30 October 2026