A retirement bonus, often called a severance allowance, is paid to private sector employees who cease their professional activity because they meet all the conditions for retirement. The calculation and amount of this bonus differ depending on whether the employee leaves voluntarily or whether his employer retires him.
An employee can decide on his own initiative to retire from the moment he reaches the legal retirement age, currently 62 years for people born from the 1 st January 1955, even if he has not acquired all his rights to benefit from a pension at the full rate.
An employee who voluntarily retires is entitled to a specific bonus paid by his employer provided that he has at least 10 years of seniority in his company. The amount of his retirement bonus then depends on this seniority.
It is equal to half of his salary if the employee has at least 10 years of seniority and at most 15 years; one month of his salary for at least 15 years of seniority and at most 20 years; one and a half months' salary for a seniority of at least 20 years and a maximum of 30 years; two months' salary if he has at least 30 years of seniority.
The salary taken into account to calculate the retirement bonus is of two kinds:it is either 1/12 th the gross salary for the last 12 months preceding retirement, i.e. 1/3 of the last 3 months of salary including other exceptional compensation items recalculated on the basis of these 3 months. The most advantageous formula for the employee is used to determine the amount of his retirement bonus.
On the other hand, a collective company agreement may provide for a more favorable calculation for the employee.
A retirement bonus is considered as a salary and not as damages. As a result, it is subject to social security contributions, as well as the general social contribution (CSG) and the contribution to the reimbursement of social debt (CRDS). However, she is exempted from it in the event of voluntary retirement as part of a job protection plan (PSE) in the event of dismissal for economic reasons.
A voluntary retirement bonus is also subject to income tax.
An employer can decide to retire its employees if they meet the conditions. In this case, the employees concerned are entitled to notice similar to that which must be respected in the event of dismissal, and to a retirement indemnity, also calculated on the model of the legal indemnity for dismissal.
The amount of the legal retirement indemnity when the decision is taken by the employer depends on the seniority of the employee.
In the event of retirement decided by the employer, the premium paid is subject to social security contributions, including the CSG and the CRDS. On the other hand, it is not subject to income tax unless its amount exceeds the amount provided for by law or by a collective company agreement.
In the latter case, the retirement bonus remains non-taxable only if its amount does not exceed twice the amount of the gross annual remuneration received the year preceding the retirement (within the limit of 205,680 euros for premiums received in 2020), i.e. 50% of the amount of compensation received (within the same limit of 205,680 euros for compensation received in 2020).
