• New Social Security Contributions on Indemnities Paid To Employees in the Context of the Homologated Termination by Mutual Agreement (Rupture Conventionnelle Homologuée)
  • December 27, 2012
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • The law on financing the social security system for 2013 has just been published.

    Article 21 of the law substantially changes the social security treatment of an indemnity paid under a homologated termination by mutual agreement by providing that the portion of such indemnity which is less than 74,064 Euros in 2013 will be subject to a specific social security contribution, at a flat rate of 20%. This specific contribution is exclusively an employer’s contribution.

    Up to the present, the homologated termination by mutual agreement indemnity benefited from the same favourable social security treatment as dismissal indemnities. The only exception was the case of employees having reached the age qualifying them for requesting the payment of a pension (currently 62 years), for which such indemnities were fully subject to social security contributions at full rate.

    As from 1st January 2013, the indemnities paid under an homologated termination agreement will therefore be subject to additional social security contributions. This may result in certain cases in such a termination being more costly than a dismissal followed by a settlement agreement.