The end-of-career indemnity (IFC) is paid by the employer to the employee who leaves the company to retire. Often referred to as a retirement departure bonus, this amount depends on seniority, the mode of departure, and the applicable collective agreement. Its tax and social regime varies depending on whether the employee leaves voluntarily or is retired by their employer.
Voluntary departure or retirement: two distinct regimes for the end-of-career bonus
The confusion between voluntary departure and retirement remains common. Both situations entitle the employee to an indemnity, but the access conditions, calculation, and taxation differ in almost every aspect.
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An employee who decides to retire must be on a permanent contract and have at least ten years of seniority in the company to receive the legal indemnity for voluntary departure, as provided by Article L 1237-9 of the Labor Code. Below this threshold, no legal indemnity is due (the collective agreement may provide for better terms).
In the case of retirement imposed by the employer, no minimum seniority condition is required for the legal indemnity. Article L 1237-7 of the Labor Code then provides for the payment of an indemnity at least equal to the legal dismissal indemnity. To explore this topic further, a guide on the end-of-career bonus details the applicable scales according to each situation.
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The employer can only retire an employee from a certain age and subject to a specific procedure. The employee, on the other hand, can leave as soon as they meet the conditions for opening their old-age pension rights.
Calculation of the end-of-career indemnity: reference salary and seniority
The amount of the indemnity is based on two variables: the reference salary and the employee’s seniority. The reference salary considered is the most favorable between the average of the last twelve months of gross pay and one-third of the last three months.
Legal scale in the case of voluntary departure
The Labor Code sets a progressive scale. The amount increases in increments of seniority:
- Half a month’s salary after ten years of seniority
- One month’s salary after fifteen years
- One and a half months after twenty years
- Two months’ salary after thirty years of seniority
Scale in the case of retirement
The retirement indemnity cannot be less than the legal dismissal indemnity. This minimum is more advantageous than the scale for voluntary departure, especially for employees with little seniority. The collective agreement or a company agreement can raise these amounts.
The employee always receives the higher amount between the legal indemnity and the contractual indemnity. Checking the applicable collective agreement remains a step not to be overlooked before signing anything.
Taxation and social contributions on the retirement departure bonus
The tax treatment constitutes the most marked difference between the two modes of departure.
In the case of voluntary departure, the indemnity is fully subject to income tax and social contributions. The employee can request the quotient system to smooth the tax impact over several years or opt for spreading it over four years.
In the case of retirement imposed by the employer, the indemnity benefits from a partial exemption from income tax. The exempted portion corresponds to the highest of three ceilings: the legal or contractual amount, double the gross annual salary of the previous year, or half of the indemnity received. Social contributions are also reduced within certain limits set by regulations.
This tax asymmetry explains why some employees prefer to wait for a retirement rather than leave voluntarily when the employer is willing to do so.
End-of-career indemnity and unemployment benefits: what seniors should check
The question arises for employees retired who do not yet meet all the conditions to liquidate their pension at full rate. An employee retired while missing quarters can register with France Travail and receive the unemployment return-to-work allowance (ARE).
The end-of-career indemnity is not deducted from the calculation of the ARE. However, a waiting period applies: France Travail calculates a deferral of compensation based on the amount of the supra-legal indemnity (the portion that exceeds the legal minimum). The higher the indemnity, the longer the deferral.
For a senior employee alternating between retirement and registration with France Travail, this interaction changes the timing of income receipt. A negotiated departure with an indemnity significantly higher than the legal minimum can paradoxically delay the payment of the ARE by several months.
The available data do not allow for setting a universal threshold beyond which the deferral becomes penalizing: it depends on the reference salary, the supra-legal amount, and the remaining contribution duration. Simulating the two scenarios (voluntary departure with immediate pension, retirement followed by registration with France Travail) remains the most reliable approach before making a decision.
Steps to obtain the end-of-career bonus
The employee who leaves voluntarily must notify their departure to the employer while respecting a notice period. No specific legal formalism is required, but sending a registered letter with acknowledgment of receipt secures the departure date.
The employer pays the indemnity with the final account settlement. The employee should check three points before signing the receipt:
- The amount corresponds to the most favorable legal or contractual scale
- The seniority considered includes the periods of suspension of the contract that count (maternity leave, work accident)
- The payslip details the portion subject to contributions and the portion possibly exempted
In case of disagreement over the amount, the employee has six months to contest the final account receipt before the labor court. After this period, the receipt becomes liberating for the employer.
The actual amount of the end-of-career bonus depends as much on the collective agreement as on the mode of departure. An employee approaching retirement has every interest in comparing the two scenarios, voluntary departure and retirement, taking into account taxation and any unemployment compensation deferral. The most useful reflex remains to request a numerical simulation from the HR department or a retirement advisor several months before the intended date.