When an employer announces the permanent closure of their business, the first question from the employee’s side quickly arises: how much will I receive, and on what basis? The answer depends on several parameters, some of which often go unnoticed, such as the applicable collective agreement or the method of calculating the reference salary. Understanding the mechanism of the business closure indemnity helps avoid signing a final settlement without verifying what is actually owed.
Reference Salary: The Variable That Changes Everything in the Calculation
Before even discussing seniority, one encounters a technical point that competitors rarely address in detail: the choice of the reference salary directly determines the final amount. Two calculation methods coexist, and the one most favorable to the employee applies.
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The first takes the average of the last twelve months of gross salary. The second considers the average of the last three months, including bonuses and rewards on a pro-rata basis. In a position with a variable component or an annual bonus paid in December, the difference between the two methods can be significant.
In practice, an employee who received a special bonus three months before the closure has every interest in verifying that the employer has indeed used the three-month calculation. When it comes to the business closure indemnity for employees, this detail of the salary base often makes the difference between a correct amount and an undervalued amount.
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Legal Termination Indemnity: The Formula and Its Seniority Thresholds
The closure of a business leads to an economic dismissal. The legal indemnity resulting from this is based on the employee’s seniority. To be eligible, one must justify at least eight months of uninterrupted seniority with the same employer.
Applicable Legal Scale
The calculation follows a tiered progression:
- A quarter of a month’s reference salary for each year of seniority for the first ten years.
- A third of a month’s reference salary for each year of seniority beyond ten years.
- Incomplete years are taken into account on a pro-rata basis for the months worked.
An employee present for fourteen years will therefore receive ten times a quarter, plus four times a third, all multiplied by their reference salary. Seniority is calculated up to the end of the notice period, even if the employee is exempted by the employer.
Collective Agreement: Check Before Accepting
Since 2023-2024, several sectors have raised their scales for economic dismissal indemnities. This is the case in the Syntec, metallurgy, and banking sectors, where the contractual indemnity often exceeds the legal minimum. The employer must apply the most favorable amount between the legal and the contractual.
In practice, it is observed that some employers calculate solely based on the legal basis without checking the collective agreement. The employee has every interest in consulting their sector agreement before validating the proposed amount.
Particular Cases That Modify the Amount of the Closure Indemnity
Not all employees are treated the same during a closure. Two situations deserve special attention because they radically change the calculation.
Incapacity Due to Professional Reasons
When an employee is dismissed due to incapacity resulting from a work accident or occupational disease, even in the context of a site closure, the legal indemnity is doubled. This doubling applies by right, without negotiation. The employer cannot evade this by citing the economic reason for the closure.
Employees on Fixed-Term Contracts
For employees on fixed-term contracts whose contract ends due to the closure, the logic is different. They receive a contract termination indemnity (precariousness bonus), not a dismissal indemnity. Its rate is generally set at a percentage of the total gross remuneration paid during the contract. Feedback on this point varies according to collective agreements, with some providing rates higher than the legal minimum.
Check Your Dismissal Indemnity with the Official Simulator
The digital Labor Code simulator, updated by the Ministry of Labor, now includes the eight-month seniority threshold and the rules stemming from the Macron ordinances. One inputs their gross salary, seniority, and the nature of the dismissal to obtain the minimum legal amount.
The tool does not replace the verification of the collective agreement, but it allows one to quickly spot a discrepancy between the employer’s calculation and the legal floor. If the amount proposed by the employer is lower than what the simulator shows, it is a clear warning signal.
Role of the AGS When the Company Can No Longer Pay
When the closure occurs within the framework of a judicial liquidation and the employer no longer has the funds to pay the indemnities, the AGS (Association for the Management of the Employee Claims Guarantee Scheme) takes over. This mechanism guarantees the payment of dismissal indemnities, unpaid wages, and compensatory indemnities for notice and paid leave.
The AGS guarantee is capped. The judicial representative transmits the employee claims, and payments generally occur within a few weeks after validation. The employee does not have to take direct action with the AGS: it is the representative who manages the case.
- Check that the representative has properly registered all claims (salaries, bonuses, indemnities).
- Keep pay slips and the employment contract to justify the amounts claimed.
- Dispute within a reasonable timeframe if amounts are missing from the claims statement.
The amount of the business closure indemnity is never a standard flat rate. It depends on the chosen reference salary, the exact seniority, the collective agreement, and sometimes the specific reason for the dismissal. Before signing anything, cross-check the employer’s calculation with the official simulator and the sector agreement to ensure nothing is left on the table.