Mutual termination agreement

Given the various advantages it provides, the mutual termination agreement is increasingly adopted in companies. Indeed, in the context of terminating a permanent contract (CDI), it is an amicable procedure that benefits both the employee and the employer. But what exactly is meant by mutual termination? We explore the issue for you.

What is a mutual termination agreement?

When an employee and an employer wish to amicably terminate the employment contract, it is now customary to proceed with a mutual termination agreement. This procedure is essentially based on a mutual agreement between the two parties and relies on consent free from any pressure.

That said, it is important to specify that the mutual termination agreement is only applicable within the framework of a permanent contract or CDI. In this sense, a fixed-term contract cannot be subject to a mutual termination agreement. Furthermore, in the public sector, it is also possible to proceed with a mutual termination agreement.

Wrongly associated with resignation or dismissal, this procedure stands on its own and takes the form of an amicable separation.

What are the conditions required to implement a mutual termination agreement?

As we mentioned earlier, the mutual termination agreement is primarily a procedure dedicated to CDIs, whether the employee is protected or not. Along the same lines, the essence of this type of termination mainly rests on a free agreement of each party. In this sense, to be effective, the mutual termination must not be driven by any pressure. You understand, each party has the right to freely refuse such a termination.

Regarding the necessary conditions, certain elements must be taken into account to formalize a mutual termination agreement. To begin with, this procedure necessarily requires holding one or more interviews between the employee and the employer. It is during these meetings that the two parties can agree on the terms of the termination contract.

Once this first step is completed, the various agreements are transcribed into the contract which must be signed by both the employee and the employer. The latter must also prepare to pay compensation to the employee following the termination. In any case, the amount of the mutual termination compensation must be higher than the legal severance pay for dismissal.

Finally, following the signing of the contract, both parties have a 15-day withdrawal period. This period allows either party to revoke the terms of the contract or simply withdraw from the agreement.

Who can request a mutual termination agreement?

A mutual termination agreement can be initiated by either the employer or the employee. That said, if the employer uses this procedure, it must not be a substitute for dismissal. Indeed, since the termination may be subject to judicial review, any flaws will be noticeable to judges if there is pressure from the employer. If such a situation arises, the mutual termination will then be classified as an unfair dismissal, which will not be advantageous for the employer.

Moreover, a civil servant can also request to proceed with a mutual termination agreement. However, the initiator of the proposal should not always expect the other party to fully cooperate.

How does the mutual termination procedure unfold?

As you will see, a mutual termination consists of several mandatory steps that condition it.

The notification step

Whether the procedure is initiated by the employee or by the employer, this first phase aims to inform the other party of their intentions. Of course, it is possible to proceed with an oral notification, but the written form is recommended to allow easy tracing.

If you are an employee, it would be advisable to send the employer a registered letter to avoid misunderstandings. Furthermore, ideally, you should not inform any of your colleagues and discuss it verbally with your employer when the time comes.

The interviews

In the context of a mutual termination agreement, it is mandatory to conduct one or more interviews. During the various meetings, all the details that will frame the conditions related to the termination will be discussed. This may include the contract end date, the amount of compensation, non-competition clause indemnity…

Moreover, the employee may request to be assisted during the interviews, but must inform their employer. Similarly, the employer may also do the same.

Signing the mutual termination agreement

After reaching an agreement, the next step is drafting the contract. This must explain the terms of the termination and requires the signatures of both parties.

Once done, both parties will have a 15-day withdrawal period. During this time, both the employer and the employee have the possibility to change their mind and withdraw.

The approval request

The mutual termination must be approved to gain its full formal value. Thus, it is mandatory to send a request for approval of the mutual termination to the DREETS or the DDETSPP.

This final procedure follows the withdrawal period and aims to ensure the consent of each party.

Termination of the contract

When the termination is approved, the employer must provide the employee with three documents: a work certificate, a Pôle emploi certificate, and a receipt for the final settlement.

It should be noted that if the employee has not taken all their leave, they are entitled to receive paid leave compensation.

What is the employer’s role in a mutual termination?

In the context of a mutual termination, it is often the employer who handles all the administrative formalities: summoning the employee for interviews, drafting the termination contract, sending the approval request…

Just like the employee, the employer is also entitled to be assisted during the interviews (if such a step is also undertaken by the employee). Thus, the employer can ask a company colleague or a person from the union organization to assist them during the interviews. If this is the case, they must inform the employee.

Beyond these initial aspects, it is the employer’s responsibility to pay the various compensations to their former employee: overtime, bonuses, balance of paid leave and RTT, mutual termination indemnity (amount to be mentioned in the approval request)…

What is the employee’s role in a mutual termination?

Very often, employees are poorly informed about their rights and obligations during a mutual termination agreement. If the latter is the one initiating the termination request, they must be open to dialogue. That said, the employee is not obliged to state the reasons for their request, but it is obvious that they have every interest in doing so if they wish to convince their employer. To negotiate the steps, they could thus mention issues such as an unsuitable work schedule or working conditions that do not allow for their fulfillment…

In order to bring the discussion to a successful conclusion, they must have a good argument and have a prior idea of their compensation. Indeed, since nothing guarantees that the employer will accept the request, it is advisable to prepare properly: plan training for the new arrival to lighten the employer’s burden, propose a departure date, propose a termination compensation amount…

What are the employee’s rights in the event of a mutual termination agreement?

Within the framework of a mutual termination agreement, the employee must be able to inform themselves about their rights. Thus, here are the employee’s rights during a mutual termination agreement:

The right to refuse the mutual termination agreement

This is a point that must be emphasized: consent must be free to terminate the contract. In this sense, the employee has the right to refuse the mutual termination agreement. This right is also shared by both parties.

The right to a protective procedure

The good news is that the employee is protected by law in the event of a mutual termination agreement. This means that the employee can be assisted during the various interviews related to the process. In the same vein, the signing of the termination agreement also aims to protect the employee and to ensure their free consent.

The right to mutual termination compensation

Even though the mutual termination agreement is not a dismissal, the employee will always be entitled to severance pay. Of course, it will not be called dismissal compensation, but mutual termination compensation. This must be higher than the legal dismissal compensation indicated by the Labor Code.

The right to compensatory paid leave indemnity

If the employee has not yet used all of their paid leave at the time of the termination of the employment contract, they may receive compensatory paid leave indemnity.

The right to unemployment benefits

When the mutual termination agreement is approved, the employee may be entitled to unemployment benefits. However, it should be recalled that the employee must meet all the general conditions for unemployment benefits.

What are the advantages for the employer in proceeding with a mutual termination agreement?

A mutual termination agreement is not only beneficial for the employee; it should be for the entire company, thus for the employer as well. Here are some advantages of this procedure for the employer:

• A simple and quick procedure: Unlike a dismissal, which is a time-consuming process, or a resignation, which sometimes takes one by surprise, a mutual termination agreement is simple and quick. The implementation period is estimated at about one month.
• A low risk of litigation :  Given its amicable nature, a mutual termination is a bilateral decision.  In this sense, it is a procedure that protects the employer from conflicts. That said, as an employer, it is important to remember that a mutual termination can be challenged within 12 months.
• No proof of departure required : In the context of a mutual termination, the employer is not required to justify the employee’s departure.
• No notice period required : Unlike a resignation or dismissal, neither the employer nor the employee is obliged to go through a notice period. Indeed, the employee’s departure date is agreed upon during the meetings. Thus, the employer does not have to provide compensation for the notice period.

In conclusion, it can be said that the mutual termination simplifies the employer’s procedures. Even better, compared to a dismissal, it is an amicable procedure that avoids labor court disputes.

Does mutual termination entitle one to a severance pay?

At this stage, it is important to recall and specify that a mutual termination is neither a resignation nor a dismissal. In this sense, unlike a resignation, mutual termination entitles the employee to severance pay. As we indicated earlier, this severance pay is known as the mutual termination indemnity. It is thus the employer who pays this amount to the employee after the request is approved.

The amount of a mutual termination indemnity must be agreed upon in advance by both parties. That said, in all cases, the amount must not be less than the dismissal indemnity. Similarly, to calculate the amount of such indemnity, several factors must be considered, including the employee’s seniority.

How is the mutual termination indemnity calculated?

Before submitting a mutual termination request, it is always advantageous for the employee to have an idea of the severance pay they might receive. This is indeed a crucial point to discuss during the meetings, hence the importance of calculating the amount beforehand.

In this regard, to calculate the amount of the mutual termination indemnity, several factors must be considered: the sector (public or private), the employee’s salary, and the employee’s seniority.

Regarding seniority, the calculation will be based on the end date of the notice period, which is therefore the termination date; even if the notice period is not always observed by the employee. Furthermore, if the indemnity does not exceed 82,272 euros, it will be exempt from social security contributions.

Calculation of the mutual termination indemnity for seniority of less than 10 years

• Private sector

If the employee has worked for the company for less than 10 years, the minimum amount must refer to ¼ of the monthly salary.

For example, if the employee’s reference salary is 2500 euros and they have worked in the company for 6 years and 4 months, the calculation will be as follows :

[(2500 x ¼) x 6] + [ (2500 x 1/4) x (4 /12) ]= 3209 euros

• Public sector

As you probably know, an employee in the public sector can also claim a mutual termination agreement. Thus, if the employee has worked for the same employer for less than 10 years, the calculation will be done in the same way as in the private sector.

You will have understood, if the civil servant decides to leave the administration to which they belong, they will be entitled to receive a minimum compensation that takes into account ¼ of the gross (monthly) salary multiplied by the years of service in the administration.

Calculation of the mutual termination compensation for seniority of more than 10 years

If the mutual termination is approved and the employee has seniority of more than 10 years in the company, the calculation of the compensation will differ from the one previously indicated. Thus, the first 10 years worked within the company will be clearly separated from the following years.

To do this, the calculation will be based on ¼ of the monthly salary for the first 10 years and on 1/3 of the monthly salary from the 11^th year of work onwards.

In this sense, if the employee has a reference salary of 2500 euros with seniority of 14 years 3 months, the calculation will be as follows:

[ (2500 x ¼ ) x 10] + [ (2500 x 1/3) x 4 ] + [ (2500 x 1/3) x (3/12) ] = 9791 euros