How is the end-of-contract indemnity for fixed-term contracts (CDD) calculated?

What is the end-of-contract indemnity for CDD?

The end-of-contract indemnity for CDD, often referred to as the "precariousness bonus," is a financial compensation intended to reward the employee for the temporary and precarious nature of their contract. According to Article L. 1243-8 of the Labor Code, this indemnity is paid when the fixed-term employment contract (CDD) does not lead to a permanent contract (CDI).

It is an integral part of the employee's total remuneration and aims to recognize the flexibility and vulnerability inherent in CDDs. This indemnity includes not only the base salary but also bonuses, allowances, and benefits in kind received during the contract.

What is the difference between CDD and wage portage ? The CDD is a classic employee contract but for a limited duration, where you are subordinate to an employer. Wage portage allows you to be independent and choose your assignments while benefiting from the social protection of an employee through an umbrella company.

Formula for calculating the indemnity

The calculation of the end-of-contract indemnity for CDD, also known as the precariousness bonus, is simple to understand. The basic formula consists of applying 10% to the total gross remuneration received by the employee during the period of their contract.

This remuneration includes not only the base salary but also all other amounts that have the nature of salary. This includes salary increases, allowances, and various bonuses such as holiday bonuses, year-end bonuses, or the 13th month.

Here is the summarized calculation formula: 

End-of-contract indemnity = 0.10 × Total gross remuneration. Note that the compensatory indemnity for paid leave is not taken into account in this calculation.

Calculation examples for different scenarios

To better understand, let’s examine some practical examples.

• Example 1: CDD contract without renewal

Suppose an employee worked under a CDD for 6 months with a gross monthly salary of €2,500. If this employee also received a holiday bonus of €500 during this period, here’s how to calculate the indemnity:

Total gross remuneration: (2,500 €/month × 6 months) + 500 € = 15,000 € + 500 € = 15,500 €

End-of-contract indemnity: 0.10 × 15,500 € = 1,550 €

• Example 2: CDD contract with renewal

Imagine an employee who worked under an initial CDD of 3 months, renewed once for the same duration. The gross monthly salary is €2,000. The calculation of the indemnity includes the entire duration of the contract, including the renewal:

Total gross remuneration: 2,000 €/month × 6 months = 12,000 €

End-of-contract indemnity: 0.10 × 12,000 € = 1,200 €

• Example 3: CDD contract with work accident

If an employee suffers a work accident during their CDD and cannot work until the end of their contract, the indemnity must be calculated based on the remuneration already received and what they would have received until the end of their contract.

Suppose the employee worked 4 months on a 6-month contract with a gross monthly salary of €2,200. The calculation would be:

Total gross remuneration: (2,200 €/month × 6 months) = 13,200 €

End-of-contract indemnity: 0.10 × 13,200 € = 1,320 €

These examples illustrate how the precariousness bonus is calculated in different scenarios, taking into account the total gross remuneration received by the employee.

Payment modalities for the indemnity

The end-of-contract indemnity for CDD must be paid by the employer at the effective end of the contract. In practice, it is generally included in the final settlement given to the employee at the time of contract termination.

The payment deadline may vary, but it is often a few days after the end of the contract. It is essential for the employer to respect this legal deadline to avoid sanctions. Non-payment within the stipulated deadlines can lead to significant legal and financial consequences.

The payment modalities for the indemnity may be defined in the employment contract or the applicable collective agreement. Generally, the indemnity is paid by bank transfer or check.

The fiscal and social impact of the end-of-contract indemnity

The end-of-contract indemnity for CDD is considered an integral part of the employee's gross remuneration. Therefore, it is subject to the same fiscal and social rules as salary.

From a fiscal perspective, this indemnity is included in the employee's total remuneration and is therefore taxable. Employers must take these fiscal implications into account when calculating and paying the indemnity.

From a social perspective, the indemnity is subject to social security and retirement contributions. This means that the employer must also pay the corresponding employer contributions. These obligations are essential to ensure compliance with current legislation.

In summary, calculating the end-of-contract indemnity for CDD represents an essential step for both employers and employees. This indemnity, also called the precariousness bonus, corresponds to 10% of the total gross remuneration received during the contract. However, certain exceptions apply, particularly in the case of the conversion of the CDD into a CDI or termination for serious misconduct. This amount, which includes all components of remuneration such as bonuses and allowances, must be paid at the end of the contract.

Furthermore, it is important to consider the fiscal and social implications related to this indemnity. A good understanding and application of the rules in force allow for compliance with legal obligations while maintaining harmonious relationships with employees. For optimal management of CDD contracts, it is recommended to consult collective agreements as well as specific regulations applicable to your company.

What are the conditions for an employee to be entitled to the end-of-contract indemnity after a CDD?

The employee is entitled to the end-of-contract indemnity after a CDD, except in certain specific cases. This indemnity is generally paid at the end of a fixed-term contract, except in the following situations:

• Hiring in CDI after the CDD.
• Refusal by the employee of a proposed CDI.
• Serious misconduct committed by the employee.
• Force majeure preventing the continuation of the contract.
• Certain subsidized contracts or usage contracts.

How to calculate the amount of the end-of-contract indemnity for a CDD?

The amount of the end-of-contract indemnity for a CDD corresponds to 10% of the total gross remuneration received by the employee during the duration of their contract. This indemnity is paid at the end of the CDD, except in specific cases provided for by legislation.

Are there exceptions where the employer is not obliged to pay the end-of-contract indemnity?

Yes, several exceptions allow the employer not to pay the end-of-contract indemnity. Among them:

• Contracts concluded with young students.
• Seasonal CDDs.
• Student CDDs.
• Training contracts.
• Early termination for serious misconduct or force majeure.

Additionally, if the employee is hired in CDI after their CDD, the precariousness indemnity is not due.

What is the impact of collective agreements on the amount of the end-of-contract indemnity?

Collective agreements and company agreements can modify the amount of the end-of-contract indemnity. For example:

• Some agreements provide for rates higher than the legal 10%, such as an increase to 15%.
• They may also exempt certain specific or seasonal assignments from this indemnity.