Economic dismissal: conditions and procedure
In France, economic dismissal allows employers to adapt their organization within a predictable legal framework. Whether individual or collective, it is based on statutory grounds, a structured procedure and employee support measures.
In a nutshell
- Economic dismissal is based on grounds unrelated to the employee.
- It must be justified by a real and serious economic cause.
- The employer must seek reassignment before any contract termination.
- The procedure varies depending on the number of employees concerned.
- Support mechanisms (CSP, PSE) may be offered.
In France, economic dismissal is based on precise rules, identified thresholds and support mechanisms defined by law.
For the employer, this framework makes it possible to anticipate the social consequences of a reorganization and to manage business transformations, while supporting employees.
What is an economic dismissal?
An economic dismissal is the termination of an employment contract by the employer for economic reasons, rather than for grounds related to the employee.
It must be justified by a real and serious cause that has an impact on employment.
The procedure varies depending on the scale of the project: individual economic dismissal, collective dismissal and, when legal thresholds are met, the implementation of a job protection plan (“Plan de sauvegarde de l’emploi” or PSE).
When can an economic dismissal be considered?
An economic dismissal may be considered in cases such as:
- Economic difficulties.
- Technological changes.
- Cessation of activity.
- Reorganization necessary to maintain competitiveness.
What steps must be taken before termination?
Before proceeding with an economic dismissal, the employer must carry out several preliminary actions.
The employer must explore all reassignment possibilities and offer the employee any available positions suited to their skills. These must be provided in the form of written, precise and serious offers.
When several employees could potentially be affected, the employer must determine the order of dismissal based on objective criteria (length of service, family situation, professional qualifications, etc.).
What is the procedure based on the number of employees?
The procedure depends on the number of employees affected by a proposed economic dismissal within a 30-day period.
| Situation | Employees affected | Procedure |
|---|---|---|
| Individual dismissal | One employee |
|
| Collective dismissal | Two to nine employees over 30 days |
|
| Dismissal with a job protection plan (PSE) | At least 10 employees over 30 days, in a company with at least 50 employees |
|
What is the procedure for an individual economic dismissal?
If no reassignment is possible, the procedure takes place in four steps:
- Summons to a preliminary interview.
- Preliminary dismissal interview.
- Written notification of dismissal.
- Notification of the administration (DREETS).
The employee is summoned by registered letter or by hand delivery against a signed receipt.
A minimum period of five working days must be observed between the summons and the interview. The employer presents the grounds for dismissal and hears the employee’s observations.
Depending on the size of the business:
- Fewer than 1,000 employees: Offer of the professional securitization contract (CSP).
- 1,000 employees or more: Possibility of a reassignment leave.
The decision is notified by registered letter after a minimum period of:
- Seven working days (non-skilled employees);
- 15 working days (skilled employees).
The employer informs the DREETS within eight days.
The competent DREETS is the one located in the area where the business or the specific site affected by the dismissal project is situated.
What is the procedure for a collective economic dismissal?
A dismissal is considered collective when it concerns at least two employees over a 30-day period.
The procedure takes place in six steps:
- Definition of the reorganization project and the economic grounds.
- Search for reassignment possibilities.
- Information and consultation of the CSE (where one exists).
- Implementation of a job protection plan (PSE) if the thresholds are met.
- Submission of the file to the administration (DREETS), which monitors the regularity of the procedure and, depending on the case, validates or approves the PSE.
- Notification of the dismissals to the employees concerned.
The Social and Economic Committee (CSE) is informed and consulted on:
- The economic grounds.
- The number of job eliminations.
- The professional categories affected.
- The selection criteria for dismissal.
- Measures intended to avoid dismissals.
- Support measures.
This consultation stage places the procedure within a framework of social dialogue and formalizes the support measures adopted by the business.
Mandatory for 10 or more employees over 30 days in a business with at least 50 employees, the PSE aims to prevent dismissals, reduce their number and facilitate the reassignment of employees whose contract termination cannot be avoided.
It may include:
- Training actions.
- Internal or external reassignment measures.
- Mobility assistance.
- Support for career retraining.
- Support for business creation.
The administration monitors the regularity of the procedure and either validates or approves the PSE.
The competent DREETS is generally the one where the business or the site affected by the collective dismissal project is located. When several sites are involved, specific jurisdictional rules apply.
What support mechanisms are available?
The professional securitization contract (CSP) allows the employee to benefit from:
- Enhanced support.
- Specific compensation.
If the employee accepts, the contract is terminated by mutual agreement. No compensation in lieu of notice is paid, with certain exceptions. In some businesses, reassignment leave may be offered to support the professional transition.
What severance payments are made?
An employee dismissed on economic grounds may receive several types of compensation, depending on their situation.
An employee dismissed for economic reasons is entitled to severance pay subject to seniority (minimum eight months under a permanent contract/CDI), with certain exceptions.
The minimum amount is calculated as follows:
- One-quarter of a month’s salary per year of service (up to 10 years).
- One-third of a month’s salary per year for each year thereafter.
The reference salary used for the calculation corresponds to the most advantageous formula for the employee: either the monthly average of the last 12 months or the average of the last three months (with annual or exceptional bonuses included on a pro-rata basis).
You can find the severance pay simulator on the Ministry of Labor website: Simulator – Calculating severance pay – Digital Labor Code
This is paid if the employee has not taken all their accrued leave by the date the contract is terminated, regardless of the cause of termination. The amount is calculated using the method most favorable to the employee:
- The 10% rule (one-tenth of total gross remuneration).
- The salary maintenance rule.
This is paid if the notice period is not worked (except in the case of the CSP).
The employee may benefit from the return-to-work allowance (ARE) paid by France Travail, provided they meet the requirements. Eligibility depends on:
- Registering as a job seeker.
- The length of time they contributed to the system (affiliation period).
- Actively seeking employment.
- Other conditions provided for by unemployment insurance regulations.
What are the employee’s rights after termination?
The employee benefits from several rights, including:
- Priority for re-employment for a period of one year.
- The right to challenge the dismissal.
- Access to unemployment benefits.
What is the impact on residency rights?
For an employee who is a citizen of a country outside the EU, the European Economic Area or Switzerland, job loss may have different consequences depending on the residence permit held.
For the employees concerned, the effects of dismissal depend on the type of permit held and the situation at the time of renewal; see the table below.
It is recommended to prepare for the renewal of the permit without delay, including the supporting documents to be submitted to the authorities and, where applicable, the need for a new work authorisation.
| Situation | Impact |
|---|---|
| Permit authorising all professional activities | No direct impact on the right of residence. |
| “Employee” (Salarié) residence permit | If the employee changes employer, a new work authorisation may be required. In the event of involuntary unemployment, renewal of the permit may remain possible, subject to certain conditions. |
| Multi-year “Talent” residence permit | The impact depends on the category of permit and continued compliance with the conditions under which it was issued. A case-by-case assessment is required when renewing the permit or taking up employment again. |