The expatriation contract is a specific contract integrating several internationals issues.
It is at the end of the expatriation that problems arise.
We will focus here on the procedure for contractual termination, but this reasoning can be extended to the dismissal of an expatriate employee (a post-dismissal transaction can be carried out). Contact us for more information.
How to react in the event of a proposal for a contractual termination of the expatriation contract by the employer?
Determining the gross monthly remuneration: distinction between remuneration elements and reimbursement of professional expenses (crucial & delicate step).
Calculate the statutory severance pay based on the employee’s gross monthly remuneration (as required by law and the collective bargaining agreement).
Negotiate the “supra-legal”: additional indemnity that will be negotiated according to seniority and conditions of termination of contract (here an analogy is made with the situation that the employer would have to face in one of the labour court).
Calculate the total net amount of the contractual termination with regard to its taxation (CSG-CRDS, social contributions, income tax), taking into account the different social and tax levels (6 PASS – 10 PASS).
Determine the country in which the income tax relating to the severance package is to be reported and use bilateral tax treaties to avoid double taxation.
Sign and set up the procedural schedule (withdrawal period and approval period) and prepare the employee’s return to France (relocation).
The first step, decisive because it forms the basis of the entire negotiation, is the most delicate. Correctly determining the gross monthly remuneration requires a thorough analysis of the employment contract, the collective agreement, and the documents annexed to the employment contract, all under the interpretation of a case law that may be changing.
As a reminder, contractual termination, like dismissal, is made up of a so-called legal indemnity and a supra-legal indemnity. The legal (statutory) indemnity cannot be less than ¼ of gross salary per year of service during the first 10 years, then 1/3 from the eleventh year.
The legal indemnity for contractual termination is therefore based on the gross monthly remuneration.
In theory, the employee benefits from the maintenance of his so-called “French” remuneration, to which are added pecuniary or in-kind benefits.
Among the advantages are: the payment of housing costs, the provision of a company vehicle with an authorization for private use, the granting of a second vehicle for the husband or wife of the expatriate employee, an expatriation bonus, payment of tuition fees, annual travel costs to France for the family, payment of income tax in the country of origin and / or in the country of expatriation, the cost of training for the spouse of the expatriate employee, the cost of moving, etc.
The gross monthly remuneration must include all the elements which do not constitute reimbursements of professional expenses. Thus, the cost of accommodation and the car are generally considered as benefits in kind, unlike the school fees of the employees’ children, and must be included in the calculation of the gross monthly remuneration.
The amount of gross remuneration will however depend on two essential elements: the drafting of the employment contract and the applicable collective agreement.
The collective agreement for metallurgy, and in particular its annex 2, will make it possible to retain a very large gross monthly remuneration, incorporating many advantages, unlike the solution resulting from the collective agreement for the bank or the oil industry, or even syntec.
The drafting of the employment contract and its annexes relating to expatriation will also be important as regards the qualification of the sums paid to the employee (professional costs or elements of remuneration).
These issues therefore require in-depth and individualized study, taking into account the drafting of the contract, the applicable collective agreement and the state of case law.
Once the gross monthly remuneration has been defined, the legal indemnity for contractual termination should be set, which cannot be less than ¼ of gross salary per year of seniority during the first 10 years, then 1/3 per year of seniority at -beyond the tenth year.
Then, the negotiation will focus on the “supra-legal” part, which will be fixed according to the length of service and the end of contract conditions (we make an analogy here with the situation that the company should face in labor tribunal) , in addition to the integration of the various damages (eg: compensation for the loss of Stock options or Stock-Grants, Restricted Stock Units, non-pecuniary damage, etc.).
The negotiation will have to integrate the social and fiscal aspects, and in particular the social contributions, the CSG-CRDS, the social package, and the income tax, without overriding the different tax levels (6 PASS and 10 PASS).
It will also be necessary to determine the country in which the income tax relating to the contractual termination indemnity must be declared with regard to the application of bilateral tax treaties aimed at avoiding double taxation.
Finally, the time will come for signing and setting up the procedural schedule (withdrawal period and approval period), as well as preparation for the employee’s return to France (moving costs, end of the lease, etc.).
In summary, it is impossible to choose a single solution: the outcome will depend on the drafting of the contract and its annexes, on the collective agreement and on the case law of the Court of Cassation in force. The use of advice is therefore necessary.