Negotiating the departure of an executive or senior manager is a sensitive stage in the employment relationship. Whether it involves a mutual termination agreement, dismissal followed by a settlement, or employment tribunal conciliation, the aim is generally to organise a departure that is:
- legally secure,
- financially controlled,
- and compatible with the professional interests of both parties.
In practice, negotiation extends beyond financial compensation. It involves anticipating legal, financial, tax, and reputational considerations.
A Holistic Approach to Departure Negotiation
Each case is unique. The negotiation strategy depends on factors such as:
- the employee’s or executive’s seniority,
- the structure of their remuneration (fixed,variable, bonuses),
- specific contractual benefits,
- equity-based incentives,
- and the level of legal risk in the event ofemployment tribunal proceedings.
Assessing these elements allows employers to quantify potential risks and determine an appropriate negotiation strategy.
Key Considerations Before Entering Negotiations
Before starting a departure negotiation, several factors should be analysed:
- Legal framework of termination – mutual termination, dismissal followed by a settlement, or tribunal conciliation may have different implications.
- Overall cost for the employer – for instance, since 1 January 2026, the employer contribution on the exempt portion of mutual termination severance has increased to 40%, significantly affecting the cost.
- Social security and tax treatment of payments – classification of payments impacts the net amount received.
- Impact on unemployment benefits – certain payments may delay entitlement to France Travail unemployment insurance.
- Sensitive contractual clauses – non-compete, confidentiality, non-disparagement, and communication arrangements.
- Equity-based incentives – such as stock options, BSPCE, RSU, free shares, or management packages, which may represent significant financial stakes.
- Communication and reputation management – internal and external communication around the departure may be critical for professional reputation.
Legal Frameworks for Negotiated Departures
Mutual Termination Agreement ("Rupture Conventionnelle")
A mutual termination agreement allows the employer and employee to end the contract by mutual consent. It provides a relatively predictable and legally secure framework.
However, since 1 January 2026, the employer contribution on the exempt portion of severance has increased to 40%,which has led some companies to consider alternative departure arrangements.
Dismissal Followed by a Settlement Agreement
Termination may alsooccur via dismissal followed by a negotiated settlement. This type of agreement typically:
- resolves potential disputes,
- secures the legal terms of departure,
- and organises the financial and contractual arrangements.
It also allows consideration of specific elements, such as non-compete clauses or coverage of certain costs.
Employment Tribunal Conciliation ("Conciliation prud'homale")
In some cases, parties may formalise the departure through conciliation before the employment tribunal ("Conseil de Prud’hommes").
Advantages include:
- judicial recording of the agreement,
- potential favourable social and tax treatment of payments,
- and structured dispute resolution where applicable.
This option may be particularly suitable when certainty and legal enforceability are priorities.
Considerations Specific to Executives and Senior Managers
Combined Corporate Office and Employment Contract
Some executives hold botha corporate office and an employment contract. Termination of these two statuses follows different rules, which can complicate negotiations.
Equity-Based Incentives
Executives often holdequity-based instruments, including stock options, RSU, BSPCE, or othermanagement packages. Correct treatment of these instruments is crucial due totheir financial significance.
Sensitive Contractual Clauses
Clauses such asnon-compete, confidentiality, non-disparagement, or communication protocols can be key elements in negotiations. For example, decisions may need to be made on whether to maintain or waive a non-compete to facilitate career transition.
Status of Senior Executive ("Cadre Dirigeant") and Working Time Calculated in Days Arrangement (“Forfait jours”)
In certain circumstances, the implementation of the Senior Executive status ("Cadre Dirigeant") Working Time Calculated in Days Arrangement (“Forfait jours”) may be challenged and give rise to a dispute regarding overtime and undeclared work ("travail dissimulé").
Reputation and Communication
Managing professional reputation is often a critical factor. Discussions may include internal and external communications, drafting of departure announcements, professional references, and any outplacement support.
Complex Situations
Certain factors can make negotiations more complex, such as:
- occupational accident or illness,
- long-term sickleave,
- ongoing disputes,
- emotional factors related to long service.
A structured and strategic approach is particularly important in these circumstances.
Strategic Approach to Executive Departures
Effective negotiation requires balancing legal, financial, tax, human, and reputational considerations. A holistic approach identifies critical points and leverage, facilitating a balanced outcome for both parties.
Practical Steps for Employers
Employers should:
- review contractual terms carefully,
- assess allcompensation elements,
- evaluate litigation risks with legal advice,
- consider social security and tax consequences,
- plan communication strategies,
- clarify non-compete and confidentialityexpectations.
Proper preparation mitigates risk and improves negotiation outcomes.
Legal Support for Executive Departure Negotiations
Negotiating executive departures under French employment law can be complex, especially for companies operating internationally. Expert legal advice can help:
-structure severance and settlement agreements,
-assess risksand compliance,
-manage sensitive contractual clauses,
- and safeguard the company’s interests.
📩 For a confidential review of your executive or senior manager departure, contact Alexandra DABROWIECKI, English-speaking lawyer in Lille. Legal guidance ensures a structured, secure, and pragmatic approach.
