5 Things to Consider When Employing Workers in France
If you are a global mobility professional with responsibility for assigning staff to France, then you will want to consider some of the unique employment rules that you will be facing in that EU country. France has always had a reputation for being independent in their culture and historical role in the European Union
If you are a global mobility professional with responsibility for assigning staff to France, then you will want to consider some of the unique employment rules that you will be facing in that EU country. France has always had a reputation for being independent in their culture and historical role in the European Union. This trait also applies to how they view labor and employment protections, and French authorities will enforce those for any company doing business in the country, whether foreign or domestic.
DIY vs. GEO in France
As in any country where you assign employees or hire residents, you have two choices: either set up a local corporation and run a DIY payroll, or outsource employment to a third-party GEO using an Employer of Record. An Employer of Record solution is usually preferred by companies just entering a new market, to not only run outsourced payroll but also provide legal insulation from compliance issues that may arise.
In either case, there are five things that you should be aware of when employing any type of worker in France, which may affect your choice of employment method.
Termination of Employees in France
Termination rules in France are fairly stringent, and if a termination is not mutually agreed, it can be difficult and expensive for a foreign company. Here are a few of the laws on termination:
- All termination notices must be in writing, stating the exact cause and grounds, either personal conduct, or economic (very strict test).
- The required notice period depends on length of service, and after six months of employment the notice is one month minimum, and up to 2 months after two years of employment.
- There is a statutory termination payment (severance) required, which for fixed term contracts will be 10% of the salary earned to date.
- If the termination is without cause, there is a separate damages payment requirement, and if the employee has more than two years of service they may be entitled to up to six month’s salary.
- The payment for less time employed varies, but there is no statutory minimum or maximum.
Income Tax in France
There are some very different income tax procedures in France compared to some countries, such as how it is paid and what is included. Income tax is not withheld from the paycheck, but is paid at year end directly by the employee (or in monthly / quarterly installments). What this means is that each employee must calculate their tax liability and set it aside, which may be a new system for some expats who are used to employer tax withholding.
The taxable income amount and rate is calculated for the entire household, including children. This is also unusual, and makes the use of a GEO local employer even more attractive to assist with tax calculation and payments to make sure tax payments are accurate.
France does have tax treaties with many developed countries, which avoids double taxation for the employee in their home country.
A medical exam is required for all workers hired in France, whether a local resident or expat on assignment. It is considered the company’s responsibility to make sure that the new hire is in good health before beginning work. This must be done pre-employment and failure to offer a medical check to employees can result in penalties.
Another health-related rule is that medical, dental and optical insurance must be provided for all employees. There is one level of coverage provided by the French National Health Insurance (NHI) program, but a law was passed in 2016 requiring employers to offer Private Medical Insurance (PMI) as well.
The PMI coverage is needed to make up for the percentage of outpatient care (30%) and inpatient care (20%) that is not paid by the NHI coverage. One quirk to be aware of is that this mandatory PMI premium must be split between the employer and employee, and the employer has to pay at least 50% of the premium (but can pay more).
Depending on how the PMI is structured and enrollment of dependents will affect whether this is a taxable benefit to the employee, and if you are attempting a DIY employment approach then local experts should be consulted for full tax and insurance compliance.
Two Classes of Workers
There are two classes of workers in France or: executive or cadre, and non-executive. The worker class affects certain statutory employment rules and entitlements such as notice and severance. Here are some of the key differences:
Executive: Managers, engineers, supervisors, specialists and senior employees
- The executive class employee is not entitled to overtime
- Longer notice period for termination (3 months)
- Longer trial period (up to 4 months)
- Higher minimum wage
Non-executive: All other employees
- Non-executives must be paid overtime after 35 hours worked per week.
- Standard 1-2 month notice period
- Shorter trial period (2-3 months)
- Standard minimum wage
There are other employment rights and benefits to consider in France, including the 35- hour work week, 5 weeks paid vacation, employer-paid commuting expenses and a mandatory 13th month annual bonus, which all add cost and administrative work to employment. For executives, some of these benefits will be expanded even further.
After reviewing these legal and statutory employment hurdles in France, it may seem like a good idea to have a resource such as Shield GEO at your disposal. When you engage us to handle your employees, our local partners can assist you with meeting all of these requirements and in many cases, we will do it for you.
When you factor in other challenges in France such as language and cultural barriers, it becomes apparent that having a French Employer of Record that is already in place is a real asset for your company. While France welcomes foreign business activity, your company must meet all immigration, employment and payroll laws or you risk penalties, fines, delays or even losing your right to do business in the country.
Shield GEO makes international employment simple. Our customers use Shield GEO to employ and payroll hundreds of workers in over fifty countries. Find out more.