There are many things you will need to know before you hire in France but here’re our top 3:
1. Employment in France
Employer and Employee Social Security in France
Social security in France covers retirement benefits, family allowance and medical, dental and optical insurance, which 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 employer contribution amounts to around 50% of gross pay, and the employee contributes 20% of their salary.
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2. Tax in France
Tax Rates in France
Income tax rates in France range from 0-45% based on compensation.
However, income tax is not withheld from the pay check, but is paid at year end directly by the employee (or in monthly / quarterly instalments). 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.
Corporate Tax in France
The corporate tax rate in France is 33%.
3. Payroll in France
Social Security Registration
Both employers and employees must register for social security with URSSAF to make required contributions. The employee must provide the following documents to register:
- Birth Certificate (translated into French and notarized)
- A signed employment contract
- DPAE (a French abbreviation for ‘pre-hiring declaration’)
- RIB: (a French abbreviation for details of the employee’s bank account for electronic transactions):
Note: For EU citizens, they can use their current account, but non-EU citizens have to open an account in France.
- Proof of Address (electric bill or apartment contract confirming their residence in France)
- In addition, the employee will need to go down to the CPAM office, which is the agency that administers health insurance in France.
13th/14th month bonus
There is a mandatory 13th month bonus paid to all employees in France.
It’s going to be hard to employ someone remotely. Here’s what else you should be worried about:
The risk of non-compliance is very high, especially when employing in a new country like France
Employing in an unfamiliar country like France can be overwhelming. The burden and risk of non-compliance is all on you and your company and you need to be careful when navigating the employment and tax laws of France. The information you’re looking at may be inaccurate, outdated or in another language. The consequences of non-compliance in France are far too high to not invest time and money in thoroughly understanding the French jurisdiction.
Involving tax and immigration providers early is the number 1 most preferred method to manage compliance risks for companies, with 72% stating that they are focusing on outsourcing these services early on in the assignment.
There are many hidden costs that you may have overlooked
When employing in France, it is highly like that you may fail to factor in some costs involved while estimating a budget for the assignment. Usually, these costs occur during the course of employment and tend to be country-specific. They are often unpredictable and unavoidable resulting in the assignment being far more expensive than the business intended it to be. Hiring just one employee in France doesn’t justify the effort and cost it takes for a company to learn everything from scratch about employing in France.
Outsourcing services is the most preferred way for global mobility professionals to contain costs with 71% stating that they have already made outsourcing changes in an effort to maximise cost savings. Unsurprisingly, outsourcing is preferred over reducing the number of assignments/transfers or improving in-house administrative processes as a method to save costs.
These considerations are common when hiring an employee in any new country. In our years of experience employing in France we have helped our clients with several other problems specific to France. Here’re a few examples:
Other Issues Our Clients Have Encountered When Employing in France
Probation is not mandatory in France, but if there is a probation the maximum is 1 month for fixed term contracts. But this is related to the length of contract (1 day probation per 1 week of assignment) up to a maximum of 30 days.
Termination of Employees
Termination rules in France are 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 months salary. The payment for less time employed varies, but there is no statutory minimum or maximum.
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.
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.