With its familiar Western culture, U.S. companies commonly set their sights on Europe for a more seamless international expansion. France, in particular, is a popular target market because of its thriving culture and its tourist draw. Plus, French is expected to be the most commonly spoken language by 2050, so it’s not a bad place to start. If you’re considering an operation in Western Europe, we suggest you start grasping the basics of France employment law.
There are a number of legal liabilities to consider before hiring international employees, and France has a few quirks of its own. For example, income tax is not withheld by the employer today, but that will change in 2018. Also, employment contracts in France are not at all like many contracts in the U.S.
Discover the France employment law basics below before wrapping up your global expansion strategy.
Payroll Contributions for French Employees
French employees make social security contributions, which amount to roughly 22% of their gross salary at the time this article was written. This share equals an average of 43% for employers. The amount does vary, as some contributions are capped for wages up to four or eight times the social security ceiling, which sits at EUR 12,744 per month in 2016.
Social security rates include coverage for family benefits, accident at work and pension, among others.
Employee Pay Slips have a Long List of Requirements
Since we’re on the payroll train, it’s important to understand the requirements for employee pay slips. If you’re outsourcing your international payroll, something we highly suggest doing, this won’t be a concern.
According to Expatica, wages are paid on a monthly basis and employees must be sent a payslip even if they receive direct deposit through a bank transfer. Payslips must include the following information:
- Employer information including APE Code and Siret number
- Employee information including position
- the URSSAF, which is the social security office, where contributions are paid
- Pension fund contribution
- Gross pay components including hours worked, rates and bonuses
- Social security deductions
- Tax deductions
- Net amount paid to employee
This is the Minimum Wage for French Employees
As of January 2016, the minimum gross monthly wage for employees in France is EUR1457.52 for a 35-hour work week. It rose roughly EUR17 in the past year.
Employees who are employed under an ordinary employment contract, fixed and indefinite, are entitled to the minimum wage, according to Thomson Reuters Practical Law. French collective bargaining agreements (CBAs) typically provide minimum wage as well.
Changing Income Tax Withholdings in France
France does not currently have an operating tax withholding system in place for employment income. The only income tax currently held is from non-resident taxpayers on their French source employment income along with other investment income like dividends.
This is obviously very different than U.S. income tax, which is withheld from each paycheck based on earnings, marital status, and dependents.
Employees in France currently save money throughout the year and pay income tax by September for the previous tax year. They can also pay through monthly installments.
With that being said, this is all about to change in 2018. In two years, French employers will begin withholding their employees’ income tax and paying the government directly. The change occurs on January 1, 2018.
Tax Requirements for Foreign Nationals who are not French Tax Residents
Employees that are not permanent residents of France, but work in the country, are still subject to withholding tax at a progressive rate ranging between 0% and 20%, depending on the income. This is imposed on salary payments unless a double taxation treaty prevents the tax.
Rights for Non-Permanent Employees in France
Temporary and part-time employees receive the same entitlements and benefits of permanent employees. These benefits include:
- Holiday pay
- Probationary period
- Family benefits
- Time off requirements
- Weekly working hour limits
For part-time employees as of July 2014, employers must provide them with a minimum of 24 working hours each week. There are exceptions for lower hour limits and those must be documented in a contract.
Independent contractors are not subject to these rights unless a court determines that they are working as a subordinate of the company. In that case, the contractor may be deemed a permanent employee who is then subject to the same rights.
French Employees Subject to Termination Protections
Unlike many contracts in the U.S., employment in France is not at will. If you need to terminate a French employee, it must be on objective grounds and the employee must be notified in writing. According to Triplet & Associates, dismissals are subject to stringent, and often bureaucratic, procedural statutory constraints.
Layoffs and terminations due to financial restraints on the firm do not fall under this category.
Intellectual Property Protection for French Employers
If you find a great team of employees in France, that’s wonderful! It’s still important to protect your assets, which includes your intellectual property. In Europe, IP, which consists of trade secrets, inventions, and artwork, should be protected legally.
Securing your IP with a patent, trademark, or copyright ensures that permanent and temporary employees cannot steal your great ideas.
Break into the French Market with an Experienced Partner
France offers a wealth of global expansion opportunities for a number of organizations—but taking that first step can be daunting. Velocity Global has assisted hundreds of businesses in establishing a presence in foreign markets; our International PEO (Professional Employer Organization) solution can have your organization operating in France in as few as 48 hours—without setting up a permanent entity. If you’re ready to expand your operations into France, reach out to Velocity Global today. We’re here when you’re ready to chat.