With one of Europe’s main financial centers, a competitive corporate tax rate, and a diverse range of industries, France is a highly attractive market for global companies.
However, one challenge businesses face when engaging talent in this country is navigating its local payroll and tax regulations. Just calculating tax liabilities for France’s complex Social Security scheme can be a major headache.
Fortunately, hiring and paying talent in France doesn’t have to be overwhelming.
Read on for an overview of French payroll. Find a list of mandatory taxes and contributions, learn how to calculate payroll in the country, and get tips for setting up compliant local payroll. Plus, find out how to hire and pay talent in France without setting up an entity.
Mandatory payroll taxes and contributions in France
Mandatory payroll taxes and contributions in France include Social Security and the state pension scheme. Employers must also withhold and remit income taxes on their employees’ gross pay.
We outline France’s statutory payroll taxes and contributions in detail below.
Social security
France’s Social security system is complex and includes various programs that offer a range of benefits to employees, including health insurance, workers’ compensation, retirement benefits, childcare allowances, and unemployment insurance.
Employers must also provide supplemental life insurance and healthcare coverage, which also fall under the Social Security umbrella.
Total employer contribution rates for Social Security are around 45% on average, while employees pay about 20% to 23%.
However, the federal government assesses rates based on various factors, like the number of employees and entity type, and it imposes contribution ceilings on specific programs. Collective bargaining agreements (CBAs) also impact Social Security rates. As a result, employer and employee contribution rates vary widely.
Below we list each benefit that falls under the French Social Security scheme, with the average employee and employer contribution rates for each:
| Scheme | Description | Employer rate | Employee rate |
|---|---|---|---|
| Health, maternity, paternity, disability, and death insurance | A program that provides basic healthcare and life insurance, plus income support for disabled individuals and employees on maternity or paternity leave | 13%, with the calculation base capped at €351,936 annually | 0% |
| Accident at work and occupational diseases | Insurance that provides income support and medical coverage for injuries and illnesses resulting from work-related accidents | 0.77% | 0% |
| Old-age insurance | A state-backed retirement insurance program | 8.55%, calculated on employee monthly earnings up to €3,666 1.90% thereafter | 6.9%, calculated on employee monthly earnings up to €3,666 0.4% thereafter |
| Family allowances | A state-backed program that provides financial support for employees raising one or more children | 3.45% for qualifying businesses and on annual employee salaries below or equal to 3.5 times the legal minimum wage (€5,241.6) 5.25% otherwise | 0% |
| Unemployment insurance | A fund that provides financial support for individuals who are unemployed but willing and able to work | 4.05% | 0% |
| Prevoyance life and disability insurance | A supplemental insurance program that ensures comprehensive coverage for employees and their dependents in case of injury or death | 1.50%, calculated on employee monthly earnings up to €3,666 2.00% thereafter | 0% |
| Mutuelle | A mandatory additional private health insurance program that ensures employees receive comprehensive medical coverage | 50% of the premium | 50% of the premium |
| Retirement (Plan d’Epargne Retraite Obligatoire) | A mandatory retirement plan in addition to state and supplemental pension schemes | Varies, with a max of 16% of the social security ceiling | 2-6% |
| Apprenticeship tax | A tax that helps companies develop apprenticeship programs and technological and vocational training | 1.73% | 0% |
Employers and employees may also be subject to additional taxes and contributions, depending on their industry and the French region where their employees reside.
For example, in the Île-de-France region, employers must pay a public transportation tax, which varies depending on company size and location and is capped at 2.95%.
Pension
On top of making contributions to the old-age insurance fund under France’s Social Security program, employers in France must also provide their employees with supplementary retirement insurance called Agirc-Arcco.
This program serves as an additional layer of support, ensuring comprehensive retirement benefits for employees across the country. The table below details the employer and employee contribution rates for Agirc-Arcco:
| Agirc-Arcco | |
|---|---|
| Employer rate | 6.26%, calculated on employee monthly earnings up to €3,666 |
| Employee rate | 4.01% calculated on employee monthly earnings up to €3,666 |
Employee income taxes
Companies that hire employees in France must also withhold and remit income taxes on employees’ gross earnings on their employees’ behalf.
Income tax brackets in France are complex as the federal government assesses rates on a progressive scale, with rates ranging from 0% to 45%, depending on total household income and family size.
The table below outlines France’s standard income tax brackets, based on per household annual income:
| Taxable income | Tax rate |
|---|---|
| Up to €10,777 | 0% |
| €10,778 to €27,478 | 11% |
| €27,479 to €78,570 | 30% |
| €78,571 – €168,994 | 41% |
| More than €168,994 | 45% |
How is payroll tax calculated in France?
To calculate payroll taxes and contributions in France, first determine your employees’ gross pay. Next, calculate the employer and employee payroll tax liability for social security, pension, and employee income taxes as percentages of your employees’ gross pay.
Remember to factor payroll taxes into your total employee cost calculations when building a distributed workforce in the country, as payroll taxes and contributions amount to additional per-employee costs on top of base salaries.
Interested in hiring an employee in France? Use our employee cost calculator below to accurately calculate payroll contributions and annual costs for your talent in France.
Key elements of payroll in France
As a foreign employer doing business in France or hiring employees in the country, understanding key aspects of running local payroll is essential for avoiding fines, limited business opportunities, and other noncompliance penalties.
Key aspects of local payroll in France include but are not limited to the following:
- Fiscal year. France’s fiscal year runs from January 1 to December 31.
- Payroll cycle. The payroll cycle in France is usually monthly, with employers paying wages by the last workday of the month.
- Minimum wage. The minimum hourly wage in France is €11.52.
- Overtime. A standard workweek in France is 35 hours. Unless an applicable CBA mandates otherwise, employees are entitled to 125% of their standard wage for the first eight hours of overtime and 150% for any additional hours.
- Termination. Depending on CBA regulations, employers in France must usually provide a one to three-month notice period to employees or pay an indemnity in lieu of notice.
- Severance. Employees who have worked for their employer for eight months are entitled to a severance payment of one-quarter of their monthly salary for each year of service up to 10 years and one-third of their monthly salary for each year of service beyond that. Employees are also entitled to compensation in lieu of paid holidays and days off that they have accumulated but not taken.
- Annual leave. As a general rule, employees in France are entitled to a minimum of five weeks, or 30 days, of paid annual leave. However, under the Portage Salarial business scheme in France, employees receive additional annual leave in lieu of paid overtime if they work more than 35 hours.
- Maternity leave. Mothers in France are entitled to 16 weeks of paid maternity leave and must take a minimum of eight weeks. They may take six weeks before the expected birth date and 10 weeks after and are entitled to various extensions in case of health complications or multiple births.
- Paternity leave. Fathers of newborn children are entitled to 25 days of paid paternity leave, or 32 days in case of a multiple birth.
- Adoption leave. Parents of newly adopted children receive up to 16 weeks of parental leave for the adoption of one child, or 22 weeks for a multiple adoption. If parents share the leave, they receive an additional 25 days for a single adoption and 32 days for a multiple adoption.
- Sick leave. Employees who have worked for at least 150 hours for their employer in the past three months are entitled to a maximum of three years’ paid sick leave at 50% of their regular wage, capped at €3,076.70 gross per month.
- Holidays. Employees in most regions of France receive 11 paid public holidays annually. Employees who live in the Alsace region or the Moselle department of France receive two additional paid public holidays.
How to set up payroll in France
The payroll processes that global companies use to pay their distributed workforce in France vary depending on individual circumstances. However, the following outline provides a general idea of what payroll procedures in the country entail:
- Register with the URSSAF. Register with the URSSAF (Unions de Recouvrement des Cotisations de Sécurité Sociale et d’Allocations Familiales) and complete form E0, which allows you to make contributions towards your employees' social security.
- Register your employees. Register your employees with the general Social Security Scheme and complete pre-employment statements for each employee. This allows the Social Security organization to track your employees and manage their benefit entitlements.
- Collect employee information. Collect basic employee details, such as their first and last names, address, INSEE code (Social Security number), and disabilities, among others.
- Classify your workers. Classify your workers as employees or independent contractors and clarify your payroll tax liability for each worker. Correctly classifying workers is critical for avoiding back pay, benefits arrears, and other misclassification penalties.
- Establish your payroll process and policies. Decide whether you’ll manage payroll in-house or outsource it to a third party. If running payroll in-house, remember to source qualified, experienced HR talent and establish a payroll schedule according to France’s monthly cycle.
- Determine salaries and ensure compliance. Clarify employee salaries and determine applicable employer and employee tax liabilities for each employee.
- Calculate deductions and pay employees. Calculate applicable taxes and contributions as specified percentages of employee gross earnings. Make timely and accurate remittances and payments, and provide your employees with payslips indicating their net earnings and withholdings.
Payroll options for employers in France
When administering payroll in France, global companies generally use one of the following methods: internal payroll administration, local payroll outsourcing, and global payroll outsourcing.
We discuss each approach in detail below.
Internal payroll
Global companies with established entities in France may choose to hire local talent and create in-house finance teams to run payroll for their distributed workforce in the country.
While internal payroll gives you full control over your payroll processes, it also leaves you fully responsible for compliance and exposes you to serious compliance risks.
Employers who choose this route must navigate France's complex payroll and tax regulations on their own, leaving themselves exposed to potential fines, limited business opportunities, and other payroll noncompliance penalties.
If you choose this route, consider partnering with a third-party legal expert to reduce risk exposure.
Local payroll outsourcing
Another option for global companies with entities in France is to outsource payroll to a local payroll processing firm in the country.
With local payroll outsourcing, you offload the burden of the entire payroll process, including calculations, payments, and filings, to a third-party entity that has local expertise.
While this approach decreases your workload, it offers limited visibility into the payroll process, making it difficult to address payment errors and delays.
Plus, if you plan to hire talent in multiple countries, you’ll likely end up working with multiple local payroll providers in each country, further siloing your payroll information and decreasing visibility even more.
Global payroll outsourcing
The most efficient way to run payroll for a distributed workforce in France is to outsource payroll to a global payroll partner. A global payroll partner is a third-party entity that has expertise in payroll and tax laws worldwide, including in France, and administers payroll for your international employees on your behalf.
By coordinating with local payroll vendors worldwide, a global payroll partner streamlines payroll into a single management platform, helping you reduce errors, ensure compliance, and maintain transparency when paying a distributed workforce, no matter how many countries your employees are located in.
How to administer payroll in France before entity establishment
Companies that want to hire employees in France must establish a legal entity in the country. However, entity establishment is a lengthy process that significantly delays your eligibility to hire local talent. Also, you may not be willing to make long-term investments in the French market without testing the waters first.
A simpler workaround is to partner with an employer of record (EOR). An EOR is a third-party organization that allows global companies to quickly and compliantly hire and pay talent worldwide without establishing entities.
With expertise in international payroll and tax regulations, an EOR handles compliant onboarding and timely payroll administration on your behalf, allowing you to continue owning your day-to-day management responsibilities as you build a distributed workforce.
In addition to running compliant global payroll, an EOR also handles talent relocation, immigration, and global benefits administration while providing ongoing HR support, serving as an ideal solution for companies building international teams or eyeing expansion into more than one market.
Learn more: What Is an Employer of Record (EOR)?
Simplify payroll and taxes in France with Velocity Global
Don’t let France’s complex payroll and tax regulations discourage you from hiring top local talent and expanding to this lucrative market. With the right partner, compliantly hiring and paying talent in France is simple.
Velocity Global’s Employer of Record (EOR) solution allows global businesses to quickly and compliantly hire and pay top talent in 185 countries, including France, without establishing a local entity.
Our solution simplifies running payroll for supported employees in France and beyond by consolidating payroll into a single, easy-to-use platform that easily integrates with your HR stack—facilitating timely, accurate, and compliant payroll and reporting for your distributed team.
Lean on us to handle the heavy lifting and compliance issues so you can build a distributed workforce in France and beyond without the added burden.
Contact Velocity Global today to get started.
Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. You should contact your attorney or tax advisor to obtain legal and/or tax advice with respect to your particular situation. Only your individual attorney or tax advisor can provide assurances that this information—and your interpretation of it—is applicable or appropriate to your specific situation. All liability with respect to actions taken or not taken based on this information is hereby expressly disclaimed. All content is provided "as is" and Velocity Global makes no representations or warranties concerning this information.
