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ContactCorporate Regulations Labor & Social Security Law in France
Labor Law
French Labor Law seeks to protect wages and hence it is quite restrictive for employers.
A wage earner is any individual employed by a company in which there is a relationship of subordination. This occurs whenever the employee does not hold a majority of the capital and is not remunerated by virtue of a business contract (outsourcing) and is not one of the company’s legal counsels.
The most frequent forms of contract are permanent (undetermined duration) job contracts (CDI) or temporary (determined duration) job contracts (CDD). In the absence of a temporary contract, what applies is a permanent contract. A contract must obligatorily be drafted in the event of temporary contracts and it is strongly recommended for permanent contracts.
A contract must be drawn up in French in order to be legally valid. The Labor Code, which is the basic regulation, can be replaced by a collective wage agreement or by a company wage agreement if said collective wage agreement and/or company wage agreement provide more favorable wages than the Labor Code. Ethical codes, which can be drafted in English (as required by the SOX provisions) in principle must not go against wages.
Labor Law applies in principle to all wage earners working in France, even if they are employed by a foreign company.
The legal workweek is 35 hours. Wage earners can work overtime under certain conditions.
The minimum wage (known as the SMIC) is €1,365 a month as from January 1st, 2011 for a 35-hour workweek. It is generally raised once a year, though not by much more than the inflation rate.
When they are hired, wage earners go through a trial period during which they can easily be dismissed. This period lasts one month for employees and three months for managers. Termination of wage earners jobs at companies is highly regulated. Dismissals of wage earners must be notified in writing. The layoff of any wage earner is always accompanied by severance pay which is proportional to the wage earner’s seniority at the company.
Senior executives (CEO, Chairman) are never considered wage earners as far as labor law is concerned. The above-mentioned rules do not apply to them. They may be removed from office at any time without severance, provided that it is not done in an offensive manner.
Social Security costs
The remuneration paid to wage earners is subject to social security contributions in France, provided that the wage earner works in France.
On average, the sums paid by employers represent an average of 45% of the remuneration per contract of wage earners, and the sums paid by the wage earners amount to around 23% of that same remuneration. The net remuneration paid to a wage earner amounts to around 53% of the total cost borne by the company (1-23%) / (1+45%) = 53%.
However, remuneration not exceeding 1.3 times the SMIC benefits from a reduction allowing a substantial decrease in the social security contributions by employers. For a «Smicard» (a worker earning the minimum wage), the reduction limits the social security costs to 15% of the gross wages.
Conversely, for a high remuneration, the percentage of employer costs decreases very slightly. For a gross annual remuneration of €100 K, the employer contributions average 43%. For a remuneration of €200 K, the employer rate is just 40.70%.
Under certain conditions, social security law authorizes an exemption from paying social security in relation to profit-sharing schemes paid to employees.