Virtual Open House Webinar Series – France
The webinar focuses on hiring, on-boarding, employment contracts, employment law, benefits, payroll, termination and more in the France. Key Considerations: Legal Entity Setup: Your options from the liaison office/representative office is typically a vehicle for you to enter into the country for a short period of time for exploratory purposes.
Legal Entity Setup:
Your options from the liaison office/representative office is typically a vehicle for you to enter into the country for a short period of time for exploratory purposes.
You can also use a branch, like a US company establishing a branch there. Branches have become less popular because they don’t give you the legal presence and the entitlement to protections from company law and employment law in France, so they are less likely to be able to help you in terms of representation in court.
France has normal legal entity formats, such as common subsidiaries, SAS, SARL( most popular) and SA. France retains the option of a US company registering as a non-resident employer for payroll taxes and statutory benefits, which entitles you to enter into an employment agreement with a French employee, establish payroll, pay payroll taxes and pay statutory benefits on behalf of the employee. This is a good option if you don’t want to have a legal presence there.
Company Law Compliance:
It is pretty typical to have local directors. These can be US citizens when establishing the company. There is the traditional company law compliance requirements. France is a little bit different in that you incorporate the legal entity first, but you are actually not allowed to matriculate, i.e. actually do the registrations for payroll taxes and statutory benefits, until you actually have a French employee who has accepted your offer of employment and entered into an employment contract with you. So, it does vary in terms of that, which extends the process to typically 60 to 75 days to set up operations there.
From an accounting perspective, it is pretty standard. When setting up, there is a requirement for multi-currency and local translation requirements. The only difference is that, depending on the size of the operations, usually determined by the financial means, you are required once you get above a certain size to file statutory accounts with the government. They do have a value added tax implemented there, which is a fairly onerous tax on goods and services, as well as normal income taxes. VAT requires you to prepare tax returns on a quarterly and annual basis, and make payments if you have anything due as well as the income tax on an annual basis.
If you are having someone who is typically a part-time employer, which is typically 20 hours or less, and you do not want to hire directly, then you can hire them as an independent contractor from the US company. If you do not want to establish your legal presence, you look for companies like Global Upside, professional employer organizations (PEO), where they have a legal entity in the country, and they have the payroll and human resources services to support the employee, but they would work under your direction. You could also use the direct hire options, liaison office, wholly-owned subsidiary and the branch.
In terms of employment contracts, they have a concept of fixed-term contracts, as well as short-term contracts and long-term contracts. There are provisions over the amount of renewals that can occur. There are termination protections and there are collective bargaining agreements and works councils.
A lot of the employment law changed in 2017 when president Macron, through decree, which was unusual in terms of actually making changes to employment law and not requiring them to be approved by the government, changed some significant parts of the actual employment laws, really without the approval, really only consulting with the unions who are very strong in France.
Key sections were changed: there was a lot of devolvement down from negotiating at the national level through the unions, down instead to in-house discussions between the workers and the employers. That was a major change from having the unions negotiate on a national basis. There were also changes in terms of how terminations were allowed by companies that did not have profitable French operations, but did have global operations, which allowed a lot more in terms of workforce reductions. There was a codification of severance or termination payments which were due to employees: rather than leaving them to negotiations with the union or through the labor tribunal. There was a codification of what your entitlements are based on the length of the service that you have with the company. So, really trying to take away the power from the unions in terms of what they can negotiate on a case by case basis for damages.
There were also changes for small firms, those with less than 50 employees. There was a lot less regulation as it relates to the collective bargaining agreements applying to the labor laws, allowing you to actually have a lot more flexibility for negotiations and the work conditions they have. There are also changes in terms of short-term contracts, renewal periods and things of that nature, and also how workers could actually apply for termination benefits and damages that relate to their employer.
A lot of changes have come as a result of the 2017 labor reforms. They are a still very much a work in progress, with the unions still actively striking against them. This is very interesting in terms of how France is trying to open up its environment to become a lot friendlier in terms of the labor conditions over there.
In terms of benefits, there is the typical statutory, supplemental and discretionary benefits, such as private medical insurance, life insurance, enhanced pension and savings plans. There is a lot of the collective bargaining agreements that still apply if you work in a specific industry and your company is subject to that specific industry’s collective bargaining agreements. Then, a lot of the benefits are defined within the collective bargaining agreements that you have to provide.
France has probably one of the most detailed payroll systems because all of the requirements as it relates to the collective bargaining agreements and the labor code, a very onerous pay slip with lots of calculations in terms of allowances and deductions. Don’t be surprised to come across extensive pay slips, with all of these summarized. In terms of the hire to retire, there are lots of conflicting rules, which are trying to be codified by the government.
QUESTIONS AND ANSWERS:
What are the time tracking requirements in France?
Under French law, all employees must track their time, so it’s very important all employees track the hours that they work. It includes all executives, and all regular employees as well. So, everybody on payroll must track their hours.
The standard workweek in France is 35 hours. That’s very important; however, please note that your collective bargaining agreement may set a different standard. So, make sure you are always checking the CBA. Also, your employees cannot work more than 44 hours a week, on an average over a 12-week period. However, again, make sure you are checking your CBA.
Can we provide guidance in translating and understanding the employer and employee payments when processing payroll?
The French authorities make it very clear that payroll must be processed in French. The payslip for example is very extensive with the items that are listed and the summaries. There’s usually between 35 to 40 elements listed on the payslip. I do recommend that, if you do not understand French, to have your payslip translated by a professional translator that can give you a good overview of what each item is. Then you need to reverse calculate the items so that you understand what calculations are being put in place.
Who are the payroll HRAS, ATS and other systems vendors that can handle global clients including France?
We’re looking at global providers, very small company providers such as Intuit with pay scale, Paychecks, and the larger providers, such as ADP, North Gate, Celergo. In terms of the HRS, there is Oracle, SAP, ADP providers and ATS. We do offer our own system, Mihi, in terms of the time-attendance tracking, and also because France has a lot of statutory leave requirements which are required to be reported to the government. You really are looking at lots of time and attendance systems that track the hours, especially when you have these requirements in terms of the 35-hour workweek, the 44-hour average workweek over a 12-week period, and the maximum allowed 48 hours a week. So, a lot of that needs to be tracked and needs to be communicated. The government has the right to audit it. So, a lot of emphasis on time and attendance and statutory leave management systems.
How are RTT reduction of work-time days calculated and paid out? And how is the vacation accrued and paid out?
First off, the standard workweek in France is 35 hours, and any hours over 35 would be overtime and paid at that increased rate of pay. So the concept of RTT was for high-level employees, instead of calculating work hours, French law allows employers to enter into an employment contract that provides for an agreement in terms of work days rather than work hours. These extra rest days that are calculated are called the RTT days. They vary annually, from year to year, and is also determined by the CBA that would be applicable as to how many work days there are. There is an ongoing responsibility that the employer communicate with the employee about the workload every year to determine that they are able to balance their professional and personal life.
In regards to RTT days, it is very important that payroll and HR work hand-in-hand in understanding the hand-off between both teams. Understanding the employment contract, and following the employment contract, is important, and any items that seem ambiguous to payroll are clarified with the HR team. So that way everybody remains in compliance. In regards to unused vacation time, most folks in Europe take their time off. That is usually not the question, but in the event that someone does not take their time off, and especially the 12 consecutive days that must be taken off between May 1st and October 31st, which is a requirement, we can’t force employees to take time off. However, unused leaves in most cases cannot be carried forward.
What if it can’t be carried over? How do companies handle that at your end?
In France, the time off, is reportable to the government. If you have employees who have not taken all of their time off, the company is subject to fines and penalties, even though the employee may not receive monetary reimbursement for their time off, though the collective bargaining agreement may grant additional days off in the following year.
We very interested in general employment matters in France. Fixed term contracts vs indefinite contracts, contractors and terminations. Can we expand on that a little bit?
Just as there is a risk of misclassifying independent contractors in the US, it’s the same for France. However, in France, a bogus “self-employment” classification can bring up 3 years of imprisonment and a fine for employers. So, this is something that you really want to pay attention to, how you are determining the classification of an independent contractor. Most of the tests that we use in the US to determine independent contractor status are somewhat similar to other countries as well. For example, a long term contractor who works full time exclusively for your business will most likely be considered an employee in France.
An important step is to clearly state the scope of the services and the compensation and the terms in a written consultant agreement. This agreement should establish contractor status by showing independence and a lack of control over how the contractor performs the work. However, this written contract can easily be challenged. So, it’s not enough to prove your case and you will need justification on the truly independent nature of the work assignment. For fixed-term contracts, they are permitted but limited in scope: to replace somebody on a short term leave, seasonal work, apprentices or internships. They are also limited in duration and may be renewed a certain number of times. You want to make sure that you are meeting the requirements for fixed term contracts.
Indefinite contracts: This is the standard form of employment contract. There is no time limit, and either party may end the contract at any time, provided the notice periods are respected. However, terminating in France is not easy, and in general there are four main ways of terminating: one would be resignation, two would be a dismissal, three would be redundancy, and four would be mutual termination. Each of these general types of terminations involves different procedural steps that are vital to follow. When it comes to poor performance, it alone does not constitute an admissible ground under French law for dismissal. The employer must demonstrate the employee as incapable or lacks skills for carrying out the work in a satisfactory manner. Again, even following that, based on my own experience, it’s virtually impossible to terminate an employee, even if the case is at the works council for gross misconduct or poor performance.
How do you determine collective bargaining agreements and understand the employer’s requirements such as length of probation period or notice period.
About 90% of the companies are subject to CBAs. If the main activity of your business is engineering, consulting or IT, most of those types of companies are covered under the SYNTEC CBA. Other CBAs we see in our business are retail, trade and metallurgy. It’s important to determine precisely which CBA is applicable to your company, and on occasions we’ve had to do a full study to determine if the particular CBA is not clear. CBAs can dictate length of probationary periods, notice periods, and though we talked about changes in the employment law, RTT days would often be determined here, and insurance.
Why is it that the URSSAF deductions that are on employee payslips do not always match the final quarterly amounts that must be paid?
For the URSSAF, which is translated into organizations for the collection of social security and family benefits, the contributions that are shown on the payslip should not be more than 2 to 3 Euros off, and actually should be reconciled to what is reported. There is now a monthly URSSAF contribution option, which then guarantees that your reporting to the URSSAF will match the payslip.
Are options received in an employer recognition program taxable? If so, is it at issuance or upon redemption for rewards?
Anytime there is any money received by an employee, whether it’s employee recognition program or not, it would be considered taxable upon redemption.
What are the benefits, dangers or considerations in France?
My personal experience is, and one of the challenges is, if you are in a rapidly changing market where you have a particular software talent, but perhaps you are going to need a different talent in a couple months, is that it is can be very difficult to retool your workforce for the skills that you need. You have obligations to retrain and possibly find other employment opportunities for employees. On the other side, I personally found the French to be very industrious and productive people in the workforce, and the 35-hour workweek that gets commented on often is often not a reflection of the productivity level of the French employees.
Can we briefly explain what VAT is, and is there anything else that’s unique about France?
The VAT added requirements throughout Europe and some of the Asian countries as well. It is a tax on goods and services, a consumption tax, and it is very much impacts recording on all invoices sent to vendors, to customers, as well as invoices received from vendors, as you must make sure you collect all the information recorded over the course of the annual basis to meet the requirements.
Every country differs on what is subject to the taxes, and rates obviously change from country to country. So, I don’t think France is in any way particularly different in terms of the overall philosophy of the tax, but it is different in terms of the goods and services subject to it, and the rate does change.
*PLEASE NOTE – These questions and answers are intended to be used for informational and guidance purposes only, not as legal advice. Set up a consultation today with a Global Upside team-member for advice and strategy specific to the unique needs of your business and geographic area.
VP, Strategic Accounts
Andrew helps some of the world’s leading companies tackle complex global HR and Payroll challenges. Prior to Global Upside, Andrew worked at Price Waterhouse Coopers, Oracle and also consulted for companies like Nestle, P&G, Pepsi-Cola and Colgate Palmolive.
VP, Human Resources
Mary manages Global Upside’s HR capabilities worldwide, including the provision of services for startup organizations in need of creating scalable and efficient HR infrastructures as well as mature organizations in need of adjunct resources.
Director, Global Payroll
Nathan North is Director of Global Payroll and manages all aspects of payroll for Global Upside clients. Currently, he oversees payroll processing for 5000+ client employees across 45 countries.