Guide to becoming an Employer in France
France needs no introduction as a major player on the world stage. The second-largest country in the European Union by population with only Germany surpassing its GDP; and the seventh-largest economy in the world, France is a country rich in historic, cultural and economic heritage.
Nearly 80% of France’s economy is now made up of services, mirroring the economic make-up of many other developed Western economies.
Banking, financial services and textile-related businesses like fashion are especially strong in France, although it does retain a notably extensive manufacturing sector, too, especially in cars and aircraft.
Nonetheless, it should be noted that French culture and employment law can be very particular in parts and that its corporate tax rates are relatively high. These issues can pose some challenges to incoming businesses from a payroll perspective. This guide aims to give you some clarity around running payroll in France.
Establishing your business in France
Getting up and running in France varies significantly, depending on which type of business entity you want to operate there.
For limited companies (SARL), joint-stock companies (SA) and simplified stock companies (SAS), incorporation sets the business up either as a branch office, liaison office or subsidiary company. But the rules for subsidiaries, popular with incoming investors, are somewhat different because there are many tax benefits involved.
Articles of incorporation and patent/trademark registration should be drawn up and approved, and share capital should be deposited in a bank. Once this has been done and an incorporation notice filed, documentation should be filed with the Centre de Formalites des Enterprise and finally the Commercial Court.
The French financial year runs in accordance with the calendar year, and tax returns are expected to be filed by late May or early June the following year (the dates vary slightly in different departments of France). Running payroll from a French bank account is not mandatory but can be easier.
Employment Law in France
The Code du Travail is France’s labour code and is the cornerstone of employment regulations, both in terms of employer and employee responsibilities. It’s worth taking some time to familiarize yourself with its key points and principles.
Working hours in France are typically 35 per week – lower than in most other European countries – and are limited to ten per day and, in line with the EU Working Time Directive, 48 per week. However, these can be varied to an extent through collective bargaining. France is also very strict on the ‘right to disconnect’, whereby employees should not be expected to check emails or use similar work-related technology outside of their designated working hours.
Probation periods in France are generally between one and three months in duration, the latter being more likely for senior management. Collective bargaining can extend this to as much as five months. Terminating employees can be very difficult in France, and can only be done through necessary redundancy or proven underperformance of an employee. Notice periods are one month after six months of service, and two months after two years or more.
What is the Minimum Wage in France?
The minimum wage in France rose to €10.57 per hour on 1 January 2022; keep a close eye on this rate, as it has been increasing regularly (it had only previously been raised three months earlier). Lower rates apply to employees under 18 entering the workforce for the first time.
Bonuses are frequently awarded in France, but care must be taken as to whether they are contractual bonuses (in which case they count as part of an employee’s overall remuneration), or discretionary bonuses (in which case they don’t).
Severance pay is normally a quarter of a month’s salary for each of the first ten years of service, plus a third of a month’s salary for each year beyond that. This can also be adjusted in accordance with collective bargaining agreements.
What are the Social Taxes in France?
The “Pay-As-You-Earn” system of tax being withheld at source from each employee paycheck became standard in France in 2019. Resident income tax is complex, with a variety of different bandings, and different rates applying depending on whether an employee is single, married or married with children. Rates start at 0% and progress up to 45%.
French corporation tax rates used to vary depending on turnover and profits of each company, but as of financial years starting on or after 1 January 22, the rate of 25% applies to all businesses (on income sourced in France). VAT in France is 20% as standard, with a range of reduced rates for some essential goods.
Both employers and employees must contribute to the French social security system, which incorporates a wide range of coverage including health, work-related accidents, unemployment, retirement and more. Rates vary depending on each employee’s salary, location and personal circumstances, but generally speaking, employers contribute 47-50% of gross salary, and employees contribute 20-23%.
Maternity Leave in France
Maternity leave entitlement in France is 16 weeks, increasing to 26 for a third child onwards. Paternity leave is 28 consecutive days, plus three working days for the birth itself. Mothers who have made sufficient social security contributions receive state support, calculated on their average earnings for the three months prior to leave being taken.
Sick pay entitlement can last for up to 12 months, but eligibility and rates of allowance vary considerably according to several different factors: social security contributions, amount of service in the time leading up to the illness, length of illness, and any collective bargaining agreements in place.
French National Holidays & Annual Leave
France has 11 days of public holiday that are observed nationally:
- New Year’s Day
- Easter Monday
- Labor Day (1 May)
- Victory Day (8 May)
- Ascension Day
- Whit Sunday
- Whit Monday
- Bastille Day (14 July)
- Assumption Day (15 August)
- All Saints’ Day (1 November)
- Armistice Day (11 November)
- Christmas Day
Employees accrue 2.5 days of paid leave per month, giving them 30 days per year. As Saturdays are counted as working days in this calculation, this means five weeks rather than six. Most of this leave will be taken in August: many companies, shops and other businesses close fully for this entire month.
Why become an Employer in France
Any international business operating in France is not only accessing a huge market but one that can open doors in the rest of Europe and the Francophone world further afield. However, French culture and traditions can be very unique, and this can impact your desires for a smooth-running, compliant payroll system.
This is where TopSource Worldwide, as an expert in international payroll, can make the difference. Whether you’re just starting your expansion into the European Mainland, with ambitions of spreading into Spain, Germany and Sweden or you’re already operating within the French market, we have the solutions and expertise to help you deliver a payroll solution that will encourage staff retention and ensure national compliance.
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