Being one of the world's developed countries, it is no surprise that France also has one of the most intricate and complex payroll systems in European nations. Global companies and employers need to deal with managing and reporting employee payroll for income tax, employee social insurance monthly contributions, value-added tax, and other compliance-related responsibilities.
If you plan to expand your business or company in France, you might get overwhelmed with the high labor cost and tax rates, rigid labor laws, and complex regulations. Luckily, Rivermate studied and researched this matter carefully. This article will help you understand and provide tips on how you can grow your business in France.
Know the Nature of Your Business
Before getting started, you need to determine first where your business fits in. Knowing whether your company is regulated or not is a good starting point. This is because France's taxation and payroll regulations are based on the company's structure.
The three common company structures in France include SARL, SA, and SAS.
- SARL (Société à responsabilité limitée). It is a private type company with limited liability. SARL acquires both features and characteristics of capital companies and partnerships. In addition, only a board of managers or a single manager manages the company. In the case of having more than 60 stakeholders, it is mandatory to conduct a business meeting once every year.
To distinguish between SARL and other company structures, keep in mind that SARL is used mostly by mid-sized businesses and financial investment institutions.
- SA (Société Anonyme). This business structure is somewhat similar to the United State's corporations and United Kingdom's public limited companies. Just to provide a historical overview, the French government implemented the SA to get rid of rampant speculations leading to a cycle of boom and busts in the nation's commerce.
One of the benefits you can get from SA is the protection of the owner's own assets against creditor claims. SA is also suited for large-scale businesses and enterprises.
- SAS (Société par actions simplifiée). Undoubtedly, SAS is the most increasingly used company structure in France because of the advantages it can offer to the owners. It is more flexible compared to other business structures and has low capital requirements. There is also no certain management structure. It offers more freedom for an organization to manage and operate. More importantly, capital marketers do not have any access to SAS, and the shares will not be listed on a stock exchange. It is designed for small businesses since it's easier to set up and operate.
Learn How to Compensate Your Employees Properly
Keep in mind that you are required to issue an employment contract in France. As an employer, you also need to state in the contract the full compensation details. For the processing of France payroll, you must take into consideration some employments guidelines. It includes Compensation, Termination, Maternity Leave, Holidays, Working hours, and Sick leave.
The minimum wage in France changes every year. Currently, the monthly minimum salary is set to €1,539.42. However, you may still opt to proceed with the collective bargaining agreements since it is more generous that requires minimum salary. Keep in mind that employees must get their payments at least once every month together with a payslip. Lastly, when you require your employees to overtime or work beyond 35 hours per week, it is your responsibility to give them overtime pay. Usually, it is 125% of their regular hourly wage for the first 8 hours and will change to 150% after that.
You cannot terminate your employees for no valid reasons. In France, reasons for dismissal and termination are the following:
- Failure to perform professional duties indicated in the contract, moral and sexual harassment, showing improper behavior in the workplace, repeated absences and leaves without permission, violence, physical and verbal abuse, and disobedience.
- Closing of the company due to bankruptcy, company's financial challenges, changes in positions, and business restructuring.
As an employer, you must know that your employees are entitled to have paid maternity leave. The guidelines are as below:
- When your employee has medical complications, they are granted with additional two prenatal weeks and another four for postnatal weeks.
- Mothers of twins can have 12 prenatal weeks and 22 postnatal weeks; triplets are granted with 24 prenatal weeks and 22 postnatal weeks.
- Eight weeks of prenatal leave and 18 weeks of postnatal leave are granted to employees who gave birth to one child with preexisting children.
- Six weeks of prenatal leave and ten weeks of postnatal leave are granted to mothers who gave birth to one child with a preexisting child.
In France, the only paid holiday is Labor Day, and when you required your employees to work on this holiday, you must give them an extra credit which is equivalent to one day salary. For the remaining holidays, both the employer and employees can make an agreement on whether they will get paid leave or not. The national holidays in France include New Year's Day, Easter Monday, Labor Day, Victory in Europe Day, Ascension, Whit Monday, Bastille Day, Assumption Day, All Saint's Day, Armistice Day, and Christmas Day.
As mentioned above, 35 hours is the required workweek in France. However, employers and employees may consider collective bargaining agreements. Employees may opt not to work more than six days per week, and they must receive 35 consecutive hours as their rest once a week. However, these guidelines regarding working hours are not applicable to senior management positions.
You are not obligated to fully compensate your employees for their absences due to illness. Also, you are only required to complete the difference between the benefit given by the Social Security Health System and the employee's normal compensation. When an employee gets sick for more than 30 days, he/she must undergo a medical examination before getting back to work.
In France, payroll compliance regulations are divided into three forms of taxes. It includes Corporate tax, Apprenticeship tax, Payroll tax, Income tax, and Social taxes.
The regular corporate income tax is commonly based on the company's revenue. When you have at least less than €250 million in revenue, your company will be taxed at the rate of 28%. On the other hand, companies with more than €250 million revenue must pay the required rate of 31%. Note that on the first €500,000, 28% rate will be reduced.
A 0.68% of taxable wages and benefits will be given to employers in commercial, trade or industrial, and other industries. The apprenticeship tax is required to assist and fund apprentice training.
You need to remit payroll taxes on salaries if your company is subject to the Value-Added Tax (VAT) on less than 10% of your total sales. The rates also vary depending on each employee's income. Usually, the rates range from 4.25% up to 13.60%. Note that you no longer have to pay if your tax owed is not more than €1,200 every year.
In France, the employee income tax is based on the employee's income and family size. It ranges from 0 to 45%. Below are the brackets of the personalized rate:
- €0 – €10,064: 0%
- €10,065 – €25,659: 11%
- €25,660 – €70,369: 30%
- €73,370 – €157,806: 41%
- Over €157,806: 45%
Employers in France are mandated to contribute to the social insurance payments of their employees. Work accident insurance, family allowances, old-age pension, health insurance, health insurance, the National Housing Assistance Funds, and supplementary pension plans are tax contributions funs social programs in France.
Here is a more detailed rate:
- Work accident insurance. Based on workplace risk of illness or injury. No contribution for employees.
- Family allowances. 3.45% or 5.25% for employees.
- Old-age pension. Up to 6.9% or 8.55% for employers.
- Health insurance. 7% or 13% for employers.
- The National Housing Assistance Funds. 0.1% or 0.5% for employers.
- Supplementary pension plans. 3.15% for employees and 4.27% for employers (Bracket 1); 8.64% for employees and 12.95% for employers (Bracket 2).
Why choose Rivermate as your payroll support in France?
Rivermate offers global payroll services around the world. Our company upholds values such as accuracy, integrity, and excellence. We ensure our clients that their businesses are 100% compliant with employment regulations and local tax requirements.
When you choose Rivermate as your employer of record in France, we can surely help you with the following:
- Tax withholdings
- French employment laws and regulations.
Global expansion requires tons of work. However, you can get great benefits once you make it successful. To guide you in dealing with the employment laws, high tax rates, and other complexities, it would be best to consider hiring a global payroll provider. These solutions are guaranteed effective and cost-efficient.
Give us a call, and let us see how we can make your expansion in France smooth and hassle-free.