Compensation in France can be complex, and employers have numerous factors to consider in order to calculate compliant wages for their employees.
If you are doing business in France and employ independent contractors, offer bonuses, allow customer tipping, or require overtime, for instance, your company could be subject to additional taxes or reporting requirements.
Let’s explore compensation in France, breaking down employment and compensation types, and complying with France’s minimum wage.
How compensation affects different employee types
If you’re hiring in France, you can employ two types of workers:
- Traditional employees, who are on a company’s payroll, are subject to payroll taxes and receive benefits
- Independent contractors, who are contracted by companies and receive payments toward invoices instead of regular paychecks
While traditional employees are subject to France’s minimum wage and mandatory benefits laws, independent contractors are not—they pay taxes to the French government based on their income and bill companies as they complete contracted tasks.
However, companies shouldn’t hire independent contractors in an attempt to save money on payroll. Independent contractors must register with the Centre de Formalités des Entreprises (CFE), and their activities are closely monitored. Most importantly, independent contractors are not allowed to serve as a subordinate to anyone in the company that hires them.
If the French government discovers that a business has illegally employed an independent contractor, the business must repay any compensation-related fees owed as a result of the fraudulent employment, including:
- Back wages to compensate the worker according to France’s minimum wage
- Social security payments (with interest)
- Back payroll taxes (with interest)
- Accrued paid leave time
- A payroll tax penalty
Before you begin hiring workers in France, determine the types of employees you want to hire and create a payroll or accounts payable schedule that accommodates all relevant regulations.
4 compensation types for French employees
Independent contractors can choose what they charge companies, but businesses hiring employees in France must create compensation structures that align with the country’s regulations. These regulations include stipulations for base pay, bonuses, tips, overtime and benefits.
1. Base pay
Base pay refers to the standard, basic wage that employees make during regular (non-overtime) working hours.
French employers have two options for base pay structures:
- Salary wages, which are based on a yearly total income
- Hourly wages, which are paid based on an employee’s total working hours
In addition, French employment law stipulates a minimum wage for hourly and salaried workers. As of 2022, the national minimum wage guarantees workers a minimum gross monthly wage of €1,603.12. This wage applies to a 35-hour workweek.
The national minimum wage changes each year to account for inflation, so it’s crucial that employers update their workers’ wages each time new regulations are released.
Aside from regulatory considerations, employers must determine an employee’s base pay using a few common metrics:
- Education level – France produces a highly skilled workforce. The country’s investment in job training, public schools and higher education provide workers with ample opportunities to seek training or specialized skills. But not all employees seek the same level of training. Thus, employers will often consider an employee’s education level when determining their base pay.
- Past experience – Employers may choose to pay more experienced workers higher salaries and less experienced employees lower base wages.
- Skills profile – Employees that bring unique or specialized skills to the table may produce additional profits for a business. Thus, employers should consider compensating them based on the value of their particular skill set.
While the three considerations above aren’t required by French law, they may motivate employers hiring in France to pay an employee above the federally regulated minimum wage.
2. Bonuses and tips
Bonuses and tips are vital compensation concerns for French employers, but they each feature their own specific requirements.
In France, it’s fairly common to reward employees’ exceptional work with bonuses, which are almost always taxable. However, it’s important to distinguish between two different kinds of bonuses:
- Contractual bonuses – These are bonuses set forth by the employment contract or collective agreement.
- Discretionary bonuses – These are additional bonuses an employer may choose to award, and are not guaranteed by the employee’s contract.
When an employee signs a contract, it may stipulate a yearly holiday bonus (a contractual bonus), and the employer could calculate this bonus based on:
- A flat rate each year
- A flat rate adjusted for inflation
- A percentage of a company’s annual profits
In addition to any contractual bonuses, an employer may reward an employee’s performance at random, in the form of a discretionary bonus. However, the employer doesn’t have a legal obligation to offer continued bonuses for excellence or any other reason.
Service workers in France may also receive tips from customers for exceptional service on the job. While tips used to be taxable income in France, a 2022 law officially exempted service industry tips from an employee’s income tax calculation.
3. Overtime pay
The French minimum wage is calculated based on a 35-hour workweek—thus, any time worked beyond 35 hours per week is considered overtime. French labor laws entitle workers to additional compensation for overtime hours, which typically include:
- A surcharge of up to 25% for the first eight hours of overtime that week
- A surcharge of up to 50% for additional overtime that week
Three additional regulations govern overtime work in France:
- The surcharge paid must be greater than 10% of that employee’s base pay.
- Employees may only work up to 220 hours of overtime per year.
- Employers may forgo overtime pay, opting instead for “compensatory rest.”
Any overtime an employee works must be requested by the employer to be counted as such. This protects employers from paying unauthorized overtime wages to employees who purposefully incur overtime to pad their paychecks.
Additional time considerations for employers in France
Excluding overtime, employers must ensure that their workers do not exceed limits for the number of hours worked:
- Standard working hours are 35 hours per week, and employees must not work more than 48 hours per week.
- Employees must not work more than 10 hours per day.
- During 12 consecutive weeks, employees must not work more than 44 hours per week on average.
- Employees must not work on Sundays and must rest for 24 consecutive hours at least once a week (though some exceptions apply for workers in specific sectors).
According to French law, employees are entitled to compensation through a specific set of guaranteed benefits that employers must fund or contribute to. All of the following benefits fall under the umbrella of France’s social security system:
- Health insurance – In France, employers typically fund 80% of the payroll taxes that go toward an employee’s health coverage.
- Unemployment benefit insurance – Employers must also contribute to the French unemployment insurance program, which employees can access if they’re terminated or laid off. Employees also contribute to the fund and their eligibility for benefits depends on their past social security contributions.
- Parental insurance and leave – French employers must compensate their workers for specific amounts of leave for paternity leave, maternity leave and adoption leave. While the French government reimburses eligible employees for their pregnancy-related healthcare expenses, employers must also pay wages during parental leave and maternity leave in France.
- Paid leave, vacation and holidays – According to French law, workers are guaranteed 25 working days of vacation per year.
- Pension – In France, both employers and employees contribute to an employee’s pension.
Calculating minimum wage in France
French law stipulates a minimum gross wage—an employee’s compensation before taxes and includes employee benefits and leave time. To calculate an employee’s minimum gross wage, add the following totals:
● Base wages
● Discretionary (but not contractual) bonuses
Tips and contractual bonuses aren’t included in gross minimum wage calculations.
If this total—an employee’s gross wage—is less than the federally regulated minimum wage, you must increase one or all of the components above to ensure compliance. If you remain in violation of minimum wage laws, you’ll have to pay back wages (with interest) to underpaid employees and pay a fine to the French government.
Manage compensation in France confidently and compliantly
Businesses hiring in France must comply with French laws regarding employee compensation to prevent penalties and other legal repercussions. However, compensation laws are nuanced, and it can be difficult to navigate employee pay in France if your business is new to international hiring.
Partnering with a global workforce solutions provider like a France employer of record can guide you with in-country HR expertise to help ensure compliance, not only with compensation but all local employment regulations.
Global Employment Outsourcing (GEO), our employer of record solution, helps organizations of all sizes hire internationally, even in countries where you don’t have a business entity. Speak with a global solutions advisor today to learn more about how you can bring on new talent and stay competitive in the international marketplace with ease.