Payroll in France
France is among the countries with the most complex payroll system.
We live in an increasingly global world. Many companies wish to attract global talent in order to enter into local markets. Running payroll in a foreign jurisdiction is particularly challenging. Companies will have to deal with foreign laws and regulations regarding employment, benefits, taxes and social charges.
Some countries are stronger regulated than others, making payroll even more complicated.
French Payroll: Why it is so complex
Payroll in Europe is becoming more and more complex. With fluctuating payroll legislation, frequent tax changes and numerous collective bargaining agreements, France is among the countries with the most complex payroll system. Payroll is not only about making sure that people receive their pay on time. From the employee’s perspective, it is vital that all deductions on the payslip are transparent. From the employer’s perspective, compliance is a central issue. All local obligations regarding calculation, declaration and payment of payroll taxes and social charges must be met.
For your payroll in France, the key issues are the extensive number of laws and regulations, the complexity of the payroll calculation and rapid payroll legislative changes.
The number of laws and regulations impacting the French Payroll
Labor laws in Europe are rigorous and often pro-employee, notably in France. These laws and regulations strongly impact the French payroll.
To begin with, there is the Labor Code: with its 3000 pages (legislative and regulatory texts which clarify the law), it is the first source of Labor Law in France. Besides, many aspects of French payroll are governed by the Social Security Code with rules regarding health related absences.
In addition, there are about 500 collective bargaining agreements in France, concluded between organizations representing employees and employers. They contain specific rules (such as the notice period, severance payments or sick leave payments), usually more favorable and applicable to a given sector.
Then there are the courts that define the law. Especially in the area of labor and social laws they play a very important role to settle disputes about redundancy, severance pay, contractual termination, professional misconduct, probationary period, part-time work, etc.
Payroll regulations are not the only concern. Payroll data is sensitive information that needs to be protected based on the European General Data Protection Regulation (GDPR). Remaining GDPR compliant is critical. Any breach can result in hefty fines.
The Complexity of the calculation of French Payroll
The calculation of payroll taxes and social charges in France is very complex, especially, when compared to countries like Ireland, the UK, and Canada. Yet, France is not the only country with a complex payroll system, Belgium and Italy are not far off. In countries like Germany and Austria, where payroll complexity used to be moderate, payroll has become increasingly complicated over the last years.
For a foreign company, trying to understand French payroll deductions is a challenge.
Payroll Taxes can vary between 3 to 46 %
The first question we often get from our clients :
What is the employer’s payroll tax rate in France ?
Sometimes you can read that the average rate of payroll taxes and charges is about 33 %. However, this is not very accurate. Many specificities exist in France which add to the complexity of the calculation. The payroll tax rate in France varies based on your employee’s work conditions (working hours and salary level) and the specificities of your company (staff headcount, location, sector of activity, collective bargaining agreement).
The total employer’s payroll tax rate in France can vary between 3 % and 46 %. To simplify, the rate increases the higher the salary gets.
Before making key decisions it is necessary to have precise information about payroll taxes in France so that costs won’t be unpredictable. At My Payroll Pro France, our Payroll Services include cost estimations, so you will be able to plan ahead.
The French Payslip is incomprehensible
The complexity of French payroll becomes particularly evident when looking at the French Payslip.
Even though the French government aimed to simplify the French payslip by reducing the number of lines from sometimes 50 to only 30, it remains incomprehensible. Notably, because only the presentation of the payslip was simplified, and not the calculation itself. Whenever clients ask us to explain how a contribution is calculated, they are surprised how detailed and complex the calculation actually is.
Management of absences in the French payroll
The management of absences such as vacation, sickness and maternity is an important part of payroll.
Absences must be managed in a fair, transparent, and accurate way. Both business and personnel needs have to be respected. From an employer’s perspective, absence management has to be compliant with legal obligation. From an employee’s perspective, it has to ensure that they get the benefits they are entitled to.
In France, with hundreds of collective branch agreements, absence rules vary extremely based on industries. In addition, a very broad social security system adds to the complexity of absence management. The number of institutions receiving social contributions are very numerous, even for a single company. This makes absence management specifically difficult as processes are not harmonized.
At My Payroll Pro France we will guide you through this complex system, from setting up your Employee Benefits in France to handling absences.
Rapidly changing French payroll regulations
The legislation related to French payroll is constantly changing based on the political and social environment. Compliance with new or amended payroll regulations and social legislation is a central issue of payroll management.
Over the last years the French government introduced for instance the electronic declaration of all payroll related data (déclaration sociale nominative DSN). The intention was to streamline social welfare reporting.
The health crisis covid-19 exacerbated the trend of a rapidly evolving payroll legislation. The French government continuely had to put in place new regulations such as partial activity, exemption from charges or payment assistance.
My Payroll Pro France is your partner in every situation. We will make sure that you constantly stay informed of legal developments that can potentially impact your business.
How My Payroll Pro France can assist
As a foreign company you will not only have to deal with the complexity of payroll but also with the language barrier. Thus, it is even more important to have a partner that you can trust and rely on. My Payroll Pro is your French payroll provider. Besides French, we speak English and German helping our clients to overcome the obstacles that come with payroll in France. All of our clients have an international background. This is our field of expertise.
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