The fixed-term contract is the exception in France.
For any company wishing to employ staff in France, it is essential to familiarize itself with the specifics of French employment contracts, including French fixed-term contracts.
What is a CDD in France ?
In French, fixed-term contracts are commonly referred to as CDD contracts. This stands for ‘contrat à durée déterminée’, literally a contract of limited duration.
CDD contracts are strictly regulated in France. They can be concluded in limited cases that are authorized by law. The maximum duration must be respected. Some CDD contracts incur the financial consequence of a compensation payment equal to 10 % of the total gross salary.
Lastly, the risk of a requalification of a fixed-term contract into a permanent contract cannot be neglected.
Fixed-Term Contract instead of a Trial Period?
Many employers wish to conclude a fixed-term contract, rather than a permanent contract, in order to have more time to assess the new employee.
As a matter of fact, the trial period for permanent contracts is relatively short in France. Especially, when compared to countries such as Germany where the trial period is commonly six months. Based on French Labor Laws, the trial period for fixed-term contracts is between two months to four months. It is renewable only when certain conditions are met.
Many employers find this period too short to make a final decision about whether or not to keep an employee. The question arises whether it is possible to conclude a fixed-term employment contract in order to be able to separate from the employee easier and without compensation payment.
However, the possibilities of opting for fixed-term contracts in France are limited. It is not like in countries such as Germany, where fixed-term contracts can be concluded even without any substantive reason. In France, temporary contracts are only permitted if there is a legally stipulated reason.
Specifics of a French Fixed-Term Contract
French labor laws stipulates the authorized reasons as well as a maximum duration and number of renewals.
Last but not least, in many cases a 10 % severance payment is due at the end of a fixed-term contract. This payment aims to compensate the precariousness that goes along with a temporary contract.
A fixed-term contract must not permanently fill a job linked to the normal and permanent activity of a company. So a temporary contract can only be concluded for the performance of a specific and temporary task.
The French Labor Law provides for a list of authorized cases for a fixed-term contract.
Replacement of an Absent Employee
A fixed-term contract can be concluded to replace an employee who is in one of the following cases:
- Employee temporarily absent or whose contract is suspended:
For example: sick, maternity, parental, or sabbatical leave
- Employee temporarily decreases work hours to a part-time position
- Employee who has left the company definitively and whose position is planned to be deleted.
Temporary Increase of the Business Activity
The use of fixed-term contracts is possible in the event of a temporary increase of the business activity.
It can be a one-off or recurring increase. A common example is an overload of work resulting from an exceptional situation such as a commercial transaction or an urgent order.
To be noted that if the increase in activity consists of tasks that are normally repeated each year, on more or less fixed dates, for instance depending on the rhythm of the seasons or collective lifestyles (school vacation), the employer must then conclude a seasonal fixed-term contract and not a fixed-term contract for temporary increase of activity.
The start-up phase of a company is not considered a temporary increase.
The use of fixed-term contracts is possible for certain activities which are by nature seasonal.
This is the case in certain sectors, for instance the tourism (commercial activities in ski resorts or seaside resorts) and agriculture and food industry.
The use of fixed-term contracts is also possible for specific contract types such as a trainee or apprenticeship contract.
Duration and Renewal of Fixed-Term Contracts in France
For each authorized reason a maximum duration and a maximum number of renewals is fixed. The maximum duration ranges from 3 to 36 months.
For instance, a contract for a temporary increase of the business activity can be renewed twice, for a total maximum duration of 18 months.
Costs of a Fixed-Term Contract in France
Employers wishing to conclude fixed-term contracts in France do not only have to cope with restrictive provisions in regard to the conclusion of such a contract. In some cases, temporary contracts incur an end-of-contract indemnity. This only exist in few legislations. It is critical to take this into consideration before agreeing on a fixed-term contract as it can have a strong financial impact.
In French, this payment is referred to as ‘prime de précarité’, literally ‘precariousness bonus’.
Fixed-term contract Compensation - 10 % precariousness bonus
For certain types of contracts and subject to several conditions, employees are entitled to a compensation for the precariousness of a temporary contract.
The amount of this indemnity payment is equal to 10% of the total gross remuneration paid during the whole duration of the contract. It is due when the fixed-term contract comes to an end.
Dispenses of the compensation payment
The precariousness bonus is due for certain types of fixed-term contracts only. These include contracts for replacement of an absent employee and contracts based on a temporary increase of the business activity.
However, some contract types are dispensed from this payment. There are further exception based on the circumstances. Notably, in the event of a transformation into a permanent contract.
Common cases of Dispenses
Derogation from the 10% compensation payment exists for these contract types:
- seasonal contracts
- specific contracts such as apprenticeships
- contracts concluded with young people during school holidays
Furthermore, certain circumstances dispense the employer from the compensation payment:
- when the employee whose CDD ends accepts a CDI with the same employer
- when the employee refuses a permanent contract offered by the employer
- when the employee terminates his fixed-term contract because he has found a permanent contract with another employer
Lastly, the precariousness indemnité is not due when the employer terminates the fixed-term contract:
- during the trial period
- for gross negligence
- for serious misconduct
- in case of force majeure
Risk of Reclassification of a French Fixed-Term Contract
If the temporary contract does not comply with French regulations, the employer risks legal actions.
Notably, the employee can apply for a reclassification of the contract. If the Labor Court pronounces the reclassification, it is considered that the employee was hired on a permanent contract, and not on a fixed-term contract. This allows the employee to benefit from a certain number of additional rights.
Most commonly, fixed-term contracts are reclassified into permanent contracts for the reasons as follows:
- The fixed-term contract concerns a permanent job and not a specific and temporary task
- The total duration of the fixed-term contract exceeds the legal maximum
- The fixed-term contract is not established in writing, or does not contain the justification for the establishment of a fixed-term contract
For instance, in the past, many start-up companies concluded fixed-term contracts for their first employees arguing that this is a temporary increase of the business activity. However, the Labor Courts pronounced that the start-up phase is not regarded as a temporary increase, it is rather the normal activity of a company.
Early Termination of a Temporary Contract
After the trial period, the fixed-term contract CDD can be terminated before the scheduled term only in limited cases. The options are different from those of a termination of a permanent contract.
By the employer, the early termination can be initiated in the event of serious misconduct, force majeure or an inaptitude noted by the occupational doctor. By the employee, the early termination of a French fixed-term contract can be requested in the case of an permanent employment offer. It is also possible to terminate the temporary contract by mutual consent, but the procedure is different from those of a mutual termination agreement for a permanent contract.
In France, the temporary contracts are the exception. Based on the very strict French Laws, most contracts will have to be concluded as permanent contracts.
When concluding French fixed-term contracts, employers need to be aware of the financial implications and the risk of reclassification.
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