Independent Contractors in France

Hiring in France: freelancer vs. employee

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Independent contractors in France: a guide to hiring as a foreign company in France while maintaining compliance

Independent Contractor vs. Employee

Hiring in a foreign country can be a daunting challenge, especially in a country like France which is known to offer employees a high level of protection. Some companies may decide to opt for independent contractor engagements to avoid the legal and financial burden that comes with hiring employees.
This can be a risky and costly move. In recent years, platforms like Uber have made headlines for misclassifying employees as independent contractors, not only in France. The issue is not new and does not only concern online platforms. With freelancing becoming a more and more common practice, here is a gentle reminder.

Differences between freelance and employment

There is a fine line between independent contractors and employees. Definitions may vary from one country to another. Classification can be complex; understanding the differences between the two is crucial in order to stay compliant.

Relationship of subordination as defined by French jurisprudence

Both, independent contractors and employees perform work and receive a financial compensation for the work. In France, the difference between the two is the relationship of subordination.
According to French jurisprudence, a relationship of subordination is characterized by:

‘… the execution of work under the authority of an employer who has the power to give orders and directives, to control the execution and to sanction the poor execution of orders’.

Misclassification of independent contractors in France: risks & consequences

If French authorities consider the true nature to be employment, it could lead to severe consequences for the company.

  • Reassessment by the social security URSSAF:
    The company who misclassified an indepedent contractor in France will be liable for the social contributions that should have been paid.
    Risks: backpayments for several past years, potentially with a markup
  • Penal consequences:
    The intentional misclassification is a serious offence.
    Risks: criminal penalties including hefty fines and even imprisonment in severe cases
  • Legal action of the individual:
    The misclassified independent contractor can take legal action and claim :
    – outstanding payments such as overtime
    – payment of a notice period
    – severance payment if the termination was initiated by the company
    – lump sum indemnity of 6 months’ salary if the misclassification was intentional

Conclusion: independent contractor vs. employee

Compliance is a complex matter, even more if you hire in a foreign country like France. As a business owner it is crucial to be familiar with the difference between employees and independent contractors in France.

In many cases, in order to stay compliant you will have to classify the individual as an employee. You will then have to apply French-specific labor laws and pay local French social contributions.

Oftentimes, setting up a legal entity in France will not be necessary. Actually, you can hire an employee as a foreign employer (status ESEF) which is an ideal alternative to the costly employer of record solution.

Is your company currently seeking to hire an employee in France?
My Payroll Pro France is a French payroll provider for international companies. We will guide you; from the Foreign Employer Status registration, to the setup of your employee benefits.

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