Employer Payroll Taxes in France
The calculation of employer contributions and payroll taxes in France is very complex.
In many industries, labor is one of the biggest expenses of a company. Your total expenses are composed of wages, benefits, social contributions and taxes. As an employer hiring in France, it is crucial to familiarize yourself with French social charges before making important decisions.
The French payroll system is one of the most complex in the world. This is particularly evident when looking at the French payslip which is often composed of 30 lines. Behind each line stands a very complex calculation, impacted by different variables such as industry sector, staff headcount, characteristics of employment contract, and employee benefits.
In this article, we will break down employer payroll taxes in France. Employee deductions and the net salary in France are covered separately.
What is the Employer Payroll Tax Rate in France?
At My Payroll Pro France, we often get the question :
‘How much does an employee cost ? What is the employer payroll tax rate in France ?’
Some sources quote that the average rate in France is around 33 % but this has no informative value. Unfortunately, the answer to the question is not that simple. The employer payroll tax rate depends on a wide range of variables, notably on the salary level. It varies between 3 % and 46 %.
For a full-time position you should expect:
Annual salary ≈ 20 – 32 K: 3 – 37 %
Annual salary ≈ 32 – 49 K: 35 – 38 %
Annual salary > 49 K: 41 – 46 %
The only means of obtaining a precise rate is a cost estimation for your unique case. At My Payroll Pro France, these cost simulations are free of charge and part of our payroll services in France.
Yet, understanding payroll taxes remains crucial for making key decisions, such as hiring or granting a salary raise.
Employer Social Contributions in France: A Case Study
In order to visualize French payroll taxes and social contributions, we take an example of an employee working 35 hours per week in a company with a headcount of less than 11 employees.
In order to simplify the case, it is calculated with the following data:
- Occupational health and work accident contribution: 0.80 %
- Additional health insurance ‘mutuelle’: fixed contribution of 50 € per month / equally split between employer and employee
- Life insurance ‘prévoyance’: 1.40 % on gross salary up to social security ceiling / equally split between employer and employee
- Minimum Salary SMIC as of 1st of January 2022: 10.57 € per hour
To make data comparable, we applied contributions for non executive staff. For an executive employee 0.036 % APEC has to be added, as well as 0.80 % for life and disability insurance (obligatory 1.50 % covered by employer).
The calculations are based on official rates as of 1st of January 2022.
Comparison of Payroll Taxes
We compare employer taxes and contributions for different wage levels: from the French minimum wage referred to as SMIC up to a monthly salary of 7000 €.
The comparison of three different salary levels shows that the total employer rate significantly increases with growing salary :
Salary 1603 €: contributions of 60.21 € representing 3.76 %
Salary 2750 €: contributions of 967.04 € representing 35.17 %
Salary 6000 €: contributions of 2538.07 € representing 42.37 %
The payroll tax rate increases the higher the salary gets. You will notice that the rate is very low for the minimum wage, then significantly rises until it reaches a plateau. In our example, the maximum rate of 42.37% is reached at a monthly gross salary of about 5611 €.
What impacts the French Payroll Tax Rate?
The variables impacting the French payroll tax rate are numerous.
They can be broken down into variables based on:
- the employee’s salary level
- the company’s specifics
- the employee’s specifics
Ratio between employee's wage and minimum wage
In France, the employer payroll tax rate rises with increasing salary. The ratio between the employee’s actual wage and the French minimum wage has the most significant impact on the total employer rate.
A social charges relief applies to low-paid staff, additional contributions apply to highly-paid employees.
Social Charges Relief for low-paid staff
The Social charges relief RGCP (‘réduction générale des cotisations patronales’, formerly referred to as ‘réduction Fillon’) applies to employees with a salary up to 1.6 times the minimum salary ‘SMIC’.
The relief is the most important for employees with a minimum salary, the relief gradually decreases until 1.6 times the minimum salary is reached. This explains why the payroll tax rate is very low in the beginning of the chart.
Additional Contributions for highly-paid staff
For employees earning 2.5 times the minimum salary, an additional contribution of + 6 % for sickness insurance is due. Once the threshold is exceeded the additional rate of 6 % is applied to the total salary, explaining the second increase in the chart.
For employees earning 3.5 times the minimum salary, an additional contribution of + 1.80 % for family assistance is due. Once the threshold is exceeded the additional rate of 1.80 % is calculated on the total salary, explaining the third increase.
Company Specifics impacting the Payroll Taxes in France
Furthermore, the company specifics have an impact on the payroll tax rate. As mentioned in the beginning of this article, to simplify, we established the above calculations with certain hypothese. However, the rate might be slightly higher based on:
- Staff headcount: some employer rates go up when exceeding a certain number of employees
11 employees or more:
Training contribution: 1 % instead of 0.55 %
Social fee: 8 % on the employer contribution to life & additional health insurance
20 employees or more:
Deduction on overtime hours no longer applies : lump sum deduction of 1.50 € per each extra hour
50 employees and more:
Contribution to the national housing assistance fund (Fnal): 0.50 % on total salary instead of 0.10 % on salary up to social security limit
- Collective bargaining agreements:
Collective bargaining agreements may stipulate better insurance benefits or additional insurances like an supplementary retirement scheme. Based on many CBAs a death and disability insurance is mandatory for all staff, and not only executive level staff (CBA SYNTEC, CBA Wholesale, and CBA textile industry).
- Company activity and occupational risk:
The occupational accident and disease rate depends on your company’s activity and risks. Generally, it varies between 1 and 3 %. The work accident rate is communicated to the employer by dematerialized notification.
Employee Specifics impacting the Payroll Taxes in France
Lastly, the specifics of the employee have an impact on the payroll tax rate.
- Employee’s status: additional contributions for executive level employees
+ 0.036 % APEC unemployment services for executives
+ 1.50 % for a compulsory death and disability insurance taken 100 % into charge by the employer (calculated up to the social security ceiling)
Is there a Ceiling on Payroll Taxes in France ?
In France, the total tax rate does not significantly decrease after reaching a certain wage.
Even though a social security ceiling exists in France, it does not have the same implications as the ceiling in other countries. For instance, in Germany, when the ceiling is reached, no contributions are calculated on the exceeding amount.
In France, many contributions are calculated on the total salary, without limit. For certain contributions that are only calculated up to the ceiling, there are other additional contributions that become due once the ceiling is exceeded.
For the contributions that actually are limited, the limits are so high that they are rarely reached:
- Unemployment insurance contributions of 4.20 %:
It is no longer due on the exceeding portion of wages of more than four times the social security ceiling (164544 € per year as of 1st of January 2022)
- Retirement contribution of 14.78 %:
It is no longer due on the exceeding portion of wages of more than eight times the ceiling (329088 € per year)
With the limits set so high, it can be said that the ceiling rarely has an impact on the total payroll rate for wages.
French Payroll Taxes Costs Simulations & Optimizations
As seen above, a lot of different elements have an impact on the employer payroll tax rate in France. We understand that our clients need to have precise information about labor costs before hiring an employee. My Payroll Pro France therefore provides cost simulations as part of our services.
We also specialise in tax optimization. For instance, we can help to set up tax free incentives such as employee gift cards and meal vouchers. Incentives such as employee vacation incentives and corporate fitness incentives can also have a positive impact on your employee’s well-being and motivation. Furthermore, we keep you updated about the latest payroll news, such as the tax-free Macron Bonus. Lastly, you can learn more about the French Company Bonus Plan ‘intéressement’ which is one of the most important means of optimizing payroll taxes in France.
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