The Complete Guide: Payroll in France and Things You Must Know

Expanding your business into France can be very rewarding. It also comes with the challenge of navigating one of the most intricate payroll systems in Europe. France's payroll system involves strict tax laws, social security contributions, and compliance responsibilities. You must meet all of these to maintain compliance and avoid penalties. Whether you're dealing with income tax, social insurance, or payroll reporting, being prepared is key to success.

When planning to grow your business in France, you'll also need to tackle employment challenges. There are high labor costs, rigid employment laws, and complex regulations to learn about. However, with the right approach and guidance, you can overcome these obstacles.

Let's help you understand the payroll essentials in France and offer insights on managing it smoothly.

Understand your company’s structure

Before examining payroll regulations, the first step is determining your business's legal structure.

French payroll rules vary depending on the type of company you operate. The three most common structures are SARL, SA, and SAS, each with its own requirements and benefits.

SARL (Société à responsabilité limitée)

SARL is a private company structure with limited liability. It's generally used by mid-sized businesses and financial institutions. Managed by one or more managers, it combines elements of both partnerships and capital companies. If your business has more than 60 stakeholders, an annual business meeting is mandatory.

SA (Société Anonyme)

SA is like a corporation and is designed for larger enterprises. It protects the owner’s assets against creditor claims and is well-suited for large-scale businesses. This structure has stricter management and reporting requirements. However, it also offers strong legal and financial protections.

SAS (Société par actions simplifiée)

SAS is the most flexible business structure in France. It is favored by small and medium-sized enterprises. It has no fixed management structure, making it easier to set up and operate. There are also lower capital requirements, and its shares aren’t listed on the stock exchange. This is why it is ideal for privately held companies.

How to manage employee compensation

In France, employee compensation is strictly regulated. You'll need to issue a formal employment contract. The contract should include all details about compensation, benefits, and working conditions. Here's a breakdown of key aspects:

Compensation

The authorities revise minimum wages in France annually. As of 2024, the monthly minimum salary is €1,766.92. You must make payments at least once a month, along with a payslip. If your employees work over 35 hours per week, overtime pay is mandatory. Overtime pay is generally 125% of their regular hourly rate for the first 8 hours and 150% afterward.

Termination

Terminating an employee without valid cause is illegal. Acceptable reasons for dismissal include poor performance, harassment, and violence. It also covers repeated unauthorized absences or company restructuring.

If you need to lay off employees due to financial difficulties or business closure, you still can, of course. However, you must follow proper procedures to comply with French labor laws.

Maternity leave

French employees are entitled to paid maternity leave, with the length of leave depending on their circumstances.

• Standard leave: 6 weeks before the due date and 10 weeks after.

• Complications: An extra 2 weeks before and 4 weeks after birth.

• Twins: 12 weeks prenatal and 22 weeks postnatal.

• Triplets: 24 weeks prenatal and 22 weeks postnatal.

Holidays

In France, Labor Day (May 1st) is the only guaranteed paid holiday. If employees are required to work on this day, they must receive an additional day’s pay.

For the other 10 national holidays in France, such as Christmas, paid leave is not automatic. It depends on collective agreements between employers and employees. However, most employers offer these holidays as paid time off.

Working hours

The standard workweek in France is 35 hours. Employees cannot work more than 6 days a week and must receive at least 35 consecutive hours of rest weekly. However, senior management roles are often exempt from these restrictions. Also, collective bargaining agreements may adjust work hours.

Sick leave

Employers are not required to fully compensate employees during sick leave. Instead, they must cover the difference between the social security benefit and the employee’s normal salary. Employees who are absent for over 30 days due to illness need a medical examination before they can return to work.

Tax compliance in France

France’s payroll system requires strict adherence to tax and social contribution laws. Companies must manage multiple forms of taxes, including corporate tax, payroll tax, and employee income tax.

Corporate tax

Corporate tax rates in France are fixed at 25%. Qualifying small-medium companies earning less than 7.63 million are eligible for a 15% deduction.

Apprenticeship tax

Employers in commercial, trade, or industrial sectors must contribute a percentage of taxable wages toward apprentice training programs.

Payroll tax

If your business is subject to VAT on less than 10% of its sales, you must pay payroll taxes on employee salaries. The rate ranges from 4.25% to 13.60%, depending on income.

Income tax

French employees are taxed based on their income and family size, with rates ranging from 0% to 45%. The tax brackets are:

• €0 – €10,064: 0%

• €10,065 – €25,659: 11%

• €25,660 – €70,369: 30%

• €70,370 – €157,806: 41%

• Over €157,806: 45%

Social security contributions

You must also contribute to their employees' social insurance. These contributions cover work accident insurance, family allowances, and old-age pensions. They also cover health insurance and supplementary pension plans.

Work accident insurance rates depend on the level of workplace risk. For family allowances, contributions range from 3.45% to 5.25%.

You must also contribute between 6.9% and 8.55% to old-age pension. Health insurance: Employer contributions to health insurance range from 7% to 13%. You are also required to contribute to the National Housing Assistance Funds between 0.1% and 0.5%. Lastly, depending on your employee salary bracket, you should contribute between 4.27% to 12.95% to the supplementary pension plans.

Considering hiring a global payroll partner for expansion to France?

Navigating France's complex payroll system can be daunting for newly global businesses. Hiring expert payroll services to ensure your company remains compliant might be beneficial. These providers can help you with local tax regulations and employment laws.

You can also partner with an EOR who can provide comprehensive support. It removes the need to establish a presence in France. It also covers everything from tax withholdings to payroll management, giving you peace of mind as you expand your business.

Managing payroll in France requires careful attention to detail, but with the right partner, you can simplify the process. By working with an EOR, you can ensure compliance and focus on growing your business.

FAQ

What are the main tax obligations for businesses in France?

Businesses in France must comply with corporate tax, payroll tax, apprenticeship tax, and employee income tax. These taxes vary based on company size, structure, and revenue.

How is overtime compensated in France?

Employees working over 35 hours per week are entitled to overtime pay. For the first 8 hours, employers must pay 125% of the regular hourly rate, which increases to 150% after that.

What is the minimum wage in France?

As of now, the monthly minimum wage in France is €1,539.42. This amount is updated annually, and employers must ensure that employees receive at least this amount.