Effective October 1, as a result of a new law of August 21,
social security and tax treatment of overtime has been
liberalized in France to encourage working additional
overtime hours. The new system is quite complex but changes
can be summarized as follows:
As regards taxes,
Employees are
no longer required to pay income tax on overtime hours.
The employee's
part of social security taxes on overtime hours (i.e.
about 25%) is reduced up by about 1/5 (by a max. of
21.5%, to be precise), depending on the salary level.
The employer's
part of social security taxes is reduced by €0.50 for
each hour of overtime in companies with more than 20
employees and by €1.50 in companies with 20 or fewer
employees.
Regarding overtime payments themselves,
where the rate
of extra payment for overtime is fixed by collective
agreement for the sector, it may not be less than 10% of
pay for regular hours worked.
In the absence
of a collective agreement, the new rates for overtime
are
- 25% extra for the first eight extra hours and
- 50% extra for each hour after that.
Thus, in the absence of a collective
agreement with a lower overtime rate, all companies must now
pay the 36th through 43rd hour of work per week at the rate
of 125%. Previously for companies of 20 employees and less,
when no collective agreement was applicable, the payment for
the first four hours was 10% extra rather than 25% extra.
The new law eliminated this exception, requiring such
companies to pay the standard 25% extra.
When the workweek was reduced to 35
hours several years ago, the French government's idea was to
create new jobs by requiring employers to hire additional
employees to perform work previously done via overtime.
However, not only did the measure not increase significantly
the number of jobs, it decreased the purchasing power of the
employees who previously worked overtime. In May 2007, after
France elected a new President, Nicolas Sarkozy, the
President expressed his desire to “rehabilitate work.” With
this new measure, the government hopes to increase
productivity and purchasing power by encouraging “exempted”
overtime hours; t he weekly average working time per active
employee now is viewed as limiting the dynamism of the
French economy. In 2005, a typical US employee worked 269
hours more than a French employee (i.e. about 18% more).
According to government estimates, the tax exemption for
overtime hours should increase the number of hours of work
by 70 million, the equivalent of 45,000 full time jobs.
Thus, under President Sarkozy, the aim of the government
with this measure is to increase employees' purchasing power
and stimulate production by increasing the number of hours
of overtime worked, whereas under the prior government the
intent was to create more new jobs by limiting the amount of
work the average employee could perform.
As a reminder, the 35 hour workweek is
not a minimum, nor is it a maximum; rather it sets the
threshold after which overtime compensation must be paid.
Because the 35 hour workweek is not compulsory, companies
may adopt different collective working hours or introduce
part-time schedules. However, even with the liberalizations,
the existing overtime limits remain in place: French
employees may not work more than 48 hours per week or more
than an average of 44 hours per week over a twelve-week
period, and at a minimum, French employees are entitled to:
one day-off per
week (which, in principle, should be on Sunday);
the legal daily
minimum time off of 11 hours; and
a 20 minute
break every 6 hours of work.
The maximum number of overtime hours
any employee may work each year is 220 hours (which
translates into an average workweek of 40 hours per week),
unless the collective agreement provides otherwise. Very
often collective agreements set lower limits, e.g., 130
hours a year. Over the threshold set either by law or
collective agreement, employers are supposed to ask the
labor inspector for a special authorization prior to having
their employees work additional overtime, subject to the
weekly and quarterly limits noted earlier.
A few categories of employees are
exempt from the overtime payments and limits on number of
hours worked because of their special working conditions,
e.g. sales representatives (“VRP”), top executives
(“cadres dirigeants”), and limited liability
company managers.
