A few weeks after Dominique de Villepin,
the new French Prime Minister, had announced that one of his
main goals would be to reduce the high unemployment rate in
France, the Government has adopted, on August 2, 2005,
several measures to introduce some flexibility in the French
labor Code in favour of small companies.
One of the most salient measures of the
new regulation is to create a new form of indefinite-term
employment contract, known as “employment contract for new
hiring”, whereby employees can be terminated at-will during
a two-year period as of the hiring date. This employment
contract is only valid in companies with a workforce not
exceeding 20 employees.
If the employee has a seniority of less
than 6 months in the company, he will get a two-week prior
notice period. In case of a length of service from 6 to 24
months, the employee’s prior notice will be one-month,
irrespective of his/her grade in the company (i.e.
blue/white collar, with or without managerial
responsibilities).
A severance indemnity amounting to 8% of
the total gross remuneration paid to the employee throughout
his/her employment will be due if the employee is terminated
within the next two years after the hiring date.
Interestingly enough, this severance indemnity will be free
of social security contributions (for both employer and
employee) and income tax (for employee).
Furthermore, employees who are not
allowed to get unemployment benefits will get some specific
measures in case of termination in companies with less than
20 employees. In particular, they will get:
-a remuneration of substitution amounting to €16.40
per day to be paid by the French unemployment Fund to any
employee with at least 4-month length of service under the
new form of employment contract;
-a personalized program set by the Unemployment Fund
to help them finding a new job quickly. This program will be
partially financed by companies via a specific contribution
equal to 2% of the employee’s total gross remuneration.
To encourage the hiring of employees in
very small companies (i.e. with less than 5 employees),
“employment-vouchers” will be used by employers as means of
payment. Thanks to this system, employers will no longer
need to issue employment contracts and salary slips.
Save for the new form of employment
contract which is in force as of August 4, 2005, the other
measures will be applicable as of September 1st,
2005.
We remain at your disposal, should you
need any further information on the above.
