France: Country Profile

France bridge

Background information

History

France today is one of the most modern countries in the world and is a leader among European nations. It plays an influential global role as a permanent member of the United Nations Security Council, NATO, the G-8, the G-20, the EU, and other multilateral organizations. France re-joined NATO’s integrated military command structure in 2009, reversing DE GAULLE’s 1966 decision to withdraw French forces from NATO. Since 1958, it has constructed a hybrid presidential-parliamentary governing system resistant to the instabilities experienced in earlier, more purely parliamentary administrations. In recent decades, its reconciliation and cooperation with Germany have proved central to the economic integration of Europe, including the introduction of a common currency, the euro, in January 1999. In the early 21st century, five French overseas entities – French Guiana, Guadeloupe, Martinique, Mayotte, and Reunion – became French regions and were made part of France proper.

Economy

The French economy is diversified across all sectors. The government has partially or fully privatized many large companies, including Air France, France Telecom, Renault, and Thales. However, the government maintains a strong presence in some sectors, particularly power, public transport, and defence industries. With more than 84 million foreign tourists per year, France is the most visited country in the world and maintains the third largest income in the world from tourism. France’s leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies, and social spending that mitigate economic inequality.

France’s real GDP increased by 1.1% in 2015. The unemployment rate (including overseas territories) increased from 7.8% in 2008 to 9.9% in the fourth quarter of 2014. Youth unemployment in metropolitan France decreased from a high of 25.4% in the fourth quarter of 2012 to 24.3% in the fourth quarter of 2014.

Lower-than-expected growth and high spending have strained France’s public finances. The budget deficit rose sharply from 3.3% of GDP in 2008 to 7.5% of GDP in 2009 before improving to 4% of GDP in 2014 and 2015, while France’s public debt rose from 68% of GDP to more than 98% in 2015, and may hit 100% in 2016.

Elected on a conventionally leftist platform, President Francois HOLLANDE surprised and angered many supporters with a January 2014 speech announcing a sharp change in his economic policy, recasting himself as a liberalizing reformer. The government’s budget for 2014 shifted the balance of fiscal consolidation from taxes to a total of $24 billion in spending cuts. In December 2014, HOLLANDE announced additional reforms, including a plan to extend commercial business hours, liberalize professional services, and sell off $6.2-12.4 billion in state owned assets. France’s tax burden remains well above the EU average and income tax cuts over the past decade are being partly reversed, particularly for higher earners. The top rate of income tax is 41%. The government is allowing a 75% payroll tax on salaries over $1.24 million to lapse.

GDP (purchasing power parity):
$2.647 trillion (2015 est.)
$2.617 trillion (2014 est.)
$2.612 trillion (2013 est.)
Note: data is in 2015 US dollars
Country comparison to the world: 11
GDP (official exchange rate):
$2.422 trillion (2015 est.)
GDP – real growth rate:
1.1% (2015 est.)
0.2% (2014 est.)
0.7% (2013 est.)
Country comparison to the world: 168
GDP – per capita (PPP):
$41,200 (2015 est.)
$40,900 (2014 est.)
$41,000 (2013 est.)
Note: data is in 2015 US dollars
Country comparison to the world: 38

Employment Issues

You need to be extra vigilant and ensure that you follow French best practice to the letter when hiring in France. Invest in a stringent employment contract, which should be in French and tailored to the exact employee circumstances. Keep track of vacation time and ensure that annual leave days accrued are on each month’s pay slip. Keep employee pay slips, and all documentation in strict accordance with all French HR rules & regulations. France is very litigious in employment law terms and you need to invest in good legal advice – if not you could pay for it in the long run.

France has a strong trade union culture. A Collective Bargaining Agreement (CBA) is a written agreement entered into between one or more trade unions representing employees, or one or more trade unions representing employers in a specific sector. The CBA typically governs individual and collective labour relations, working conditions, employee benefits, etc.

Wages and salaries should be clearly outlined within any employment agreement, and if a 13th month salary bonus is to be paid or is mandatory as part of the CBA, this must also be stated within the employment contract.
When you are negotiating terms of an employment contract and offer letter with an employee in France, it will be useful to keep the following in mind:

Public Holidays
The people of France celebrate 10 national public holidays, including:nice-cote-dazur-sculpture
• New Year’s Day
• Easter Monday
• Labour Day/ May Day
• WWII Victory Day
• Ascension Day
• Bastille Day
• Assumption of Mary
• All Saint’s Day
• Armistice Day
• Christmas Day
Only Labour Day/May Day is considered a statutory public holiday in France, but in practice, all the holidays are given to employees. The remainder of the public holidays are granted by convention (collective agreement between employers’ and employees’ unions) or with the agreement of the employer.

Bonus
A 13th month salary is considered to be a universal bonus for employees in France.

Working hours:
• The length of the work week in France is typically 35 hours. Legally, employees must not work more than an average of 44 hours per week over a period of 12 consecutive weeks, and the work day may not exceed 10 hours or 48 hours during any given week, unless agreed to under a CBA. If employers agree to a longer work week with their employees, for any time worked over 35 hours per week, overtime must be paid.
• When overtime is incurred, payment must be made as follows:
o 25% an hour for each of the first eight hours of overtime (from the 36th to the 43rd hour inclusive)
o 50% for each hour after that

However, it should be noted that many exceptions are allowed, especially under CBAs. Some managerial staff, for example, classified as “autonome” work more than 35 hours a week, but are given additional holiday days.

Vacation
All employees have a right to paid leave once they have worked at least 1 month during the period of June 1st of the previous year to May 31st of the current year. Employees are entitled to 5 weeks of paid leave per year. However, if they work more than 35 hours per week, they may receive up to 4.5 more weeks of vacation for “reduction of working time.”

Sick Leave
Employees must obtain a medical certificate if they are absent from work due to illness or injury. During this time period, the employment contract is suspended and unless it is necessary to replace the sick employee with another employee under an indefinite term contract, the sick employee cannot be dismissed.

Maternity/Paternity Leave
• For a single birth, bringing the mother’s number of children to one or two, maternity leave is 16 weeks per child, 6 weeks before the expected due date and 10 weeks after the birth.
• For a single birth bringing the mother’s number of children to three or more, maternity leave is 26 weeks, 8 weeks before the expected due date and 18 weeks after the birth.
• For the birth of twins, maternity leave consists of 12 weeks before childbirth, and 22 weeks after childbirth.
• For the birth of triplets or more, maternity leave consists of 24 weeks before childbirth and 22 weeks after childbirth.
• The relevant CBA can also grant additional maternity leave.
• Employees can choose to increase the proportion of maternity leave taken after childbirth, decreasing the proportion taken before childbirth, if approved by a physician.
Employees have the right to return to their original position after the maternity leave and cannot be dismissed during pregnancy, maternity leave, or the four weeks after the end of maternity leave.
• Male employees are granted 3 days of leave on the birth of a child, and paternity leave of 11 consecutive calendar days (18 days if there are multiple births), which must be taken within the four months following the birth.
• Parental leave is granted to employees who have worked for at least 1 year before childbirth, and this right lasts until the child’s 3rd birthday. The employment contract is suspended during this time and the employer does not have to pay compensation. However, the employee can receive certain indemnities from the social security system.
• Employees are entitled to a daily allowance from the social security authorities and employers are not required to pay salary during maternity and paternity leave. However, CBAs typically state the employee’s salary must be paid in full if the employee has a certain length of continuous service (typically one year on the date of the child’s birth).
Termination/Severance
• The probation period in France is very helpful. If an employee is terminated while the probation period is in effect, your risk of a very high severance package is substantially reduced. The maximum length of a probationary period in France is 3 months for technicians and intermediate supervisors and 4 months for executive employees. The probationary period can be renewed once if the applicable CBA provides for it.
• The notice period for a termination in France depends on the employee’s length of service. Employees who are dismissed or made redundant are entitled to pay in lieu of notice if they are not required to observe their notice period.
• Severance pay is awarded if the employer terminates an indefinite-term employment contract or the employee has the minimum length of service required by the Labour Code or applicable CBA (typically 1 year). The amount of severance pay depends on the employee’s length of service and the applicable CBA stipulations. Typically the severance pay is calculated on the basis of an employee’s average salary (often including bonuses) during the last year of employment. Employees receive statutory severance pay (i.e. 1/5 of monthly salary for each year of service for the first 10 years of service and 1/3 for each year above 10 years of service) if no CBA applies or the CBA rate is lower than the statutory amount.
• For an indefinite-term employment contract to be dismissed there must be real and serious grounds for dismissal, and the employer must hand deliver a letter, or send it by registered mail with acknowledgement of receipt, giving the employee 5 working days’ notice of a meeting. The letter must include the time and place of the meeting and the employee’s right to be accompanied by a fellow employee or by person belonging to a list established by the local French authorities. After the meeting is held, the employer must notify the employee of its decision and if appropriate, specify the grounds for dismissal in a letter sent by registered mail with acknowledgement of receipt. The employee must acknowledge receipt and can dispute the dismissal grounds before an employment tribunal.

Additional Benefits
Employers in France often provide for additional benefits to their employees such as a company car, supplemental private health coverage, and meal vouchers. According to French law, employee-related expenses paid by the company but not fully incurred on professional grounds would be considered additional salary and a fringe benefit and must be taxed appropriately. Otherwise, during a tax or Social Security audit, the social contributions due on the fringe benefit will be reassessed as well as the personal income tax of the employee. The auditor may reject the deduction of the expenses in the company’s financials and any unpaid tax by the employer and employee will most likely be the liability of the company.

Bottom Line on benefits
Generally, we recommend budgeting 45% for benefits on top of the gross salary to calculate the total employee cost including benefits in France.

Employment Contracts
It is legally required to put a strong employment contract in place in France, in the local language, which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in France should always state the salary and any compensation amounts in Euro rather than a foreign currency.

French Trade Tariffs
A comprehensive list of French trade tariffs can be found here.

Business Culture – top tips

Tip 1img_5045-1
Educational background and intellectual rigour are important assets in France.

Tip 2
French government and industry have traditionally had a closer relationship than has been seen in many other industrialised nations and this has resulted in many senior civil servants taking senior roles in industry.

Tip 3
Long-term planning has been a central pillar of the French approach for many decades and leads to detailed forward planning by companies.

Tip 4
In alignment with the centralist tendencies apparent in France, most major French companies have their HQ in Paris – where most major decisions will be made.

Tip 5
The CEO (or PDG) of a French company is usually a highly charismatic leader who guides the general direction of the company in an authoritative manner and as such wields a great deal of power.

Tip 6
French companies tend towards rigid hierarchies with clear upward reporting and decision making lines.

Tip 7
Socialising across hierarchical business lines is less common than in many other European business cultures.

Tip 8
Promotion is gained through a combination of seniority, educational achievement and demonstrated competence.

Tip 9
Management style is often directive with instructions being given to subordinates in information style meetings.

Tip 10
Little open disagreement with the boss will be witnessed in open, formal meetings. Any such disagreements are aired in pre-meeting lobbying sessions or after the meeting.

Tip 11
Peer-group competitiveness can make cross functional project teams difficult to manage.

Tip 12
Logic is expected and respected. Any lack of discernible logic could be interpreted as sloppy thinking or lack of intelligence (or both).

Tip 13
There is less job-hopping than in some other countries. The French have traditionally been one-company focussed in their professional life – although this is starting to change.

Tip 14
First names are often used amongst peers (especially amongst the younger generation), although surnames are often reverted to in more formal situations or when dealing with superiors.

Tip 15
Eloquence is an important attribute and French managers will often try to dominate people through the force of their rhetoric.

Tip 16
It is important that any written communication is produced in a grammatically correct format.

Tip 17
Humour is based on wit and the intelligent use of satire – neither of which translate very well. The French are less likely to use humour in very serious situations in business than some other nationalities.

Tip 18
A strong separation is made between business life and private life and between business time and family time.

Tip 19
Business lunches can be long and not necessarily for the discussion of business. They are more a relationship building occasion than a place to discuss the finer points of a contract. Do not think time spent at lunch as time wasted – it I very valuable.

Tip 20
Punctuality is variable – possibly better in Paris than in the provinces.

For a more comprehensive guide to business culture in France please visit our website.