Benefits in France

With strong employee rights and bulging union muscle, many employers in France are disinclined to add to the basket of generous state benefits, says Vicki Taylor

If you read nothing else, read this …

The state system in France, paid into by employees and employers, is so generous that organisations provide few other benefits.

Changing employment terms and conditions is difficult because trade unions hold a great deal of power.

French employees receive five weeks statutory holiday plus bank holidays.

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France hit the headlines earlier this year with controversial proposals for a new two-year employment contract for workers under 26 which employers could end without explanation. The plans, designed to alieviate a youth unemployment rate of 22.2%, were scrapped by the government after millions took to the streets in protest. Prime Minister Dominique de Villepin followed this with proposals to offer employees over the age of 56 short-term contracts and to make it illegal to send workers into retirement before age 65, both of which are due to come into effect next year. It looks as though French employers will have to adapt to new employment laws as well as work within set collective bargaining agreements.

In general, additional benefits besides those funded through the state’s generous social security system (Le S™cu), into which both employers and staff pay, are minimal. The readiness of the French to protest, along with the power held by trade unions could be why French bosses are often reluctant to introduce new benefits schemes like flex. Michael Whitfield, managing director of Thomsons Online Benefits, says: “[Staff can] get retirement benefits, a widow’s pension, death benefits and reimbursement for medical expenses [through Le S™cu].”

The Pension Reform Act 2003 also allows employers to set up company retirement savings plans but these are typically only offered by large organisations. Sabine Smith-Vadal, an employment partner in the Paris office of law firm Allen & Overy, says: “The employee can contribute up to 25% of their gross annual salary and the employer can match up to three times the employee contribution up to a limit of €4,600 a year. There is a favourable tax treatment for employers and [staff].” Le S™cu also reimburses up to around two-thirds of any medical costs.

However, to help staff meet their part of their medical charges it is common for employers to offer additional private health cover. “Medical insurance is more or less mandatory in any firm because the collective bargaining agreements usually ask employers to participate. The costs are generally shared [between employee and employer],” she adds. Profit sharing is also mandatory for firms with more than 50 staff. “Employees are entitled to receive part of the profits that are then kept in a fund for a minimum of five years. After this period, employees can receive the amount tax-free. In some companies, the amount could reach one month’s salary so it’s not peanuts” says Smith-Vadal. Employees are also entitled to five weeks holiday, and between 11 and 13 bank holidays a year. Overall, Smith-Vadal believes benefits beyond those provided by the state system are rare because it is so generous and staff prefer to receive a higher wage. But Whitfield has a different philosophy. “You have to be incredibly careful about changing terms and conditions as there are so many collectives involved that drive what you must give. [As a result] company cars, top-up to medical [benefits], pensions, and luncheon vouchers are about the only things we can offer through [flex].”