France: New 35-hour-week law approved

On 18 January 2003, the loi Fillon was published in the French official journal, following its validation by the constitutional council. The loi Fillon makes it easier for companies to implement the legislation governing the 35-hour week and sets out a timetable for harmonising the monthly minimum wage, as well as containing reductions in social security contributions for employers.

The task of introducing more flexibility into the reduction in working time legislation passed by the previous government has been one of the most pressing issues on the agenda of the new government, led by Prime Minister Jean-Pierre Raffarin (France: New government's programme). In the event, the Bill introduced in the autumn of 2002 by François Fillon, the minister of labour and social affairs, sped through the legislative process in less than six months - an indication of the importance accorded this and the other issues covered by the legislation.

The new law, "concerning wages, working time and the development of employment" (relative aux salaires, au temps de travail et au développement de l'emploi) comprises three main chapters, addressing working time, the harmonisation of the national minimum wage - the SMIC - and reductions to employer social security contributions. The new legislation leaves virtually unchanged the draft Bill approved by parliament in December 2002. Here, we reiterate the main points, which are discussed in more detail in France: New law relaxes implementation of 35-hour week.

Working time

The legislation does not abandon the principle of a 35-hour week, but it aims to create more flexibility for the social partners to negotiate the conditions under which working time reductions are implemented at individual companies. This will be achieved by a variety of measures, as set out below.

Overtime payments

The current two sets of provisions governing weekly overtime working are to be harmonised. In future, the following rules will apply:

  • Overtime worked will henceforth attract financial remuneration, unless a sectoral or company agreement allows for compensation in the form of time off in lieu. This replaces the former system, under which the first four hours of weekly overtime were compensated by time off (in the absence of an agreement), and the following four hours attracted a payment.
  • The value of the payment will be regulated by a sectoral or company agreement, but it must be compensated by a minimum payment equivalent to 10% of the time worked, unless there is an agreement that allows for 25% for the first eight hours of weekly overtime and 50% for any supplementary hours.
  • For companies employing up to 20 people, pending a sectoral agreement on the issue, the remuneration for the first four hours remains at the equivalent of 10% of the time worked (instead of 25%), until 31 December 2005.

Overtime thresholds

The overtime threshold of 180 hours per employee per year, fixed by the decree of 15 October 2002, will remain in force. Overtime limits agreed before 18 January 2003 will be subject to compensatory rest requirements only up to the 180-hour-a-year threshold. Finally, the size threshold for companies that will be obliged to offer compensatory time off in lieu is increased from 10 to 20 employees.

Working time for managers

The existing three categories of managers remain unchanged:

  • directors (cadres dirigeants);
  • production managers (cadres integrés dans une équipe); and
  • other "autonomous" managers, whose working time cannot be pre-planned and where working time may be calculated on an annual, monthly, weekly, daily or hourly basis. The legislation has made the definition of the type of manager in this category more flexible. References to "pre-planning" of working time for managers have been dropped.

Standby working

The conditions surrounding standby working, or being on call (régime de l'astreinte), have been clarified, reflecting an appeal court judgment on 10 July 2002. Henceforth, time spent on-call will not count in the calculation of rights to time off, with the exception of those periods of time actually worked.

Time-saving accounts

Employees wishing to contribute to a time-saving account (compte épargne-temps) will not be restricted to saving time, but will also be able to accumulate cash, in a money-saving account (épargne en argent).

Annualised working time

Agreed working time calculated on an annual basis may not exceed 1,600 hours. In this case, the law drops reference to an average 35-hour week.

Existing agreements

Collective agreements that did not comply with the previous working time laws, the loi Aubry I and II, but that conform to the requirements of the loi Fillon, will remain valid.

Harmonisation of the SMIC

Harmonisation of the range of SMIC rates in existence has also been one of the government's key policy priorities. The plethora of SMICs had evolved following implementation of article 32 of the legislation dated 19 January 2000, known as the loi Aubry II, which meant that employees transferring to a 35-hour week after 15 June 1998 would be guaranteed the same wage as if they had continued to work a 39-hour week. This was ensured through the introduction of the minimum monthly guarantee (garantie mensuelle de rémunération - GMR), which varies according to the value of the SMIC at the time when the company implemented working time reductions.

Following the commissioning of a report by the economic and social committee to examine the range of options available (France: SMIC and the 35-hour week), the government decided to harmonise the various SMIC rates to the highest rate by July 2005:

  • no new monthly guaranteed SMIC rates will be created after 1 July 2002;
  • all the various SMIC rates in existence will be uprated each year by decree, but only in line with movements in the consumer price index relating to urban households where the head of the household is a blue- or white-collar worker (instead of the normal formula which includes consumer price index movements and an amount equal to half the increase in purchasing power for blue-collar workers);
  • on 1 July 2005, all the different monthly rates will be increased to the level of the 1 July 2002 monthly rate; and
  • the monthly rate of SMIC, calculated on the basis of a 35-hour week, will also be aligned with the 1 July 2002 monthly rate, by means of uprating according to the consumer price index (with additional increases where necessary) by 1 July 2005 at the latest.

Minimum wage rates and guarantees since 1 July 2002

Employees working 35 hours, not covered by guarantee

Working time reduction before 30.6.99

Working time reduction between 1.7.99 and 30.6.00

Working time reduction between 1.7.00 and 30.6.01

Working time reduction between 1.7.01 and 30.6.02

Working time reduction after 1.7.02

Working time reduction after 1.7.02

151.7% SMIC

GMR1

GMR2

GMR3

GMR4

GMR5

169% SMIC1

Value in euros

€1,035.91

€1,100.67

€1,114.35

€1,133.49

€1,147.52

€1,154.27

€1,154.27

Maximum increase on the minimum guarantee (%)

11.4%

4.9%

3.6%

1.8%

0.8%

0.0%

1Without overtime supplements.

Source: Ministry for Labour and Social Affairs, September 2002.

The upward harmonisation of the SMIC is calculated to increase the value of the minimum wage by an average of 11.4% over the three year to 2005. The table above illustrates the growth of the national minimum wage including the GMR until 1 July 2002, the level at which the SMIC was frozen.

New method for calculating the GMR

The loi Fillon introduces a new formula for calculating the GMR between 1 July 2003 and 1 July 2005, which will result in increases as follows:

  • 1.6% for those employees currently in receipt of the GMR 1 (working time reduction before 30 June 1999);
  • 1.2% for those employees currently in receipt of the GMR 2 (working time reduction between 1 July 1999 and 30 June 2000);0.6% for those employees currently in receipt of the GMR 3 (working time reduction between 1 July 2000 and 30 June 2001); and
  • 0.2% for those employees currently in receipt of the GMR 4 working time reduction between 1 July 2001 and 30 June 2002).

The GMR 5 (working time reduction after 1 July 2002) will not require any increase as it marks the point of SMIC convergence.

New rules for calculating the SMIC

As stated above, the increases in the SMIC will henceforth be linked only to the increase in the consumer price index, on a temporary basis until 1 July 2005. However, in order to ensure convergence of all the rates to the 1 July 2002 rate by 1 July 2005, an extra increase (coup de pouce) will be awarded, fixed at 3.7% a year. It is this increase which will raise the SMIC by 11.4% over three years.

Reduction of employer social security contributions

The regulations concerning a reduction in employer social security contributions will take effect from 1 July 2003, and will achieve their full implementation by 1 July 2005. The government thereby hopes to create more favourable conditions for increasing employment as well as compensating employers for the increase in their wage bills resulting from the upward harmonisation of the SMIC. The new measures will replace the existing systems that currently provide financial assistance with social contributions to employers and that are linked to reductions in working time - these will remain in force until 30 June 2003.

The reduction will apply to gross remuneration during the period of one calendar month for each employee with regard to their hourly salary (monthly wage divided by number of hours worked). While the law does not provide any details of the formula for calculating the relief, since this will be contained in a decree, it does determine the upper limits of any relief over the three-year period, with a scale of progressive rates. Specific details are fixed for 1 July 2003 and 1 July 2004. The assistance currently available relating to reductions in working time (€636 for each employee for each year) will cease.

Transitionary period

During the period before the SMIC is harmonised, between 1 July 2003 and 1 July 2005, companies will benefit from a reduction in social security contributions depending on whether or not companies introduced the 35-hour week (or 1,600 hours a year) by 30 June 2003 at the latest. The conditions are more favourable for those companies that have already moved into working a 35-hour week. The new arrangements come into force on 1 July 2003 as follows:

  • The maximum reduction of 26% (for each employee whose working time was reduced to 35 hours on 1 January 2000 and earns the GMR 2 rate) will be available on payments made between 1 July 2003 and 30 June 2005. This reduction will be in place for pay of up to 1.7 times the SMIC (€1,894.39).
  • Two levels of relief are in place for companies that have not introduced a 35-hour week -

- for contributions from 1 July 2003, the maximum reduction is equivalent to 20.8% for employees earning the SMIC, up to a pay limit of 1.5 times the hourly rate of SMIC; and

- for payments from 1 July 2004, the maximum reduction will be equivalent to 23.4% for employees earning the SMIC, up to a pay limit of 1.6 times the hourly rate.

Full implementation

On 1 July 2005, the date the full measure comes into force, the contributions for all enterprises, regardless of actual working time, will be subject to a maximum reduction of 26% for employees earning the SMIC, up to a pay limit of 1.7 times the hourly rate.

Reactions

Union representatives maintain that the new legislation will not bring many changes, as they considered that an important development had been the relaxation of the overtime threshold which was announced in the autumn of 2002. Some sectors that had already negotiated an overtime limit - such as the paper and packaging sector, which negotiated a 160-hour overtime limit - regard it as unlikely that they will return to the negotiating table. Arnaud Couvreur, responsible for social affairs for the paper union, commented: "The possibility is there, but no one should be under any illusions. It is hard to renegotiate social contracts downwards." A similar opinion is held by Jean-Pierre Grillon, vice-chair of the textile industry union, which had already negotiated a 175-hour overtime limit: "It is not worth the trouble [to renegotiate the agreement] for the sake of five hours."

Eric Hyat, the president of the employers' federation Syntec, representing 38,000 companies offering information technology services and advisory and research services, said: "The impact of the 35-hour legislation was devastating. But no one is going to start renegotiating longer working. The 35-hour week has now become standard, and it would be impossible to reverse it." He added, "The unions have got other priorities."