France: New employment measures
A series of six measures designed to boost employment in small enterprises and among young people have come into force. These include the introduction of a new employment contract for use in small companies.
In a policy speech on 8 June 2005, the French prime minister, Dominique de Villepin, highlighted the government's commitment to fighting unemployment, which, he said, was its "absolute priority". Unemployment is running at over 10% and certain sections of the population, in particular young people, are experiencing difficulties finding permanent jobs. Therefore, according to de Villepin, it is essential for the government to introduce "tough, pragmatic and efficient measures" to reinvigorate employment and growth.
Subsequently, the French parliament adopted new legislation, which is designed to promote employment, introducing key employment measures and empowering the government to legislate by decree in this area. This appeared in the French official journal on 26 July 2005.
On 2 August, at its final session before the summer break, the council of ministers approved six ordinances, which were published in the official journal on 3 August. The day they were published, de Villepin took everyone by surprise by bringing forward the commencement date of the first ordinance, introducing a new type of open-ended contract, from the beginning of September to the following day, 4 August.
We outlined the main points of the measures in France: New employment measures. Below, we look in more detail at the content of the measures.
New recruitment contract
The first ordinance introduces a specific employment contract for new recruits (contrat de travail - nouvelles embauches) and is the most important of the measures. These contracts are designed to be used by small companies that employ up to 20 workers - enterprises of this size are the most reluctant to recruit new employees, but provide an important source of employment. On 1 January 2004, there were some 2.5 million such companies listed, accounting for just under one-third (30%) of all dependent employment. However, of these, 1.5 million did not employ any dependent workers. These companies are reluctant to hire additional staff, even if their current business plan would allow them to. In particular, employers are not keen to take on permanent staff, given the volatility of the economic situation and the problems associated with dismissing workers, even if the company finds itself in financial difficulties. This situation gives rise to a high proportion of fixed-term contracts, which account for some 70% of new employment relationships.
The most important feature of the new contracts is that they simplify severance procedures for small businesses with up to 20 staff during the first two years of employment. At the same time, however, they provide a set of guarantees for employees. The legislators hope that creating a new balance between the introduction of more flexible dismissal procedures and the provision of a degree of employee security will make it easier for unemployed people to find jobs.
These contracts must be in writing and open-ended. With the exception of the relaxation of termination provisions during the first two years of employment, they are subject to normal labour code Regulations and any relevant sectoral collective agreements. Once the first two years have passed, the employment conditions revert to the usual rules that apply to an open-ended contract (contrat à durée indéterminée - CDI).
The idea is that the first two years of employment are viewed as a "period of job consolidation". During this time, either the employer or the employee may terminate the contract in writing by means of a registered letter, without having to state any reasons for this.
At the same time, employees benefit from a range of guarantees as follows:
contracts may only be terminated after a period of notice, calculated according to the length of time the employee has worked for the company. For service of up to six months, two weeks' notice must be given. This rises to one month for service of between six months and two years;
if the employer terminates the contract, the employee is entitled to compensation of up to 8% of gross pay received since the commencement of employment. This sum is not taxable and is not subject to social security contributions;
employers are obliged to pay up to 2% of the employee's gross pay to the unemployment agency, Assedic. This sum is designed to finance activities by the public unemployment service to help employees return to work; and
employees are entitled to appeal against their dismissal within 12 months, in line with labour code provisions, and they must be informed of this right.
Employees are also entitled to training and training leave in accordance with labour code Regulations, which apply to workers on fixed-term contracts (contrats à durée déterminée).
The text of the ordinance includes many details that relate to the new severance conditions. In accordance with the EU Directive on collective redundancies of 20 July 1998(98/59/EC), termination of these contracts will count towards the collective redundancy thresholds for activating information and consultation thresholds. The rules relating to protection from dismissal for union and employee representatives also apply to employees on these contracts. Finally, there is a three-month waiting period dating from the day of severance before employees may be offered a further contract following the termination of their previous contract - this has been included to prevent fraudulent use of the system.
The ordinance insures employees against dismissal by allowing those people who are not entitled to claim unemployment benefit (which is not available unless a worker has had six months of employment out of the past 22 months) to benefit from a lump sum paid either by the state (for people who had worked for between four and six months) or the Unedic unemployment organisation (for those who had worked for more than six months) before being dismissed.
Further, if one of these contracts is terminated, the worker will be covered by the rights accorded to employees of enterprises with fewer than 1,000 employees who have lost their job as part of a collective redundancy exercise. These rights are contained in dismissal legislation that was introduced on 18 January 2005, which provides for a reclassification contract (convention de reclassement personalisé - CRP) to be agreed for each individual. If there is no agreement in place, reclassification measures can be implemented by decree.
Finally, a commission made up of social partner representatives will examine the introduction of the new contracts and evaluate their effect on unemployment. This work will be completed by 31 December 2008. Employers could begin to conclude these contracts from 4 August 2005.
Changes to the rules on workforce numbers
Another aim of the legislation is to promote the employment of young people. Accordingly, from 22 June 2005, the government passed legislation that enables it to legislate further to relax the rules governing the recruitment of young employees who were under the age of 26 on that date.
Detailed implementation of this provision was provided in an ordinance issued on 2 August, under which employers will not be required to include young people under the age of 26 on 22 June 2005 when calculating the contributions due on the basis of workforce numbers. This measure is designed to reduce the cost of recruiting young people before they reach the age of 26.
It also exempts young recruits up to the age of 26 from workforce numbers when calculating workforce-size thresholds that trigger certain employer obligations under the French labour code. However, this does not apply to rules governing health and safety at work.
Once the young people have turned 26, this provision ceases to apply. Employees' representative rights will not be affected by the new legislation.
This ordinance also amends employers' contributions towards the public transport fund, the national housing fund and the national construction fund.
This ordinance is, however, a temporary measure, which only applies until 31 December 2007. By this date a full evaluation of the measure will have been completed. After this date, young people recruited after 22 June 2005 will be included in workforce numbers. In the interim, it should make it easier for young people to find work.
Threshold of obligatory contributions
A third ordinance makes it financially easier for companies to cross the 10-employee threshold and also aims to encourage young people to take up jobs in sectors that are experiencing a labour shortage, by introducing a tax incentive.
It is recognised that there are twice as many enterprises employing eight or nine employees as those employing 11 or 12 - to a large extent explained by the fact that employers are liable to pay a range of extra employer social security contributions if they cross the 10-employee threshold. To help these companies, this ordinance amends the conditions applying to three sets of employers' contributions: those due to the national housing fund, the construction fund and the national training fund, which together amount to around €5,000 a year. For the first two contributions, the employee threshold at which they are due is raised, from 10 to 20.
The ordinance creates a specific system for the employer training contribution for those enterprises employing between 10 and up to 20 employees. The employer contribution is reduced, from 1.6% of the gross wage bill to 1.05%, and to 1.35% from 2% for temporary employment organisations. This does not affect employees' rights to training.
In future, this contribution will comprise the following:
a zero contribution, instead of 0.2%, towards the cost of financing individual training leave;
0.15%, instead of 0.5%, towards financing career training and individuals' training rights (droit individual à la formation - DIF); and
0.9% towards the costs of financing training plans.
The ordinance creates two further measures, which are designed to make it easier for companies to pass the 10-employee and 20-employee threshold.
In general, the French labour market is experiencing a paradoxical situation: although the unemployment rate is high, there are many sectors in which there is a labour shortage, leading to several hundred thousand unfilled vacancies. Accordingly, the ordinance introduces tax credits for young people under the age of 26 who continue working in a sector in which there is a shortage of labour for at least six consecutive months. The list of the jobs to which the tax credit applies is fixed by decree and is based on a number of objective criteria, such as the size of the sector and the ratio of supply and demand for a particular occupation. The 23 occupations that are covered include jobs in agriculture, horticulture, banks and insurance companies, retail and hospitality.
Certain conditions must be fulfilled before workers qualify for the tax credit:
the beneficiary must be less than 26 years old on the date on which they start working in this job;
the young person must be employed in an occupation in which there is a shortage of workers;
the employment in question must have commenced between 1 July 2005 and 31 December 2007 and must last at least six months; and
the amount earned during the six-month period must be between €2,970, which is equivalent to 50% of the national minimum wage (smic) calculated on a basis of 35 hours a week, and €12,060, which is equivalent to 1.8 times the smic, calculated on a basis of 39 hours a week.
The tax credit may be applied when the annual tax bill is due to be paid, or within six months of this. It may also be requested in advance at the tax office where payment will have to be made, within two months of the due date.
The credit is equivalent to €1,000 for people whose income during the six-month period is between €2,970 (or 0.5 of the smic on a 35-hour basis) and €10,060 (roughly 1.5 times the smic calculated on a 39-hour week). Above this limit, the amount of tax credit is reduced according to income and household.
New employment cheque system
The next ordinance is designed to reduce the administrative burden on very small enterprises that are associated with recruiting new employees, making social security declarations or paying wages (which have often been criticised for creating obstacles to employment). Such tasks are particularly burdensome for the smallest companies and they often have to be carried out by the director or their spouse.
Employers with up to five employees on their payroll will be able to make use of a new employment cheque system, which will enable them to fulfil all the administrative obligations and labour code requirements associated with hiring employees: recruitment notification, issuing a contract, declaring social security contributions and issuing payslips. The system will also provide the means by which employers can pay their workers.
Additionally, the ordinance provides details on how these companies can use the employment cheque service. This will help employers calculate the amount of employer and employee social security and other obligatory contributions that have to be paid, and also assist them in declaring and paying social security contributions. The way the system is managed will be set out in an agreement between the national institutions that are responsible for the various systems. Where there is no agreement, a decree will set out the procedures.
The measures contained in the ordinance took effect on 1 September 2005.
Public sector employment
The fifth ordinance relaxes access conditions to jobs in the public service by amending age restrictions and introducing new recruitment procedures to certain sectors (including local administration, the hospital sector and general government jobs), which combine training and internships.
The first measure changes age limits for civil service recruitment to make it easier for people to have second careers in the public sector. Existing age restrictions will still apply for specific careers with a relatively short duration, such as those that entail active service or posts that require long training.
The second measure is designed to help young people who have been unsuccessful in finding work by making it easier for them to find jobs in certain public sector areas, such as local administration, hospitals and government. It introduces new recruitment procedures that will allow young people between the ages of 16 and 25 years without diplomas or other professional qualifications and whose academic achievements are below the baccalauréat (school leaving certificate) to conclude a one- or two-year contract that combines training with internships in public administration.
These young people will be guided by a mentor or a tutor for the duration of their employment contract. Young people below the age of 21 will be remunerated at not less than 55% of the smic; the others will receive not less than 70%. They will be recruited at level C of the civil service scale and will have to pass an aptitude test, but will not need to participate in the public competition for civil service jobs. These jobs will attract a reduction in employer social security contributions. This new scheme (known as Pacte) should help 20,000 young people a year find jobs.
Young people who have problems finding work
The sixth and final ordinance is designed to help young people who are experiencing difficulties in finding work. Its social and work integration measures are based on experience in the armed forces.
The target population is young people between the ages of 18 and 23 years, who have failed at school and are at risk of social marginalisation. They will be selected for careers in the army at special recruitment days.
This measure is based on the following three principles:
these young people will receive six to 12 months' training, which is tailored to their individual situations. This will help them learn to play their part in society, as well as offer them educational and sporting opportunities. They will also be able to gain a vocational training qualification (certificat d'aptitude professionnelle - CAP);
the young people will be treated in the same way as those who are carrying out voluntary national service: they will be provided with accommodation and will receive a monthly allowance as well as a payment at the end of the training period; and
they will have access to a network of mentors - older, more experienced people with a distinguished military background.
A special body will be established to run the programme, which will play a coordinating role between the two ministries involved: defence and employment.
The first training centre is scheduled to open by the end of September 2005, at Seine-et-Marne. Initially taking on 250 young people, this number will rise to 700 by the end of the year. Eventually, 20,000 volunteers should benefit from the measure.
Reactions
The first ordinance, introducing the new recruitment contracts, has been well received by employers' organisations. The CGPME federation, which represents small companies, welcomed the opportunities for greater flexibility for its members to create employment. In addition, a press release issued by the employers' federation, Medef, stated: "The new contract … represents the first chance for France to encourage much-needed growth in very small businesses."
Laurence Parisot, the new president of Medef, broke the silence she had maintained since her appointment (EIRR 379 p.6) to extend a welcome to the general spirit of the ordinances, although it has been reported that she feels that not including under 26-year-olds in the workforce tally of very small enterprises sends out negative signals to young people - apparently one reason the government decided to make that a temporary measure.
However, the measure has been severely criticised by the opposition socialist party and the union confederations, which fear that these new contracts will create more precarious employment situations. The CFDT maintains that the new measures will boost employers' flexibility to the detriment of workers. The CGT has lodged an appeal with the state council against the legislation, claiming that employers will be free to terminate contracts during the first two years of employment without having to give good reasons and maintaining that the ordinance violates ILO Convention no.158 and article 24 of the European social charter, which require employers to have good reasons for dismissing workers. The Force Ouvrière confederation (FO) has also brought a case before the state council and threatened to take a case to the ILO.
On 3 August, the financial daily paper Les Echos suggested that the government bring forward the implementation date to disarm the unions, which were planning to demonstrate against the measure in September.
President Jacques Chirac expressed his satisfaction that "measures are in place to initiate new dynamism into the labour market."
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