With one of Europe’s main financial centers, a competitive corporate tax rate, and a diverse range of industries, France is a highly attractive market for global companies.
However, one challenge businesses face when engaging talent in this country is navigating its local payroll and tax regulations. Just calculating tax liabilities for France’s complex Social Security scheme can be a major headache.
Fortunately, hiring and paying talent in France doesn’t have to be overwhelming.
Read on for an overview of French payroll. Find a list of mandatory taxes and contributions, learn how to calculate payroll in the country, and get tips for setting up compliant local payroll. Plus, find out how to hire and pay talent in France without setting up an entity.
Mandatory payroll taxes and contributions in France
Mandatory payroll taxes and contributions in France include Social Security and the state pension scheme. Employers must also withhold and remit income taxes on their employees’ gross pay.
We outline France’s statutory payroll taxes and contributions in detail below.
Social security
France’s Social security system is complex and includes various programs that offer a range of benefits to employees, including health insurance, workers’ compensation, retirement benefits, childcare allowances, and unemployment insurance.
Employers must also provide supplemental life insurance and healthcare coverage, which also fall under the Social Security umbrella.
Total employer contribution rates for Social Security are around 45% on average, while employees pay about 20% to 23%.
However, the federal government assesses rates based on various factors, like the number of employees and entity type, and it imposes contribution ceilings on specific programs. Collective bargaining agreements (CBAs) also impact Social Security rates. As a result, employer and employee contribution rates vary widely.
Below we list each benefit that falls under the French Social Security scheme, with the average employee and employer contribution rates for each:
| Scheme | Description | Employer rate | Employee rate |
|---|---|---|---|
| Health, maternity, paternity, disability, and death insurance | A program that provides basic healthcare and life insurance, plus income support for disabled individuals and employees on maternity or paternity leave | 13%, with the calculation base capped at €351,936 annually | 0% |
| Accident at work and occupational diseases | Insurance that provides income support and medical coverage for injuries and illnesses resulting from work-related accidents | 0.77% | 0% |
| Old-age insurance | A state-backed retirement insurance program | 8.55%, calculated on employee monthly earnings up to €3,666 1.90% thereafter | 6.9%, calculated on employee monthly earnings up to €3,666 0.4% thereafter |
| Family allowances | A state-backed program that provides financial support for employees raising one or more children | 3.45% for qualifying businesses and on annual employee salaries below or equal to 3.5 times the legal minimum wage (€5,241.6) 5.25% otherwise | 0% |
| Unemployment insurance | A fund that provides financial support for individuals who are unemployed but willing and able to work | 4.05% | 0% |
| Prevoyance life and disability insurance | A supplemental insurance program that ensures comprehensive coverage for employees and their dependents in case of injury or death | 1.50%, calculated on employee monthly earnings up to €3,666 2.00% thereafter | 0% |
| Mutuelle | A mandatory additional private health insurance program that ensures employees receive comprehensive medical coverage | 50% of the premium | 50% of the premium |
| Retirement (Plan d’Epargne Retraite Obligatoire) | A mandatory retirement plan in addition to state and supplemental pension schemes | Varies, with a max of 16% of the social security ceiling | 2-6% |
| Apprenticeship tax | A tax that helps companies develop apprenticeship programs and technological and vocational training | 1.73% | 0% |
How is payroll tax calculated in France?
To calculate payroll taxes and contributions in France, first determine your employees’ gross pay. Next, calculate the employer and employee payroll tax liability for social security, pension, and employee income taxes as percentages of your employees’ gross pay.
Remember to factor payroll taxes into your total employee cost calculations when building a distributed workforce in the country, as payroll taxes and contributions amount to additional per-employee costs on top of base salaries.
Interested in hiring an employee in France? Use our employee cost calculator below to accurately calculate payroll contributions and annual costs for your talent in France.
Key elements of payroll in France
As a foreign employer doing business in France or hiring employees in the country, understanding key aspects of running local payroll is essential for avoiding fines, limited business opportunities, and other noncompliance penalties.
Key aspects of local payroll in France include but are not limited to the following:
- Fiscal year. France’s fiscal year runs from January 1 to December 31.
- Payroll cycle. The payroll cycle in France is usually monthly, with employers paying wages by the last workday of the month.
- Minimum wage. The minimum hourly wage in France is €11.52.
- Overtime. A standard workweek in France is 35 hours. Unless an applicable CBA mandates otherwise, employees are entitled to 125% of their standard wage for the first eight hours of overtime and 150% for any additional hours.
- Termination. Depending on CBA regulations, employers in France must usually provide a one to three-month notice period to employees or pay an indemnity in lieu of notice.
- Severance. Employees who have worked for their employer for eight months are entitled to a severance payment of one-quarter of their monthly salary for each year of service up to 10 years and one-third of their monthly salary for each year of service beyond that. Employees are also entitled to compensation in lieu of paid holidays and days off that they have accumulated but not taken.
- Annual leave. As a general rule, employees in France are entitled to a minimum of five weeks, or 30 days, of paid annual leave. However, under the Portage Salarial business scheme in France, employees receive additional annual leave in lieu of paid overtime if they work more than 35 hours.
- Maternity leave. Mothers in France are entitled to 16 weeks of paid maternity leave and must take a minimum of eight weeks. They may take six weeks before the expected birth date and 10 weeks after and are entitled to various extensions in case of health complications or multiple births.
- Paternity leave. Fathers of newborn children are entitled to 25 days of paid paternity leave, or 32 days in case of a multiple birth.
- Adoption leave. Parents of newly adopted children receive up to 16 weeks of parental leave for the adoption of one child, or 22 weeks for a multiple adoption. If parents share the leave, they receive an additional 25 days for a single adoption and 32 days for a multiple adoption.
- Sick leave. Employees who have worked for at least 150 hours for their employer in the past three months are entitled to a maximum of three years’ paid sick leave at 50% of their regular wage, capped at €3,076.70 gross per month.
- Holidays. Employees in most regions of France receive 11 paid public holidays annually. Employees who live in the Alsace region or the Moselle department of France receive two additional paid public holidays.