An overview of French payroll Module 2 AGENDA Fact Tax - - PowerPoint PPT Presentation

An overview of French payroll Module 2

Year End 31stDecember

AGENDA

• Fact
• Culture
• Employment Law
• Setting up a Business
• Employer Obligations
• Time Management
• Absence valuation
• Tax
• Social Security
• Payslip review
• Final settlement
• Wage attachment
• Reports
• Sickness and Maternity

EMPLOYER OBLIGATIONS

3

New Employee

Declaration of employment

• The employer must complete a - Déclaration préalable à l'embauche (DPAE)

prior to hiring each new employee. This declaration enables employers to complete all hiring formalities at once.

• The declaration can be filed online at www.urssaf.fr or www.net-entreprises.fr
• The employer is responsible for making the relevant declarations and

contribution payments to the following bodies:

• URSSAF
• POLE EMPLOI (contributions collected by URSSAF)
• which collects unemployment insurance contributions as well as

contributions to the guarantee institution, Association pour la garantie des salaries (AGS)

• AGIRC and ARCCO
• which collect supplementary pension contributions via the CRE

(ARRCO institution) and IRCAFEX (AGIRC institution)

HIRING PROCEDURES – DPAE https://www.due.urssaf.fr/declarant/index.jsf

New Employee

New Employee

New Employee

DPAE - 8 Days before the start date

• If it is your first employee you must open your employer account with URSSAF
• Employer registration to Pole Emploi
• Employer registration to the occupational health service/department
• Employee registration at the caisse primaire d'assurance maladie CPAM
• Trigger for the medical examination an employee must undergo a medical

examination at the beginning of their employment to make sure that they are fit for the work

• Report - Déclaration annuelle des données sociales (DADS)

ANNUAL HEADCOUNT

Base Salary

• Base salary – Definition – Link with compensation - French Labor Code (Articles

L211/1–L236/13)

• The salary range for each job classification should meet the statutory minimum

wage for that classification as outlined in the Collective Bargaining Agreements (CBAs)

• An employee cannot be paid a salary below this legal minimum – You should

ensure that the salary range for all positions meets the national statutory minimum wage

• There may be a specific pay element which, compares base salary, minimum legal

and statutory minimum wage for that job classification as outlined in the CBAs and you should take the best in favour of the employee

Basic Pay

• Basic Pay forms the basis of an employee’s earnings and is based on pay scales
• The hourly and daily rates of pay are calculated from Basic Pay, which is based
• n Pay Scales and by the CBAs and job classifications
• Pay Scale setup consists of Pay Scale types, Pay Scale areas, Pay Scale groups

and levels

• Pay Scale groups generally represent the job grades in an organisation.

According to the employee’s job grade, an appropriate salary structure is applied.

• Pay Scale area generally represents different collective agreement areas in

accordance with the collective agreement that occurs within the enterprise

Collective Bargaining Agreement’s

MINIMUM SALARY

• The rewards Specialist should ensure that the salary range for each job

classification meets the statutory minimum wage for that job classification as outlined in the CBA.

• Ensures that the salary range for all positions meets the national

statutory minimum wage.

• French Labour Code (Articles L211/1–L236/13)
• The basic wage is usually paid once a month over 12 months or 13

months.

• When wages are paid over 13 months, half of the 13th monthly

installment will be paid in June and the other half in December but this can be also paid in one month only (November).

Remuneration

Remuneration based on worked hours :

• By far the most common remuneration, based on the time the employee is

present at the workplace, there is no reference to the amount of work the employee has to provide

• French labour laws use this formula to determine average monthly worked

hours :

• Hours worked per week (35) x weeks in a year (52)] divided by months in a

Year (12)

• This brings us to (35x52)/12 = 151.67 hours worked in a month when no

lateness or absence have been reported

Minimum Salary

• The employers should ensure that the salary range for each job classification

meets the statutory minimum wage for that job classification as outlined in the CBA

• And that the salary range for all positions meets the national statutory

minimum wage

• French Labour Code (Articles L211/1–L236/13)
• The basic wage is usually paid once a month over 12 months or 13 months
• When wages are paid over 13 months, half of the 13th monthly installment

will be paid in June and the other half in December but this can be also paid in one month only (November)

• In 2017, The statutory national minimum wage (SMIC) is €9.76 gross per hour.

This amounts to €1480,30 per month for a 35- hour work week for 151.67h a Month.

Minimum Salary

Minimum Wages In France

• Called SMIC : Salaire Minimum Interprofessionnel de Croissance
• Current Gross Hourly Wages : €9.76 effective
• Current Gross Monthly Wages : €1480.27 for 151.67 hours
• Current Net Monthly Wages : €1149.07
• (Figure from 1st January 2017)
• The SMIC is updated by government decree:
• 1st January each year or
• Whenever specific convenience goods prices increase over 2%

EMPLOYMENT CONTRACT

MINIMUM WAGES IN FRANCE

SMIC

• The SMIC also includes monthly bonuses and benefits in kind but yearly
• r one-time bonus are not.
• For instance the « thirteenth month bonus » (roughly an extra month

salary rewarded at the end of the year) cannot count in the SMIC index.

• And any bonus that is not directly related to the amount of work

provided.

• Bonuses can be fixed or variable but there are always in one of the

following category :

• Contractual (Bonuses amount and frequency are written in the

employment contract)

• Considered Contractual (The effect are the same as above but it is not

formaly written)

• Benevolent (The employer have no obligation on amount and frequency)

Bonuses

The most common bonuses in France :

• Seniority Bonus :
• To reward loyalty to the company, determined by industry-wide agreements

and the formula is usually:

• Seniority bonus = Percentage x Basic Salary
• Sometimes the Basic Salary can be the one of the lowest rank of the industry and

it can also be a lump sum

• This bonus is independent of the amount of work provided and therefore is not

to be considered when calculating the SMIC

Bonuses

• Assiduity bonus :
• This bonus rewards the efforts of the employee to avoid lateness

and absences

• It can be paid monthly or quarterly for the previous month or quarter
• The assuiduity bonus in January will be earned during

February for instance

• Constraint bonus:
• Proportional to the constraint (night shift, cold environment...)
• Usually paid monthly
• Results bonus:
• Dependant of the industry-wide agreements
• Thirteenth month bonus :
• 1/12 of the yearly salary earned at the end of the year

Seniority Bonus

• Seniority Bonus
• Amount = Base * %
• Base = mini du seniority coefficient * monthly hourly average / hourly

collectif

• Seniority Percentage: (issu de la table ANC)
• Collective Bargaining Agreement = payable after 3 years. 1% per year

until the 15th year: 3%, 6%, 9%, 12%, 15%

Name of the Bonus Subject to Contributions (FR : Cotisations) ? Subject to Levies (FR : Contribution s) ? Subject to Taxes ? To be accounted for Paid holidays base ? To be accounted for Extra hours ? Exceptional Bonus Yes Yes Yes No No Seniority Bonus Yes Yes Yes Yes No Assiduity Bonus Yes Yes Yes Yes Yes Constraint Bonus Yes Yes Yes Yes Yes Results Bonus

• r any Bonus

with objectives

• r targets.

Yes Yes Yes It depends No Thirteenth month bonus. Yes Yes Yes No No

Bonuses Table

Leavers de-registration

• Unless the collective bargaining agreement (CBA) or the

employment contract states otherwise the employment contract can be terminated without any restrictions during the probationary period

• Where an employee has passed/exceeded the probationary period set notice

periods will apply in line with the CBA or employement contract and the notice period will depend on the length of service

• If the employer terminates the employment they are required to issue a

written statement indicating the reasons for leaving

• The employer must provide the signed letter to the employee as a receipt
• f all monies due before leaving
• A certificate for unemployment registration must also be provided on the

final working day and a copy sent to the unemployment office

Leavers de-registration

• Depending on the terms of the termination and the reason for leaving

additional documents may also be required

• The employer will need to provide a copy to the employee – this is usally

completed by the employer’s solicitor or HR department

• Where the employee is made redundant then the employer completes a

CSP form, an occupational security contract

• The main purpose of the CSP is to facilitate a return to permanent

employment e.g. through redeployment or retraining

• The form must be submitted to the Pole d’Emploi

Business Expense Management

• Employee-related expenses include expenses paid directly by the company to equip

their employees (with mobile phones, etc.) and expenses reimbursed to the employees through expense reports

• Companies may reimburse their employees for business-related expenses
• The employees would provide an expense report substantiating the expense incurred
• The employer should keep the original report in order to be able to disclose them to

the tax administration in case of tax audit or social audit

• The employer may want to reimburse these expenses to the employee via the payroll
• The employer must report the reimbursements made to all employees:
• At the end of the calendar year the employer reports, the amount of expenses

reimbursed to the employees during the year via the yearly declaration “DADS”

• Whether they are directly paid by the company or reimbursed to the employees,

employee-related expenses may be considered, in some cases, as fringe benefits and taxed with social contributions

Benefits In Kind

• According to French tax law, employee-related expenses paid by the company but

not a cost incurred as part of their duties, is an additional salary payment, and has to be treated as a fringe benefit

• Fringe benefits may also exist when the expense is a non-wage compensation

provided to the employee (e.g. renting of the employee’s flat, gift to the employee,

• etc. A gift to employee max is 154€ per year in 2017 and specific events only
• Specific exemptions may apply, - gift to employee has an annual cap per year and

is only allowable for specific events)

Fringe benefits

• Fringe benefits may exist when:
• the expense is excessive in comparison with normal way of business (such as

spending on too many hotels or restaurants fares, etc. )

• the expense is partly incurred for the employee’s private use (payment of full

phone bills whereas phones are partly used for personal use, etc…)

• the expense is not supported by necessary documentation (i.e. invoices with

information detailing how the expenditure is business-related: a visa card receipt, for example, is not considered as sufficient documentation)

Benefits in Kind - Control

• If these taxation rules are not applied, then in a case of a tax audit or Social

Security audit, the auditor may reassess:

• the social contributions due on the fringe benefit (employee’s and

employer’s contributions)

• the personal income tax of the employee
• and possibly reject the deduction of the expenses in the company books

(inducing increase of corporate tax)

Benefits in Kind - Control

• If, further to the tax audit, unpaid tax is claimed by the French administration:
• The company would be liable for both employer’s and employee’s payroll

contributions

• But the company would not be responsible for the payment of employee’s

private income tax relating to the reassessment

• Some benefits granted to employees may not be considered as taxable given the

circumstances (e.g. relocation expenses when an employee is moving house for a new job/position, or travel expenses when the employee works far away from his family, etc.)

To estimate the car fringe benefits for an employee (The employee is paying the fuel). Cost of the car with VAT = 30 000 * 20% (rate for a new car) = 6000 € Car Maintenance = 1500 € Car insurance = 1000 € Total = 8500€ Amount to be calculated usually on a monthly basis = 1/12 = (8500/12) = 708,33€ per month Jan 2017 payslip Base salary = 151,67*20 = 3033,40€ Car fringe benefits = + 708,33€ Gross = 3741,73€ Social contributions – XXX,00€ Net taxable income = YYY,00€ Car fringe benefits = - 708,33€ Amount to be paid = ZZZ,00€

Benefits in Kind

Subject to the income tax the monetary value of income in kind For a meal = 4,75€ (01/01/2017) or 9,50€ per day Housing = specific calculation scheme, according the value of the lease, the purchase price, the market price and the council tax Car = 20% purchasing price or 10% (more than 5 years) + insurance cost + maintenance cost + fuel IT = laptop, mobile annual fee 10% purchasing price or 10% subscription fee

Benefits in Kind

• 1 MEAL = 4,75€, 2 Meals 9,50€
• For specific jobs, employees working in a restaurant, hotels
• 1 MEAL = 3,54€, 2 Meals 7,08€

Benefits in Kind Food

Car = 20% purchasing price or 10% (more than 5 years) PLUS insurance cost PLUS maintenance cost PLUS fuel

Benefits in Kind Car

• Employee-related expenses include expenses paid directly by the company to

equip their employees (with mobile phones, etc.) and expenses reimbursed to the employees through expense reports.

• Companies may reimburse their employees for business-related expenses. The

employees would provide an expense report substantiating the expense

• incurred. The employer should keep the original report in order to be able to

disclose them to the tax administration in case of tax audit or social audit.

• The employer may want to reimburse these expenses to the employee via the

payroll.

• Moreover, the employer has a reporting obligation concerning the

reimbursements he makes to his employees: at the end of the calendar year he has to report on the yearly declaration “DADS” to the French administration, the amount of expenses reimbursed to the employees during the year.

• Whether they are directly paid by the company or reimbursed to the

employees, employee-related expenses (or part of it) may be considered, in some cases, as fringe benefits and taxed with social contributions.

Benefits in Kind

TIME MANAGEMENT

40

• RTT (Time off requirements as compensation for working more than 35 hours per

week) is mostly managed through the T&A systems

• Hours of delegation - Employee attendance for union meetings/duties are generally

not administered as a leave type through payroll

• Job Search Leave - Leave allowed during an employee’s notice period for job

search and is usually managed locally between the line manager and the employee. It does not require leave administration but must be confirmed in a letter to the employee within the separation agreement

• Payroll systems will usually be set up with the maximum working hours limits

35 hour agreement, RTT and Leave

• Overtime exists when an eligible payee works more than the standard number of

hours during a week stipulated by the French government

• If an employee works overtime, an employer is obligated to pay a surcharge on the

extra time worked

• If the extra time worked exceeds a second limit, then an employer may have to give

the payee time off in lieu (repos compensateur)

Overtime

• Overtime calculations are based on a weekly calculation of hours worked, but

in certain situations the standard working hours can be calculated on a yearly basis

• This is referred to as the modulation of working hours.
• The modulation of working hours can be set up in companies if a CBA or a

company agreement exists

• There is a maximum limit of 220 hours overtime per year per employee

Overtime

Some overtime may be taken as time off in lieu. These hours are known as bonus hours.

• There are two different types of compensation in lieu of time off :

Repos compensateur

• This type stipulates that when a payee works over a weekly hour limit, that

payee is entitled to receive some hours paid with a surcharge and to also acquire some compensation in lieu entitlement Récupération d’heures

• This type is not stipulated by regulations and companies can decide whether

to apply this rule. The employee can take some time off instead of being paid for the overtime

Overtime

• IJSS (social security daily allowance)
• When an employee is eligible to receive a daily IJSS allowance during an absence,

the employer must uphold the employee’s salary

• Eligibility the allowance will be paid to employees who are employed for more

than one year according the collective agreement (depends on company and CBA’s) (referred to as subrogation)

• Daily IJSS allowance is not taxable
• IJSS is paid for illness, accidents at work, and maternity

Sickness - IJSS

• French law requires employers to pay a guaranteed percentage of a payee’s gross

salary during the time that the payee is on sick leave, subject to certain conditions

• Alternatively, some collective agreements stipulate a guaranteed percentage of a

payee’s net salary during a payee’s sick leave

• Many collective agreements state that the allowance paid to an employee, after

deduction of the social security daily allowances, cannot result in the their net salary exceeding the net salary earned when not on sick leave i.e. the total of the payment cannot exceed normal pay

• This is called the guarantee on the net salary (garantie sur le net)

Managing the Net Guarantee

Daily cash benefits

• In the event of incapacity for work, a sick note must be obtained from a doctor
• Daily cash benefits are payable as from the 4th day of absence from work
• The daily benefit is equal to 50% of the daily wage of the last 3 months up to a

limit of 1/91.25 of the quarterly wage with a ceiling of 1.8 times the annual SMIC and two-thirds of the daily wage as from the 31st day of sick leave (maximum amount €43.80)

• If the insured person has 3 or more dependent children the daily benefit is up to

a limit of 1/€547.50 with a ceiling of 1.8 times the annual SMIC (with maximum amount €58.40)

Managing the Net Guarantee

Daily cash benefits

• For long-term illnesses, the daily benefit can be paid for a maximum period of

three years from beginning to end date for each illness. For all other illnesses, the maximum number of daily benefit payments over a three year period is 360

Managing the Net Guarantee

A French government-subsidised contract is a contract derogating from the

• rdinary law for which employers will receive additional aid relating to hiring

grants, training subsidies or exemption/reduction in certain obligations, such as social security and tax payments

Government Subsidised Contract

• Apprentices
• Trainees
• Qualification contracts
• Orientation contracts
• Adaptation contracts
• Special part-time contracts

Specific Contracts

• Fixed-term contracts
• Specific categories of payees

• Specific contracts give exemptions on contributions
• Usually they are set up between an employer and a government department or

between an employer and payee, subject to controls from the DDTE

• The payroll system should include rules for some common exemptions regarding

some fixed-term contracts, certain exempted contracts or categories of employees

• Specific contracts have an impact on many areas of the payroll process

Specific Contracts

INCOME TAX

52

RESIDENCY STATUS

• According French Law, under Article 4 A CGI, individuals domiciled in

France are taxable on all their income of French or foreign origin. Persons not domiciled in France are taxable only on their income from French sources.

• Personal income tax is assessed on the basis of the "tax household",

i.e. the family entity consisting of a single person, two partners who have concluded a civil solidarity pact or spouses, whatever their marital property regime, and their children or other dependents. The tax base therefore generally comprises the total income of the various members of the tax household

RESIDENCY STATUS

• Under Article 4 B CGI, persons are deemed to be domiciled in France

for tax purposes if: – their home is in France; – their main place of abode is in France; – they carry on a professional activity in France, salaried or not, unless they can prove that it is a secondary activity; – they have the center of their economic interests in France. – State employees who perform their duties or are on assignment in a foreign country and are not liable to personal tax on their overall income in that country are also deemed to be domiciled in France for tax purposes.

TAXES ON INCOME IN FRANCE

• There are four categories of taxes on income in France:

– corporation tax (impôt sur les sociétés, IS); – personal income tax (impôt sur le revenu, IR); – social levies; – payroll taxes.

Income Tax

• Is not deducted at source, however this will change in 2018 when PAYE is

introduced

• Tax is based on the family income and is divided between each “part” of the

family

• Every adult must make an annual return
• Tax paid in instalments on an estimate basis direct to the tax authority
• The employer only needs to provide key data for the tax return via the

employees’ payslip

French tax rates

Category of earnings include:

• wages, salaries, compensation and emoluments received in consideration of an

employment, – including the remuneration of senior managers of joint-stock corporations – managers of limited liability companies, – allowances paid to members of the French and European Parliaments – allowances paid to the holders of local elected offices

French tax rates

Deducting:

• mandatory social security contributions
• and expenses inherent in the function or job from the gross amount paid

French tax rates

• Unless otherwise advised, gross earned income includes all amounts and

benefits in kind available to the employee

• Expenses incurred in the acquisition of earned income are allowed on a notional

basis i.e. a 10% deduction which is reviewed each year – Taxpayers may opt to deduct the actual amount of their professional expenses, subject to the production of vouchers (receipts and invoices)

French tax rates

• Pensions and annuities are eligible for 10% special relief
• The authorities calculate personal income tax based on the amounts declared

by taxpayers

• The French are required to submit a single return per tax household reporting

all income received in the previous year

French tax rates

• In addition, those receiving income from

– professional activities (business profits, non-commercial profits, agricultural profits) – investment income – income from property and capital gains on property must attach special declarations to the overall return

• The calculation of income tax takes the taxpayer's personal situation into

account e.g. marital status, children etc.

French tax rates

• The income tax calculation is adjusted to personal circumstances through

income splitting and allowing taxpayers certain tax reductions or credits for personal expenses

• Income splitting is a way of taking dependents into account and so cushions the

effects of progressive taxation by applying the progressive rate to a partial income effectively the income is split across the dependants

French tax rates

• The total household's taxable income is split into a number of parts
• (e.g. one part for a single person, two parts for a married couple, an additional

half-part for each of the first two dependent children and an additional part for each dependent child thereafter)

• The progressive tax scale is then applied to the taxable income per part

French tax rates 2017

Tax bracket Rate Up to 9 710 € 0% From 9 710 € to 26 818 € 14% From 26 818 € to 71 898 € 30% From 71 898 € to 152 260 € 41% From 152 260+ € 45%

Payment of Tax

French taxpayers have options for payment:

• Can either be paid in 10 monthly instalments
• Or by three tranches throughout the year
• Tax isn’t deducted from pay
• Tax returns for 2016 are due for submission sometime between April and June

2017, depending on whether they are paper or internet returns. http://vosdroits.service-public.fr/particuliers/N247.xhtml

Planned tax changes for 2018

• In 2016 the French government announced its intention to set up a pay-as-you-

earn (PAYE) system as from 2018, this was one of the promises made during Francois Hollande’s presidential campaign, and to refine a number of tax reduction measures to benefit both enterprises and individuals.

• Currently workers in France do not pay taxes on what they have earned in 2016

until 2017, they pay estimated amounts, monthly or thrice-yearly, based on the previous years taxes.

• The finance bills also contained measures to ensure that provisions in the

French tax code are in line with the French constitution and EU law.

• Budget Minister Christian Eckert says the reform, to be detailed in the 2017

Finance Law before the end the year, is “desirable, fair and modern”.

WITHHOLDING TAX – JAN 2018 PROJECT

WITHHOLDING TAX – JAN 2018 PROJECT

WITHHOLDING TAX – JAN 2018 PROJECT

End of Session