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Tax efficiency for overtime and tax rules in France

Due to the ‘Yellow Vests’ protest crisis in France, the French government has introduced tax exemption for overtime as from 1 January 2019. Any overtime worked is subject to mandatory 125% pay-out for employers in France. This tax efficiency means that overtime is now exempted from taxation and employee contributions for social insurance for the employees (i.e. the exemption does not apply to the employer contributions) from 2019. This ensures that employees receive a higher net amount for their overtime. This exemption applies up to a net annual amount of € 5,000.

What is a ‘regular working week’ in France?

The regular working week in France consists of 35 working hours. Any hours worked in excess are meticulously registered and paid out (125% from the first hour above 35 hours).

Are there any exceptions to the 35-hour working week?

Exceptions can be made subject to the following rules.

Maximum daily working hours

The effective daily working hours are subject to a maximum of 10 hours per day, with some exceptions. Exceptions may be permitted in the following cases:

  • At the employer’s request, subject to the Labour Inspector’s approval
  • In the event of an emergency resulting in temporary increase of activities
  • If an existing Sector Agreement or Company Agreement sets out a provision for exceeding the maximum of 10 working hours per day, if the increased activity is related to the company’s organisation, subject to a limit of 12 hours of effective hours per working day

Maximum weekly working hours:

The effective weekly working hours may not exceed the following limits:

  • Maximum 48 hours per week
  • Maximum average of 44 hours per week over a 12-week period

An example

If an employee works 48 hours per week for a period of 6 consecutive weeks, followed by 6 consecutive weeks of 40 hours per week, this results in an average of 44 hours per week spread over 12 consecutive weeks. This is within the limits of the statutory rules.

In derogation of the rules, subject to the Labour Inspector’s approval, the working hours may be increased to 60 hours for a maximum of 1 week in exceptional circumstances.

Exceptions can be made to derogate from the average of 44 hours per week up to a maximum of an average of 46 hours per week for 12 consecutive weeks if the employer fulfils the following conditions:

  • If agreed in a Sector Agreement or Company Agreement
  • If no Agreement applies, subject to the Labour Inspector’s approval

Non-compliance with the very strict rules regarding working hours in France may be punished with sanctions and fines.

How does this work with field representatives? Does the 35-hour weekly maximum apply to them?

For independent employees working from home with a certain minimum wage limit, practice shows that it is possible to derogate from the 35-hour working week.

  • For example, a 39-hour working week can be agreed in the individual employment contract.
    In such cases, the total gross wage on the pay slip is visibly split up in a fixed gross portion that corresponds to the 35-hour working week, and a fixed gross amount for the 4 ‘fixed overtime’ hours per week. If the latter salary portion is broken down into an hourly wage, this hourly wage will amount to 125% of the regular hourly wage in the 35-hour component. Both components jointly form the monthly fixed gross salary agreed.

  • If the applicable CLA allows, the ‘forfait de jours’ (fixed amount per day) is also an option. In that case, the employee has more freedom for variable distribution of the hours throughout the working week, including having more than 35 hours per week. This results in a lower administrative burden to the employer because the weekly overtime check can be skipped. If a ‘forfait de jours’ was agreed, the employee agrees to perform work for a fixed number of days per year (for example 214 or 218 days), with ten RTT days (similar to ADV shorter working hours in the Netherlands, or ‘compensation rest’ in Belgium) as a remuneration for exceeding the 35-hour working week.

Please note:

  • it is essential to correctly record any agreements on structural overtime work, both in the employment contract and on the pay slip.

  • In practice, labour conflicts in France often result in allowing the employee to claim overtime performed from the employer (this often involves major financial consequences to the employer). For this reason, it is advisable to conduct an assessment with the employee about work pressure and work-life balance at least twice per year, and filing the outcome and conclusions in a document. This is certainly required if structurally derogating from the 35-hour working week. This provides better cover for an employer against potential employee claims in arrears.

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Since 1972, Interfisc has offered international HR & Payroll solutions in the Netherlands, Belgium, Germany, France, the United Kingdom, and Italy. We do this from our offices in the Netherlands and Belgium, and with an international team of around 45 committed and caring employees. 

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