By Emmanuelle Ries a partner at Miller Rosenfalck in London and Isabelle Raoul—Duval at Marceau Avocats in Paris

With a potential market of 60 million consumers across the Channel, British companies have considered setting up a business in France to take advantage of these opportunities. One of the first decisions to take in this respect is whether to recruit a local employee or to second an existing employee to France.

France is famous for its protective employment legislation and whether hiring an employee in France or seconding one to France, companies need to be mindful of not finding themselves on the wrong side of the law.

•Will your business activity attract Principal Place of Establishment tax status?

A permanent establishment refers to a fixed place of business through which the business of a company is wholly or partly carried out. The existence of a PPE will subject all revenues generated in France to French tax and may also trigger the application of the bilateral convention for the avoidance of double taxation. When considering setting up a representative office of your company in France (“bureau de representation”), you should be mindful of the PPE concept: if the “bureau de representation” sells goods or services in France through staff having the capacity to enter into and sign agreements on behalf of the company, the French tax authorities might imply the existence of a PPE.

•Will your first employee be working alone reporting directly to your UK company?

If your first employee is working alone in France, he or she will be affiliated to the regime of social security and registered to the Strasbourg URSSAF body as the French representative of your British company. He or she will have the status of RFE (Représentant de firme étrangère or representative of a foreign company). This means that he or she will be responsible on behalf of your company to ensure that any social security contributions are paid as they fall due. This is an onerous responsibility as failure to make social security payments on time can lead to heavy fines and we always strongly advise our clients to be assisted by a French accounting firm to issue salary slips and organize payments to the relevant social security bodies.

•Will your employee (and you) pay social security in the UK or in France?

If your employee is French or lives in France, he should already be affiliated to the French regime of social security and employer and employee will need to pay French social security contributions. This is a significant expense for a new company set up as French social security contributions come to around 40% of the employee’s base salary.
However, if you decide to assign one of your employee from England to work in France temporarily ((i.e. for less than 2 years), your employee can opt to remain in the English social security system and continue to pay national insurance contributions in England during the period of assignment.

A point to note here is that the law applicable to the employment relationship is the law of the country where the employee works and the salary subject to social contributions must be paid in that country.

You must always remember that employees will be able to invoke the protection of French employment laws if they work in France. Last April, Easy Jet was found guilty of employing 170 employees under English contracts at Orly airport in Paris. The French courts ordered Easy Jet to pay 1.4 million Euros.

•Which collective bargaining agreement applies to your industry?

An employment relationship in France is governed by the French Code du Travail, the employment contract and the terms of any collective bargaining agreement (“convention collective”) applicable.

As soon as a company has carried out all the registration formalities through the Commercial Court of the place where the company will be set up, it will obtain a “NAF” code. This NAF code relates to the economical activities of the company as described in its Memorandum and Articles of Association. The NAF code will allow you to find out which Collective bargaining agreement applies to your company depending on the industry or sector of activity.

Without a NAF code, the employer have to determine which of the 528 collective bargaining agreements may apply to the employment relationship depending on the nature of the company’s activities and sector of activity in France.

•Which category of employee will your employee belong to?

It is important to consider whether or not your employee will be considered in France to have managerial functions as an executive (“cadre”) or not. This is because a cadre status attracts different rights and obligations.

A cadre is an employee with a specialist level of knowledge, seniority and/or responsibilities, able to work autonomously and/or to supervise the work of other employees.

Usually the convention collective defines the tasks performed by a cadre and will rank them. This ranking is linked accordingly to minimum wage levels and other benefits which are regularly updated. Generally speaking, a cadre will benefit from a longer notice period (generally 3 months instead of 1 or 2 months for an employee) and a higher minimum salary according to the classification provided for by the collective bargaining agreement. A cadre however normally has to satisfy a longer trial period.

For all employees except cadres a maximum working time is 35 hours per week. The working time of cadres can be extended beyond 35 hours per week and is be subject to a yearly quota of days, called “forfait jours” (usually from 216 to 218 days) which is usually more flexible than the 35 hours. Working time has become an extremely technical area of French employment law and you should seek advice if you wish to extend working hours beyond 35 hours per week.

•How long would you like the trial period to last?

A recent law has extended the length of time for probationary periods applicable to indefinite term contracts. The maximum duration of the probationary period depends on whether the employee is a cadre or not.

A cadre can be given to a 4-month trial period whereas ouvriers et employés” (blue collars workers) can be given to a 2-month trial period and “agents de maîtrise” (technicians and lower supervisors) to a 3 month-trial period. The trial period can be renewed once for the same duration if provided for in any applicable collective bargaining agreement and explicitly in the contract of employment.

Like in England, the trial period is a key period during which the employer will assess the suitability of new employees to the job. During the trial period employers do not have to provide genuine and serious reasons for dismissal and therefore face less risk of claims for unfair dismissal.

If you decide to dismiss your employee during the trial period, you will nevertheless have to give notice to the employee. Statutory minimum notice to terminate the contract during a trial period is 2 weeks where the employee has more than 1 month of continuous employment and 4 weeks where the period of employment is more than 3 months. It is strongly recommended that you ensure that the provisions of the employment contract on trial periods comply with the mandatory provisions of French law as well as with any collective bargaining agreement applicable.

•Will the employee be working from home?

Asking your employee to work from home could be an attractive and economic option for a new business. You should be aware that regulations provide that the employer has to bear installation and maintenance costs of all the necessary office equipments (professional telephone line, fax, PC, internet facilities, security computer accesses etc.). You will also have to ensure that your employee is not bearing undue financial costs. Your employees may well ask to be compensated for using their residential accommodation as a workplace (i.e. rent and payment of utility bills)

Employing staff in France is one of the solutions you may contemplate for entering the French market. But you can also decide entering into an agreement with a distributor or a commercial agent in France who will be commercial entities or self employed people. There are pros and cons for all three options depending on the specifics of your business and before making a decision on how to structure your business in France, you should consider these carefully to ensure that you do not waste your initial investment in time and money.

For specific queries on employing staff in France, please contact Emmanuelle Ries at Miller Rosenfalck in London (er@millerrosenfalck.com) or Isabelle Raoul—Duval at Marceau Avocats in Paris (ird@marceau-avocats.com).