France: Labor Rules Eased to Encourage Hiring

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June 25—France has unveiled a raft of new labor reforms to encourage hiring among small businesses as part of an effort to stem unemployment in Europe’s second largest economy. Prime Minister Manuel Valls said the new measures, which target the country's 2.1 million very small and 140,000 small and medium-sized firms, are needed to reduce the “complexities and uncertainties” that cause employers to hesitate before adding new workers.

Hot-Button Issue

Unemployment has become a hot-button issue for France's president Francoise Hollande, who has vowed not to seek a second term in office in 2017 if he fails to lower the country's jobless rate, which now stands at 10.3 percent.

The new measures include:

• Revising the upper and lower limits for compensation an employer must pay an employee whose dismissal is contested before an industrial tribunal. The government hopes this will bring greater legal clarity and shorten labor tribunals.

• Delaying certain social charges and administrative burdens that kick in once an employer's workforce reaches 50. France’s Labor Law mandates that employers with 50 or more employees must pay extra payroll taxes, create a workers' council, establish profit sharing and submit restructuring plans to the council if it wants to fire workers for economic reasons. Under the new reforms, these requirements are waived for the first three years after the employee threshold is passed. 

Contract Changes

The measures also allow small employers to renew short-term contracts twice instead of just once, provided the total duration of the contracts does not exceed 18 months. This makes it easier for a firm to fire these employees since their short-term contracts do not afford them “permanent” status.

Firms that hire an employee for the first time, either on a short-term contract of more than 12 months or on an indefinite contract, also will receive a 4,000-euro ($4,500) subsidy from the government over two years. This measure is directed at the 1.2 million very small employers that currently employ no staff but may have enough business to merit one or more employees.

Altogether, the reform measures will cost the government about 200 million euros ($224 million), according to Economy Minister Emmanuel Macron.

To contact the editor responsible for this story: Rick Vollmar at

For more information on French HR law and regulation, see the France primer.