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June 16—Multinational companies in France should begin adapting their payroll systems by early fall at the latest to ensure they comply with requirements set to take effect in 2016 for France's new unified system for reporting data to social welfare agencies, practitioners tell Bloomberg BNA.
Since 2013, France has been gradually implementing a system to replace its Byzantine reporting requirements for dozens of social welfare, health insurance, pension and related public and private agencies that collect tax-like contributions. The government claims the new déclaration sociale nominative (DSN) system, part of a larger effort to reduce companies' administrative compliance burden as a way to boost hiring, will cut employers' compliance costs some 1.6 billion euros ($1.8 billion) by allowing them to report data in a standardized digital format through a single portal.
The DSN lets “companies transmit payroll data without a mountain of different formalities,” said Elisabeth Humbert-Bottin, director general of the public body in charge of the project—the Groupement d'Intérêt Public Modernisation des Déclarations Sociales (GIP-MDS). “This is a real opportunity to standardize payroll management in France, as other countries, like the UK and United States, have already done.”
French employers, however, have been slow to respond to an early call for volunteers for the system, said Humbert-Bottin. Only 26,000 companies have signed up for the DSN so far, employing together about 7 million workers.
“The system has been open since April 2013, but the call for volunteers has not worked,” Humbert-Bottin said. “Some 1.2 million companies subject to the obligation now have six months to sign up.”
Concern there could be a flood of companies signing up at the end of 2015 led the government to issue Decree No. 2014-1082 of Sept. 24, 2014, requiring approximately 13,000 of France's largest firms to begin using the DSN system no later than May 5 of this year.
Thierry Muller, a partner specializing in regulatory compliance at EY Paris, said most U.S. multinationals have until Jan. 1, 2016, to implement the new system, but he advised them to start at least three months before that.
Until now, employers had to report payroll data separately to dozens of social welfare agencies via separate forms, often in different formats, with a variety of deadlines, said Muller.
Once the DSN process is fully implemented, companies will be able to make a single submission that will fulfill all their reporting obligations, said Nathalie Devernay, a Lyons-based attorney for Bird & Bird. Companies will submit their DSN data through a single portal (net-entreprises.fr) to the national bank for French Social Security—Agence Centrale des Organismes de Sécurité Sociale—which will forward it to relevant public agencies. Data will be stored by the national pension fund, according to the GIP-MDS. Calculation rules and rates will be just as complicated as before, but overall things will be simpler, said Muller.
Employers will still need to separately report such events as hirings, terminations, accidents and leave within strict time limits.
Employers using the DSN system must inform employees via a meeting, e-mail or intranet. The French data protection authority (CNIL) requires that employees be provided with an information sheet explaining what personal data the new system processes and how they can access it to make corrections if necessary, said Devernay. CNIL provides a template for this information sheet.
Under the old system, companies have some time leeway in filing employment declarations and are only required to file social data once a year, Muller said, while “under DSN, it will be necessary to send data every month. So payment data has to be complete and accurate.”
For Jean Saphores, an official of the French national association of certified public accountants (Conseil Superieur De L'ordre Des Experts-Comptables), “the DSN . . . is a very different philosophy, based on providing information for permanent management of human resources.”
Under the old way of doing things, when an employee is sick the payroll department has to go back to calculate how much the person should get in sick pay.
“Now the data will always be available because all employee information will be updated constantly,” Saphores said. “The DSN will also allow managing on a much more fine level the different social protection actions. It provides a permanent database of knowledge about the employee's rights to social protection services. It's a really big change for France to do it this way.”
According to Muller, a large company with a human resources department and quality data could implement the new system in one to two months. If the company uses a payroll service, its service provider should make and test the necessary changes, which “shouldn't cost much,” and considering the regulatory changes, tools needed and level of risk, it would be safer for large companies to use such a service, Muller said.
The main difficulty that companies are facing for implementing the DSN is updating their information technology systems, specifically payroll systems, to ensure they transfer the correct data in the right format, said Devernay.
“Payroll providers have not all been quick in providing compatible systems and companies have not all anticipated its implementation,” Devernay said.
If companies choose to make the transition internally, “you had better be really sure of yourself,” Muller warned.
“If your data are clean, in theory, you push a button, the file is generated, you verify, and send,” Muller said. “That shouldn't cost much either.”
When there are problems such as incorrect social security numbers or incorrect addresses, however, it will take time to clean up data. said Muller.
Once up and running, the DSN should save employers money.
“We have clients for whom we do payroll, including quite a few American multinationals,” Muller said. “The impact of the DSN will reduce our prices by about 5 to 10 percent for a dossier, because it will take less time to do the declarations,” although, “we will have to wait for the reporting/declarations of 2016 to really see how much savings there will be.”
Humbert-Bottin urged companies that have not yet done so to sign up “very quickly.” For companies subject to the Jan. 1, 2016, deadline, the ideal would be to start testing implementation by the end of summer holidays in September. If it doesn't work, there will be no impact while any problems are corrected. The new system is complex, so January will be too late to begin.
To contact the reporter on this story: Rick Mitchell in Paris at email@example.com
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The text of Decree No. 2014-1082 is available at http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000029499622, additional information at dsn-info.fr, both in French.
For more information on French HR law and regulation, see the France primer.
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