Payroll and Tax in France: An Overview for Global Employers

One of Europe's financial heavyweights, France is home to a diverse economy, world-class infrastructure, and a competitive corporate tax rate. For global companies, it's a market that makes a lot of sense.

But doing business in France comes with a challenge. And it's one that trips up more companies than you might think: navigating local payroll and tax regulations.

Between its detailed tax rules, famously complex Social Security system, and maze of mandatory contributions, just figuring out what you owe in France can feel like taking a test you didn't study for. A very expensive test.

It doesn't have to be that way. In this guide, we break it all down. What the mandatory taxes and contributions actually are. How to calculate payroll the right way. And if you're thinking, "Do I really need to set up a whole legal entity just to hire someone in Paris?"-we've got answers for that, too.

Mandatory payroll taxes and contributions in France

Mandatory payroll taxes and contributions in France include Social Security and the state pension scheme. Employers must also withhold and remit income taxes on their employees' gross pay.

France's statutory payroll taxes and contributions include:

Social security

France's Social security system is complex and includes various programs that offer a range of benefits to employees, including health insurance, workers' compensation, retirement benefits, childcare allowances, and unemployment insurance.

Employers must also provide supplemental life insurance and healthcare coverage, which also fall under the Social Security umbrella.

Total employer contribution rates for Social Security are around 45% on average, while employees pay about 20% to 23%.

However, the federal government assesses rates based on various factors, like the number of employees and entity type, and it imposes contribution ceilings on specific programs. Collective bargaining agreements (CBAs) also impact Social Security rates. As a result, employer and employee contribution rates vary widely.

Below is each benefit that falls under the French Social Security scheme, with the average employee and employer contribution rates for each:

Employers and employees may also be subject to additional taxes and contributions, depending on their industry and the French region where the employees reside.

For example, in the Île-de-France region, employers must pay a public transportation tax, which varies depending on company size and location and is capped at 2.95%.

Pension

On top of making contributions to the old-age insurance fund under France's Social Security program, employers in France must also provide their employees with supplementary retirement insurance called Agirc-Arcco.

This program serves as an additional layer of support, ensuring comprehensive retirement benefits for employees across the country. The table below details the employer and employee contribution rates for Agirc-Arcco:

Employee income taxes

Companies that hire employees in France must also withhold and remit income taxes on gross earnings on their employees' behalf.

Income tax brackets in France are complex as the federal government assesses rates on a progressive scale, with rates ranging from 0% to 45%, depending on total household income and family size.

The table below outlines France's standard income tax brackets, based on per household annual income:

How is payroll tax calculated in France?

To calculate payroll taxes and contributions in France, first determine your employees' gross pay. Next, calculate the employer and employee payroll tax liability for social security, pension, and employee income taxes as percentages of your employees' gross pay.

Remember to factor payroll taxes into your total employee cost calculations when building a distributed workforce in the country, as payroll taxes and contributions amount to additional per-employee costs on top of base salaries.

Interested in hiring an employee in France? Use our employee cost calculator to accurately calculate payroll contributions and annual costs for your talent in France.

Key elements of payroll in France

As a foreign employer doing business or hiring employees in France, understanding key aspects of running local payroll is essential for avoiding fines, limited business opportunities, and other noncompliance penalties.

Key aspects of local payroll in France include but are not limited to the following:

• Fiscal year. France's fiscal year runs from January 1 to December 31.
• Payroll cycle. The payroll cycle in France is usually monthly, with employers paying wages by the last workday of the month.
• Minimum wage. The minimum hourly wage in France is €11.52.
• Overtime. A standard workweek in France is 35 hours. Unless an applicable CBA mandates otherwise, employees are entitled to 125% of their standard wage for the first eight hours of overtime and 150% for any additional hours.
• Termination. Depending on CBA regulations, employers in France must usually provide a one- to three-month notice period to employees or pay an indemnity in lieu of notice.
• Severance. Employees who have worked for their employer for eight months are entitled to a severance payment of one-quarter of their monthly salary for each year of service up to 10 years, plus one-third of their monthly salary for each year of service beyond that. Employees are also entitled to compensation in lieu of paid holidays and days off that they have accumulated but not taken.
• Annual leave. As a general rule, employees in France are entitled to a minimum of five weeks, or 30 days, of paid annual leave. However, under the Portage Salarial business scheme in France, employees receive additional annual leave in lieu of paid overtime if they work more than 35 hours.
• Maternity leave. Mothers in France are entitled to 16 weeks of paid maternity leave and must take a minimum of eight weeks. They may take six weeks before the expected birth date and 10 weeks after and are entitled to various extensions in case of health complications or multiple births.
• Paternity leave. Fathers of newborn children are entitled to 25 days of paid paternity leave, or 32 days in case of multiple births.
• Adoption leave. Parents of newly adopted children receive up to 16 weeks of parental leave for the adoption of one child, or 22 weeks for a multiple adoption. If parents share the leave, they receive an additional 25 days for a single adoption and 32 days for a multiple adoption.
• Sick leave. Employees who have worked at least 150 hours for their employer in the past three months are entitled to a maximum of three years' paid sick leave at 50% of their regular wage, capped at €3,076.70 gross per month.
• Holidays. Employees in most regions of France receive 11 paid public holidays annually. Employees who live in the Alsace region or the Moselle department of France receive two additional paid public holidays.

Setting up payroll in France

The payroll processes that global companies use to pay their distributed workforce in France vary depending on individual circumstances. However, the following outline provides a general idea of what payroll procedures in the country entail:

1. Register with the URSSAF. Register with the URSSAF (Unions de Recouvrement des Cotisations de Sécurité Sociale et d'Allocations Familiales) and complete form E0, which allows you to make contributions toward your employees' social security.
2. Register your employees. Register your employees with the general Social Security scheme and complete pre-employment statements for each employee. This allows the Social Security organization to track your employees and manage their benefit entitlements.
3. Collect employee information. Collect basic employee details, such as their first and last names, address, INSEE code (Social Security number), and disabilities, among others.
4. Classify your workers. Classify your workers as employees or independent contractors and clarify your payroll tax liability for each worker. Correctly classifying workers is critical for avoiding back pay, benefits arrears, and other misclassification penalties.
5. Establish your payroll process and policies. Decide whether you'll manage payroll in-house or outsource it to a third party. If running payroll in-house, remember to source qualified, experienced HR talent and establish a payroll schedule according to France's monthly cycle.
6. Determine salaries and ensure compliance. Clarify employee salaries and determine applicable employer and employee tax liabilities for each employee.
7. Calculate deductions and pay employees. Calculate applicable taxes and contributions as specified percentages of employee gross earnings. Make timely and accurate remittances and payments, and provide your employees with payslips indicating their net earnings and withholdings.

Payroll options for employers in France

When administering payroll in France, global companies generally use one of the following methods: internal payroll administration, local payroll outsourcing, or global payroll outsourcing.

Internal payroll

Global companies with established entities in France may choose to hire local talent and create in-house finance teams to run payroll for their distributed workforce.

While internal payroll gives you full control over your payroll processes, it also leaves you fully responsible for compliance and exposes you to serious risks.

Employers who choose this route must navigate France's complex payroll and tax regulations on their own, leaving themselves exposed to potential fines, limited business opportunities, and other payroll noncompliance penalties.

If you choose this route, consider partnering with a third-party legal expert to reduce risk exposure.

Local payroll outsourcing

Another option for global companies with entities in France is to outsource payroll to a local payroll processing firm in the country.

With local payroll outsourcing, you offload the burden of the entire payroll process, including calculations, payments, and filings, to a third-party entity with local expertise.

While this approach decreases your workload, it offers limited visibility into the payroll process, making it difficult to address payment errors and delays.

Plus, if you plan to hire talent in multiple countries, you'll likely end up working with multiple local payroll providers in each country, decreasing visibility even more.

Global payroll outsourcing

The most efficient way to run payroll for a distributed workforce in France is to outsource payroll to a global payroll service or partner. A global payroll partner is a third-party entity that has expertise in payroll and tax laws worldwide and administers payroll on your behalf.

By coordinating with local payroll vendors worldwide, a global payroll partner streamlines payroll into a single management platform, helping you reduce errors, ensure compliance, and maintain transparency when paying a distributed workforce, no matter the number of countries.

Administering payroll in France before entity establishment

Companies seeking to hire employees in France must establish a legal entity in the country. However, entity establishment is a lengthy process that significantly delays your eligibility to hire local talent. Also, what if you don't want to make long-term investments in the French market without testing the waters first?

A simpler workaround is to partner with an employer of record (EOR) in France, a third-party organization that allows global companies to quickly and compliantly hire and pay talent worldwide without establishing entities.

With expertise in international payroll and tax regulations, an EOR handles compliant onboarding and timely payroll administration on your behalf, allowing you to continue owning your day-to-day management responsibilities as you build a distributed workforce.

In addition to running compliant global payroll, an EOR also handles talent relocation, immigration, and global benefits administration while providing ongoing HR support, serving as an ideal solution for companies building international teams or eyeing expansion into more than one market.

Learn more: What Is an Employer of Record (EOR)?

Simplify payroll and taxes in France with Pebl

Great opportunities rarely come without challenges. You might be eager to hire in France; it has the talent, the market's strong, and expanding just makes sense. But then you look at the fine print. Payroll rules. Tax regulations. Social Security contributions. Suddenly, that great idea feels complicated, maybe even impossible.

But it doesn't have to. Not if you have the right help. Not if you have Pebl.

Our Employer of Record (EOR) service lets you hire and pay top talent in France (well, actually, in over 185 countries) without setting up a legal entity. You get the team you want, in the market you need, without jumping through bureaucratic hoops.

And we do it through one simple platform, integrated with your HR tools and designed to make payroll accurate, compliant, and, importantly, on time. The complex stuff becomes our job rather than your problem.

Reach out today and let us take it from here.

Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided "as is," and no representations are made that the content is error-free.

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