Episode 2: Payroll in France

Luisa Rollenhagen  00:00

Hello everyone, I’m your host Luisa Rollenhagen and we’re back with another episode of ADP Payroll Around the World! This audio series serves as your guide to how payroll really works in a specific country. We really dig into the details of what makes payroll tick and speak to both ADP experts on the ground and locals who’ll give us their perspective on work and pay in their homeland.  

After all, payroll can’t really be global if it isn’t local as well. 

So please join me today on a trip to France! With an average 77.8 million visitors a year, the European country is one of the most popular tourist destinations in the world. The French government traditionally offers its citizens a high degree of social security, which is one of the reasons why French payroll is considered to be notoriously complex.  In fact, in any global ranking of countries by payroll complexity, you’ll often find France in the top spot.  

Emmanuel Prevost  01:01

It is clear that France has a very complex social environment and also social legislation and payroll calculation. Probably this comes from legislation because, for example, the number of social tax has increased by nearly 50% over the past eight years.  

Luisa Rollenhagen  01:22

Being on the other side of things as an employee doesn’t seem to be much easier either.

Rachel  01:26

Even though you can speak a very high level of French, I think it’s still very challenging being in France and working in France and getting your head around the bureaucracy and understanding health insurance and what you need to do for taxes and all of that.

Luisa Rollenhagen  01:44

But despite the complexity, France is still a very popular location and a leading destination in Europe for foreign investment in sectors such as AI.

Carlos Carvalho  01:54

I’m seeing more and more that multinationals are choosing France as a playground to have and develop their business.

Luisa Rollenhagen  02:01

So today, we’re going to take a deeper look at what makes French payroll work and find out how ADP is helping multinationals navigate those waters.

You’ve just heard a little teaser from our two experts for this episode, as well as Rachel, who’s a British expat living and working in Paris. She’ll be telling us a bit more about what it’s like for her to deal with French bureaucracy as a foreign employee. But first, let’s meet our ADP experts!

Emmanuel Prevost  02:30

Hello, I am Emmanuel Prevost. I’m in charge of the legal watch and template teams for France.

Luisa Rollenhagen  02:37

Emmanuel has been with ADP since 1998 and is based in Nanterre, close to Paris. He’s joined by Carlos.

Carlos Carvalho  02:45

I am Carlos Fontelas de Carvalho. I’m the president of ADP France and another four countries in central Europe. And I’m here at ADP since 2013 and also based here in Nanterre.

Luisa Rollenhagen  02:57

Thank you both for joining us today. I’d like to kick us off by getting straight to it: Why is payroll in France so complicated?

Carlos Carvalho  03:05

Yes, a pay slip is quite, I would say complex. We have really the full position, there’s a complexity index and France is on the top, but at the same time this means transparency. On my pay slip, I see my interaction with the administrative entities. I see my interaction as a citizen, so it’s very transparent, where the goes money, what I am being paid for and all the details. So at the same time it’s a mix of complexity and transparency. 

Emmanuel Prevost  03:38

The complexity is also found in the number of collective agreements, we have 800 collective agreements in France, and the number of contracts for the company… France has, for example, more than 500 mutual insurance company, insurance pension funds. So that means that, as Carlos said, the payroll is complex because you have more than 50 lines on the bulletin, but also according to the mandatory monthly report called DSN, because it is 350 data every month to send for each employees. So we have to make sure every month that the rules are followed and that all the data is correct. So it’s a very important and accurate work. 

Luisa Rollenhagen  04:26

Okay, so it’s complex because of all the contributions to the country’s extensive social security system and collective bargaining agreements, as well as extensive reporting obligations. Anything else?

Emmanuel Prevost  04:37

The complexity is here because we have many industries where the pay is totally different. For example, the payroll calculation in the banking area is totally different from the one of a building company or entertainment company. The status of the employees is also a concern, for example, we have several type of apprenticeships, corporate officers, employees on fixed term or permanent contracts with their own rules. And if you had the exemption of contribution that depends on the status of the company, then, of course, you have a cocktail of complexity. 

Luisa Rollenhagen  05:19

I love that term, cocktail of complexity. Why is there a difference in sectors?

Emmanuel Prevost  05:24

It’s because we are in different collective agreements. So the minimum salaries are totally different. The way of increasing wages also. The collective agreements are setting some of the contribution rates. So you have a stack of rules that you have to know how to implement. 

Carlos Carvalho  05:43

Let me give you an example to make it more clear. For instance, we have here a rule, and once again it is about the transparency then, the way socially the country is so complex. The hours, the way we measure hours in the banking system, in construction, in entertainment or in retail or in the restaurant business, we have it what we call pénibilité. So how hurtful is to spend those same hours. So the way a waiter in the restaurant passes his eight hours because it’s on foot, because it could be too aggressive temperatures, could be in construction, taking hard objects… It measures [these hours] in a different way and it measures also in the different way the age of retirement. So it’s this kind of, I would say particularity. Yes, I had a full day of work, but the full day of work with a hard way of working, and the quantity and the calculation of the hours that makes on the pay slip, this has all been calculated.  

Luisa Rollenhagen  06:46

Right, that makes sense. So it’s not just about how many hours you worked, it’s also about how physically demanding that work was. I think it’s actually pretty cool that this is acknowledged.

So given that the regulations around labor and pay are pretty intricate in France, what advice would you give to multinationals who are interested in setting up shop there?

Carlos Carvalho  07:06

They need central reporting. They need to have all the information at time and in France, this means that ADP provides a service that in terms of monitor all legal developments. And we have a big team of lawyers, I would say the biggest team and the best team of lawyers in all of France because it’s more than 20 lawyers that are working only for getting in touch with our customers. But at the same time they have a connection with the public authorities to anticipate these kind of changes every day. 

This is so important for multinationals, because there are so many updates, so many things at the same time, that having peace of mind requires a full, complex, but at the same time steady legal watch at all time. Isn’t that so Emmanuel?

Emmanuel Prevost  07:56

Yeah, that’s clear. So because we are working on full compliancy, we need to of course have a strong service within ADP to monitor the legal developments. And also, before, the legal watch… so in my team we have 20 lawyers who are analyzing the text and especially working with the public authority to anticipate them to the maximum.

It’s never-ending work to be sure that we have a full comprehension of the new text and that we understand the spirit of this text and the rules that we have to implement. So yes, we are creating a secure environment for our customers, and we also have a service that allows our clients to request legal assistance in all elements concerning the life of the employee in the company. So we are answering questions about leave, illness, dismissal, and hiring, so it’s very secure for our customers and that gives them a very user-friendly experience. 

It’s not a difficulty for my team because we are following more than 500 collective agreements. So whatever, wherever the client is working on, we will have the capability to follow the collective agreement and to be compliant on that subject. 

Luisa Rollenhagen  09:29

Because ADP is a company that prioritizes local expertise on the ground, this series also gives a platform to the experiences of people who live and work in the country we’re featuring.

So we wanted to hear from Rachel, a journalist who’s originally from the UK, but who’s been living in Paris and working at a French company for almost two years now. Although she had studied French in university, she suddenly found herself having to use the language to navigate professional and bureaucratic requirements.

Rachel  10:00

I was excited. I knew that I spoke… well, I thought I spoke a relatively high level of French. But as I’m sure anyone will tell you, it’s one thing to be good at it at uni. It’s another thing to move to the country and to work in the language. It’s always a bit of a bit of a challenge. It’s very humbling, definitely.

Luisa Rollenhagen  10:21

Remember Carlos telling us about how complex a pay slip is? Rachel can definitely relate to that.

Rachel  10:27

I think the main thing was understanding my pay slip, because with my pay slip, we had social security deductions, which is money that’s taken out of your salary that goes towards the French government, but tax is then paid separately on top of that, if that makes sense. You have social security, which is used to fund healthcare, but then you also get taxed on top of that.

So I think once I asked the question, it was relatively straightforward getting an answer, but yeah, I think you do just need someone to explain these things to you when you first arrive, because it doesn’t make a lot of sense a lot of the time, because you look at your pay slip, you think, oh, okay, well, that’s social security, that must be tax, but it’s not tax, it’s something different. And then filling out a tax return form. I didn’t know that I had to do that myself. I think I just assumed, oh, well, I’m being taxed already, but you actually have to fill out a form on top of all of the pay slips that you get. But again, once someone explained that to me and told me what I had to do–so I had to go to the tax office and ask for a form, and someone at the tax office then helped me and told me what documents I needed to bring to fill out my first tax return form.

Luisa Rollenhagen  11:36

Thankfully, Rachel was able to find people who could help her parse through the complexity.

Rachel  11:40

I think, once you have someone explain to you, okay, well, actually, you’re on a contract, you need to fill out this form, and then the rest of it is irrelevant, like you don’t need to worry about box, you know, these other five boxes, because these are for people who have a different income to you, or who are self-employed or whatever. And once you understand how the system works as well, it then makes sense. Once you understand, oh, okay, so the reason why I’ve got to fill out a form for this is because this then goes to this person, then they work it out, like once you understand how the system works, it’s a lot easier, I think.

Luisa Rollenhagen  12:13

Even though it took a while for Rachel to adjust to the French system, she found that both her French and expat colleagues played a major role in making her feel integrated.

Rachel  12:23

So I think when you first start a new job, it’s always going to be quite challenging. And add to that, it’s all new because it’s a new job and a new country with new people, with a new language. You know, there are always going to be challenges to that.

Luisa Rollenhagen  12:39

Almost one out of ten workers in France come from abroad. I wanted to know whether Carlos and Emmanuel could tell me a little bit more about how ADP is helping their clients—and especially their payroll teams—onboard foreign workers.

Carlos Carvalho  12:52

This is always happening, and happens more and more with the new companies that are establishing here in France. How am I going to be attractive on recruiting? How am I going to explain correctly how it’s going to be? Because I know for sure what is the gross [value], but I have no idea at the end what’s going to be the net, and what are the rights, and what are the things that they need to comply. So what we help here is that we have like a species of handbook that is a virtual handbook to the new joiners.

We have tutorials, and we have also training, and training in France done by ADP, as we are one of the biggest training certificate companies that we have in terms of HR and payroll certification. We give this kind of tutorials to make it like, how payroll is going to be for them. It is like saying, when you arrive, what are the 10 key things that you need to know, what are the 10 key rights that you have, and what are the things that you should do and you must not do, compared inclusive to other countries.

Because, as we know, the rules that happen with my fellow colleague that is in Spain or in Italy and Germany or in UK, we can do like a species of gap analysis of all the things that can be quite different. And this is something that very regularly, customers ask us to do in the first three months of work. It’s more than training: Giving this kind of, what are the top 10 thing that I need to know, in a five minute speech, that they need. to know about the payroll. Yes, and definitely something that you really need to do, because it’s quite different in France.

Emmanuel Prevost  14:29

The difficulties are here, but we support our clients, both in our service but also in our payroll management tools. For example, our offers are very templated. That mean that could be an insurance in compliancy, because we have several thousand modeling rules that cover the majority of the legal and collective agreement options. So if the company wishes to deviate from it, we will analyze the case and come back to it to tell that it cannot be implemented. I remember, for example, a company that wanted to force the withholding tax rate of one of its employees. This is totally not possible due to the law, because the rates are issued to the employers by the public treasury. So the company would have risk a very high penalty if it has done so. Yes, we are here to support them and to help them toward these compliancy rules. 

Luisa Rollenhagen  15:35

While researching this episode, I came across something that I was hoping you two could clear up for me. I read that when you hire someone in France, you’re required to be compliant from “moment zero.” What does that mean?

Emmanuel Prevost  15:48

That means that in any new hiring process for example, there is a form to respect. I’m not just talking about the announcement of course, but there is also the formalism of the employment contract. The fact that it’s necessary before the arrival of the employee in the company to have declared his hiring to the contribution collector called URSSAF. Otherwise the company has a risk of undeclared work. Another example, you cannot collect the employee’s withholding tax rate before the signing of the contract. In short, there are a number of rules to respect that requires knowledge of the legislation, otherwise you risk not only difficulty with the employee but also with the public authority. 

Carlos Carvalho  16:40

And these are very, very tiny differences but could be a huge penalty for the company. So imagine a multinational company that has someone working outside France and says, oh, let’s send the standard contract and let’s send him during the week and he can start work already. He could be making huge penalties for the company if, on the first day, he doesn’t have any contract signed. And with these kind of things, you need a good partner, you need a reliable partner to understand and to anticipate what is going to happen when you start your business in France. Because it’s good to have business in France. You just have to follow the rules.

Luisa Rollenhagen  17:18

What happens if you don’t follow the rules?

Emmanuel Prevost  17:19

We have two types of collectors, social and fiscal collectors, so they could give some penalty to the company. We talked about the monthly social declaration called DSN. The information is sent to 34 public authorities through this declaration. And of course, depending to the case, the penalty could be given also by other organizations. So that could be really, really a huge amount of penalty. For example, on the fiscal case, if some mistake could be done, it could be for example 10% of the amount as a penalty. So that could be quickly huge. And then you could have also some risk coming from the employees, because if the compliancy is not giving at the pay slip level, of course they have some action that could be done by the employees. 

So the difficulty when you are processing pay slips is to be compliant every month for everyone, for every public authority and of course for the employees and also because the rights, the long-term rights, for example for retirement calculation are sent through the monthly social declaration. 

So you need to be compliant because it could be 10 years after that you could have some difficulties for the employees if you are making some mistakes. So we need to be compliant every month. 

Carlos Carvalho  19:06

I would say as an example also that France is a unique country in terms of, as I mentioned before, in terms of the transparency between employer and employee. And it’s not only the pay slips, it’s the way we work, the way we communicate. That’s why also unions are very present in France because they know correctly their rights and they know how to defend their rights. So that means that the company that does not follow this alignment, does not follow this discipline, can have immediately and a very reactive, aggressive reaction in terms of their employees. And at the same time in terms of exposure to the market itself. So it means that being well-partnered with a good partner in terms of payroll like ADP is quite key in terms of anticipating and following the rules. 

Just a small example at the end: The CEO of a company here in France, whether it’s a branch from a different country, has unlimited responsibility in terms of social to their employees. So that means that he can go to jail if he doesn’t follow the rules. And that is quite, I would say tough, but at the same time you need to know the rules. This is what it is to work in France. 

Luisa Rollenhagen  20:19

Wow, those are really high stakes then.

Carlos Carvalho 

Very high.

Luisa Rollenhagen 

Since we’re on the subject of compliance: Are there any reporting requirements that employers must comply with, such as reporting on the wage distribution in their workforce according to gender?

Emmanuel Prevost  20:33

We have several actions and rules to follow and to respect. For example, if we are talking about gender pay gap reporting: First of all, all employees, regardless of the size of their enterprise, must ensure equal pay for women and men for the same work, work of equal value. The employee of at least, for example, 50 employees must report to the staff representative during a mandatory consultation some indicators on the wage gap. They have to produce it and put them in in the social and environmental economic database that is shared with the trade unions. And employers with at least 300 employees have more indicators to produce regarding the wage gap.

Luisa Rollenhagen  21:26

France adopted an energy and climate bill in 2019 that is meant to reduce greenhouse gas emissions and promote greener industrial practices. Are there any requirements that businesses need to comply with on this front?

Carlos Carvalho  21:38

It’s related to the carbon footprint. So more and more related to the inclusive… the Paris meeting that every country needed to have their own agenda in terms of ecology. France anticipated these rules to the French right and the French law. So that means the companies need to anticipate in terms of, for instance, electricity consumption, in terms of how the employees come to the office and the transportation that they need to take. Everything is measured in order to once again create an index that needs to be published and gives the performance of each company. And the correct data, the timing of that data, that comes on the payroll at the end, from the payroll system. It needs to be very accurate and timely in order to do that. And of course we comply and give that reporting to all of our customers. 

Luisa Rollenhagen  22:33

So businesses in France are required to report and process massive amounts of data every month. Obviously the payroll department is spearheading and managing all of this.

We’re going to be wrapping things up, but I just want to end by asking you to what do you personally love about working in payroll in France,

Carlos Carvalho  22:53

I would say that is both these, the ying and yang, it’s delicate, but it’s exciting. And why? Because we need to comply every time and you need to be aware of everything that needs to be done. The declarations, the payroll itself, do the right thing at the right timing no matter what is the environment.

But at the same time is something that we know that each month that what we provide gives transparency and peace of mind for our companies and it’s really our expertise. More than 50 years in France, 75 years as world-known market leader, but it’s a big responsibility also, so that the more than 3 million pay slips that we calculate every month on the private sector give us this pride to do something that works out for the companies and makes our associates and our colleagues so proud of participating in that. So I would say exciting because it’s complex and they need us, but at the same time this complexity make us… the next day is never the same day as the day before because there are so many legislation changes that every time something is happening.

Emmanuel Prevost  24:06

For our employees it’s very exciting because the legislation is constantly changing. So definitively if you like stability or routine, then it’s not in this sector of activity that you have to work because it’s a never-ending story, and that’s the exciting point. 

Luisa Rollenhagen  24:30

Carlos and Emmanuel, thank you so much for your time and expertise! It was great to chat with you and get a better understanding of why payroll in France is considered to be so complex.

I hope you got a bit of a deeper insight into how payroll in France works today. If this episode has piqued your interest, or your company is considering expanding into France, and you want to learn more about payroll there, please go to the ADP France website, fr.adp.com and don’t forget to subscribe to learn more about payroll around the world with each new episode.

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