Internago often gets the question of how much it costs to employ staff in France, which is why we want to share some information about this topic. This blog is an introduction to how to calculate the cost and to explain the different salary components. In practise it is very important to consider the collective agreements affecting specific employer taxes in order to reach the exact cost figure.
What is a French net salary?
When calculating the costs for hiring workers and managers, the first distinction to make is between gross- and net salary. In France the net salary is actually rereferred to as the salary before income tax when the employee and the employer deductions have been made. This is often an element for confusion for foreign employers.
It should be noted that the employee will pay an income tax on his or her French “net salary”. This is new from January 2019 to withhold directly from the gross salary as a withholding tax. Read more about withholding tax in France in this blog post.
The different salary components
In order to understand the personnel cost in France it is important to understand the main components making up a French salary:
- Social security and unemployment contributions
- Health insurance (“mutuelle”)
- Life and accident insurance (“prévoyance”)
- Other contributions (e.g. contributions to professional training)
An example of employee cost calculation
In this example, we have a manager with a gross salary of €3500 (based on a 35-hour working week). For the purpose of the example we could say that this will yield a net salary of about € 2744 (€770 less) due to payment of employee social charges, hence the employee’s contribution of the above components.
On average, the employee social charges (in French “charges salariales”) correspond to about 22 % of the gross salary. In our example it will therefore be €770. Hence, the employee will have a net salary of € 2730 from which withholding tax will be deducted.
The income tax varies a lot depending on family situation and level of the salary. A table for neutral tax rate could be found here. If we assume this employee has a neutral tax rate, the income tax will be 14 %. Hence the “net net” salary for the employee would be € 2744 * 0,86 = 2359,84
The next step is to calculate the social charges of the employer. In French this is called “charges patronales”. On average (but there many exceptions) they are approximately 42 % of the gross salary. In our example this will be €1470 (€3500 * 0.42).
So in this example, the total cost for the employer will be: €3500 + €1470 (0.42 %) = €4970.
Be cautious about online estimation tools
French unemployment agency (Pôle d’emploi) presents a rough calculation here for simulations, but it does not consider other specific taxes and costs related to collective agreements, which is why it only a rough indication.
Other important factors affecting the employment costs
Apart from standard costs associated with employment such as office space, phone costs for employees etc. there are some other considerations that the employer should be aware of in terms of cost and benefits;
- Companies employing R&D personnel could also apply for the status “JEI” (Jeune entreprise innovante) and be granted substantial reductions of social contributions. A specific demand has to be made to be granted this status.
- Companies can choose to compensate for transport costs and commuting, e.g. Paris companies can pay for monthly commuting cost of approximately €75 per month, or at least 50 % of this sum.
- Costs for employment contracts should be considered. This will vary depending on the complexity and number of employment contracts to be written.
Do you want more information or need help with employment and payroll in France?
Internago can assist with cost calculations and full payroll service in France and on other European markets. Please click here to find more information, or if you prefer contact us directly at email@example.com