Independent Contractors & Employment Guidelines in France
Contract length allowed
There are no limitations to genuine independent contracting if the contractor has multiple clients and their use can be justified by the contractor’s specific know-how and skills and the company can show that their own staff cannot accomplish the task.
Fixed-term contract limitation
The fixed-term contract can be renewed twice within an 18-month limit. These limitations do not apply to fixed-term contracts entered into to replace an absent employee.
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What makes someone an employee
The notion of “employee” is not defined by French law. Rather, the law defines it by defining the employment contract. An employment contract is defined as an agreement by which an individual works for another person (natural or legal), under the latter’s subordination, for which they receive remuneration.
Three factors make up an employment contract - the discharge of tasks, remuneration and relationship of subordination. As the first two factors are found in almost every agreement, a subordination relationship is the predominant factor that differentiates employees from independent contractors. The French Supreme Court has ruled that a “subordination relationship is characterized by the performance of duties under the authority of an employer who has the power to give orders, monitor execution of assigned duties and punish his subordinates’ breaches of duties.”
Independent contractors, on the other hand, are defined as “any individual whose working conditions are defined exclusively by themselves or in a contract, in conjunction with their customer”.
Employee vs contractor
Under French law, independent contractors are not considered employees and are therefore not subject to the same regulations and protections. Employees should comply with the company’s working hours and be provided with the necessary tools for work, while contractors are free to organize their daily schedule as they see fit and must use their own tools.
Employees have a permanent task for which they receive a regular monthly salary. In contrast, contractors are called upon for specific skills and work assignments and are usually paid lump sum remunerations upon task accomplishment.
Employees are declared and registered with various institutions, notably the social security agency, by their employer, who pays the relevant social security contributions on their behalf. On the contrary, independent contractors have to personally register as self-employed independent contractors and pay their own tax and social security contributions, which is a different scheme from the employee’s scheme. Independent contractors are subject to income tax on their profits and can deduct their professional expenses from their professional income.
Employees are eligible for the Unemployment Fund, which allows them to receive unemployment allowances paid by this fund in case of dismissal. Independent contractors are not protected against this risk and do not contribute to this fund. Employers are obligated to provide pensions and healthcare to employees, while independent contractors have to set it up and pay for it themselves.
Employees are heavily protected from unfair dismissal, and are entitled to severance, including dismissal indemnity, paid notice period and paid holidays indemnity. Independent contractors do not receive the same level of protection from termination. However, they are protected from abuse, and employers must respect the notice period; otherwise, they must compensate the contractor for the break in the contract by paying for the time left in the contract of services or pay damages for the unfair termination of the established relationship.
Penalties for misclassification in France
The re-characterization of the relationship entails heavy legal, financial, administrative, and criminal consequences for the employer who misclassifies employees as contractors. The burden of proof lies upon the independent contractor, who should demonstrate the existence of a subordination relationship.
The penalties for misclassification include:
- Payment of a minimum wage, taxes and social security contributions
- Payment of retroactive salary, benefits, social security contributions, and back taxes—all with significant interest
- Payment of overtime hours, bonus schemes and other benefits applicable within the company arrears
- Payment of any sums related to a breach of the employment contract.
- Up to 3 years of imprisonment.
- Fine of up to €45,000 for the company’s legal representative and a fine of up to €225,000 for the company as a legal entity for undeclared work.
- A specific indemnity corresponding to at least six months’ wages would be awarded against the company in case of termination of the relationship with the independent contractor, now considered as an employee.
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