Employee vs. Contractor: How to Classify Workers in France (Quiz included) [2024]
Ready to hire a new worker in France? Whether you’re looking for an employee or an independent contractor, correct classification is crucial.
French employment laws are complex, and penalties for misclassification are severe. The French governing authority on labor laws, the URSSAF, pays close attention to worker classification and cracks down on employers who flaunt the law, whether it’s by accident or on purpose.
Wondering how severe the penalties are? Just ask Uber, who was found guilty by the French Court of Cassation for misclassifying their employees as contractors and ordered to pay around 17 million euros in damages and lost salaries to their workers earlier this year.
Learn about how to classify your workers correctly—and stay compliant with French labor and employment laws—in this guide.
Classifying workers in France
France has different definitions for employees and contractors that will help you differentiate between the two, similar to many other countries. By following the guidelines and classifying your workers correctly, you’ll be better positioned to run your global team smoothly.
Misclassification is taken seriously:
- First, it cheats misclassified contractors out of benefits they should be entitled to as employees, such as pensions and overtime pay.
- It also reduces the amount of taxes owed to the French government that are used to pay for social programs and the running of the government.
- It’s bad for companies, too. Your reputation will be damaged, and depending on the case, you may be severely punished with more than just fines (which we’ll discuss later on).
What is an employee in France?
Workers who are classified as employees in France are permanent members of the company they work for, and they receive a regular monthly salary that is not based on whether they turn in a particular task on time or not.
Furthermore, employers must file a pre-hiring declaration for a new employee at least eight days before the new team member starts at the company. This declaration must be filed with the URSSAF. This is one of the areas in which employers can find themselves paying for skipping this step: The URSSAF can charge up to 7,500 euros per employee for not filing the declaration.
Additionally, employees are entitled to protections and statutory benefits under French law. These include the following:
- Retirement pension schemes
- A work week of 35 hours
- Paid statutory holidays
- Maternity/parental/adoption leave
- Paid sick time
- Help from their employer paying for health insurance
- Five weeks or more paid vacation leave
- Eligibility for the Unemployment Fund
Additionally, employers deduct taxes and the appropriate amounts of pension pay and other social programs from the employees’ paychecks for them. This is not the employee’s responsibility.
What is a contractor in France?
In France, an independent contractor is hired to complete specific tasks for the company and receives payment upon finishing those tasks and doing an adequate job. They are not on the payroll and must send in invoices. The employer is not required to give them work if they don’t have anything for the contractor to do.
Furthermore, independent contractors are not eligible for the benefits employees receive. And, they are responsible for deducting taxes and other required payments from their own paychecks. The employer is not obligated to do this for them.
France has a few different types of contractors (more on those below).
Worker classification overview: Employees vs contractors in France
Contractors
Employees
- High level of worker control.
Contractors are generally given more autonomy to determine how to complete the work and when to do it. - Equipment and tools are owned by the worker.
- Less integrated. Contractors tend to be independent, they’re more likely to work remotely, and they use their own tools and equipment.
- No entitlement to benefits. Contractors are not entitled to the same benefits and protections as employees, and they are responsible for paying their own taxes.
- Time-bound engagement. Contractors are typically engaged for a specific project or period of time.
- Risk of loss. Contractors may assume more risk and liability for the work they perform.
- Non-exclusive services. Contractors cannot be contractually bound to a single company; they can provide their services to more than one organization.
- More direction from the employer. Employees are generally subject to more control and direction from their employer, who will provide guidance on how to perform the work and may set specific hours of work.
- Equipment and tools are typically provided by the company.
- Highly integrated. Employees are typically more integrated into the employer's organization, for example, they may work at the employer's premises.
- Entitled to benefits. Employees are entitled to certain employment benefits and protections, such as minimum wage, overtime pay, and vacation pay. They may also be entitled to benefits like overtime, retirement plans, maternity leave, and paid sick leave.
- Indefinite engagement. Employees are generally hired for an indefinite period of time.
- No risk of loss. Employees are generally protected from liability for work-related issues.
- Exclusive services. Employees can be contractually bound to provide services to just one company
Tests to classify workers in France
To help you classify your workers correctly, the French government has created a series of “tests” consisting of nine factors that will help you correctly define the employment relationship. The French Court of Cassation will also take these “tests” into account should you run afoul of the law. Before we dive into the individual components of the “test,” remember: No single test should be considered a guarantee you’ve correctly classified an employee or an independent contractor.
The following are the nine components of the “test”:
- Mutuality of obligation
- Personal service
- Control
- Other activities
- Pay and benefits
- Integration
- Facilities and equipment
- Financial risk
- Taxation
Now, let’s review these in more detail.
Mutuality of obligation
This refers to whether there is a binding commitment on the company to offer work and on the consultant to provide work.
Personal service
An employee is required to provide their services personally, and if there is a right to appoint a substitute, this will typically be qualified at the employer’s discretion.
Control
This refers to the degree of control which the employing entity has over a worker’s hours and place of work.
Other activities
This refers to whether the worker can undertake other work outside of the employing entity and if so, to what extent.
Pay and benefits
An employee will be paid a fixed amount on a regular payment date according to their hours worked, irrespective of performance targets or project completion.
Integration
Integration means how involved a worker is in the company and its management and how they are perceived by third parties.
Facilities and equipment
An independent contractor will usually provide their own equipment and materials in order to perform the services while an employee will rely on the employer to provide the same.
Financial risk
Which party has liability for any losses arising from the agreement? An employee will be paid even where there is insufficient work to keep them occupied and will assume no financial risk in working for the employer, whereas an independent contractor, as a self-employed individual, does assume financial risk.
Taxation
Which party bears the liability for tax arising from the engagement? A self-employed independent contractor will be responsible for the payment of their own income tax and social security contributions, whereas the employer will take care of these in the case of employees.
Penalties for misclassifying workers in France
As mentioned earlier in this guide, France comes down hard on employers who misclassify employees as contractors. Here are just some of the penalties and consequences you can expect to face:
- Payment back taxes, missed pension and social security contributions, and fines
- Payment of retroactive salary and benefits, both of which come with significant interest rates attached
- Up to three years of jail time
- Fines for both the company’s legal representation and the company itself; the former could be fined as much as 45,000 euros, while the latter could be fined up to 225,000 euros
- A ban on hiring independent contractors for up to 10 years
As you can see, misclassification is enormously expensive and can even result in criminal charges. There are additional repercussions, too. Once your reputation is damaged and word gets out, you may experience a high turnover rate, lawsuits from the employee who was misclassified, and difficulty recruiting new employees, just to name a few.
Deliveroo, an online food delivery company, felt these ramifications in April of 2022 when they were slapped with a penalty of 375,000 euros for misclassifying their workers as independent contractors when they should have been classified as employees.
The French government is quite active in auditing and penalizing companies that break misclassification laws. The bottom line: Follow the law and seek expert help if you’re not sure you’ve classified a worker correctly.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
