With Brexit, many companies are thinking of moving their head offices to France. But France has a reputation for complex employment and labour laws. The legislation tends to be rigid and is often seen as cumbersome from a fiscal and administrative point of view, motivating foreign companies to have second thoughts. One solution could be to work with independents. In this case, companies need to be aware of the risks and opportunities.
The risk of requalification
Probably the greatest risk a company faces when hiring an independent consultant for a long-term assignment in France may be that his/her services are requalified as an employment contract. What does this mean?
First, imagine recruiting a consultant for a 12-month business assignment on an average daily rate basis of €350. For a full-time contract with an average of 18 days a month over 12 months, you will be investing €75,600 before taxes (€350 x 18 x 12). However, should the service be requalified as an employment contract, the consultant will no longer be considered as an external service provider, but as one of your employees. Consequently, you will need to pay for employers and employees social contributions in addition to this amount. These can total nearly €60,000 so the total cost of employing that person will be €135,600.
In addition to this high financial burden, you will need to retroactively integrate the consultant into your staff numbers, and if you terminated the contract before the requalification occurred, you may also have to pay damages for breach of contract without actual and serious cause.
Finally, and perhaps most importantly, the CEO of your company risks criminal prosecution. The company can be charged for undeclared work and lose the benefit of social contribution exemptions, such as the “Fillon” exemption or the “Tax Credit for Competitiveness and employment.”
How to avoid or reduce this risk
Levels of risk with regard to requalification as an employment contract differs according to how a consultant is offering services. Let’s have a look at each intervention level.
Consultant working from own company:
This intervention mode can carry the highest risk, especially if he works 100 per cent of his time for your company. However, several provisions and precautions should help you reduce the risk. You should especially try not to create any type of subordinate relationship and reduce indications reminiscent of a company/employee relationship.
There may be a risk for your company, but it is usually low when a consultant is contracted via a consulting firm, or an interim management firm. These companies tend to know the risks involved and will do their best to limit them by making sure that the consultant’s form of activity conforms to requirements (for example, contract wording) and more importantly, in practice.
Umbrella or interim companies:
Umbrella workers or interim consultants are employees. Consequently, these intervention modes should reassure you with regard to employment contract requalification. With umbrella companies, the requalification risk should be non-existent. An umbrella company employee who has decided to work with this status is already an employee of the umbrella company.
With interim work, requalifications have occurred, but in extreme cases of non-compliance of interim regulations. Nonetheless, even with umbrella companies or temporary agencies, precautions listed in the following scenario should also be followed.
Indications of subordination
For the provision of services to be requalified as an employment contract, several indications must demonstrate the existence of a subordinate relationship. Law defines a subordinate relationship as “working under the authority of an employer who has the power to issue orders and directives, to control their execution and to sanction any failings of his/her subordinate.”
Requalification is not automatic, but risks increase when the following elements exist in a consultant-client company collaboration. For example:
• The client company imposes working hours.
• The principal sets deadlines that are too stringent. Setting deadlines is authorised, but they should not be too precise or prevent the contractor from organising their time freely.
• The consultant bows to a client’s authority.
Consequently, your company should avoid this and other indications of subordination and be aware of how a consultant is offering services.
Daniel Pardo is author of "How to work with independents in France" available here: http://dld.bz/guAYd