France’s labour reform
After multiple weeks of negotiations and a hundred of meetings with trade unions, the French government has unveiled on 31 August an ambitious and comprehensive labour law reform. The aim of the “Law on the Reinforcement of Social Dialogue” is to increase the flexibility of the labour market through 36 concrete measures.
Greater flexibility will in turn lower the cost of doing business for businesses and start-ups and therefore increase competitiveness and investment. This reform is a cornerstone of the government’s plan to adapt our economy, the second largest in the Eurozone, to a competitive, globalized and fast-moving world economy.
This reform is supported by a strong legitimacy from voters of the presidential and legislative elections, as well as from the French National Assembly which authorized the government to use ordinances to speed up the process. The ordinances will be officially introduced during the council of ministers meeting on 22 September and come into effect after being signed by President Macron.
The government is therefore making good on President Macron’s promise to reform the French economy as soon as possible. The reform will encourage employers to ramp up hiring by erasing rigid aspects of the labour market. We would like to point out that some proposals go much further than recent labour reforms carried out in other EU countries.
The reform has 3 main axes:
Labour relations will be simplified. Employers will have more freedom to negotiate working time, salaries and overtime with less constraints from rules set up at the industry or branch levels. The number of statutory bodies representing workers will be cut from four to one. Companies employing fewer than 50 workers, that is to say 95% of French companies, will be able to negotiate directly with employees, without any delegate from a trade union.
The labour market will be more flexible. The element of financial risk and the uncertainty linked to redundancy plans will be minimized thanks to a lower cap on damages awarded by labour courts for unfair dismissal. Every company will be able to rely on a voluntary dismissal mechanism.
France will be more welcoming to entrepreneurs and investors. Labour tribunals will only take into account the financial health of subsidiaries in France, and not a company’s assets abroad, when assessing the relevance of lay-offs on the grounds of economic difficulties.
In the past year, France has already attracted renewed interest from investors around the world. In 2016, the number of foreign investment projects was up 30%. We firmly believe this reform will consolidate and amplify this trend.
Economic agenda of the government of PM Edouard Philippe
The reform of the French economy goes well beyond the labour market and the government plans to have the following measures adopted in the upcoming months to further increase France’s economic competitiveness:
Reform of the housing tax, designed to increase the purchasing power of consumers by 3 billion euros in 2018.
Ecological and Digital Transition Pact with local governments, which is aimed at allowing access to high-speed, broadband Internet by 2022 at the latest.
Reform of the pension system to make it more just and transparent.
Reinforcement of the professional training system.
Abolition of employee mandatory contributions to the health care and unemployment insurance funds in order to reward work. This reform is to increase the purchasing power of more than 20 million workers as early as 2018, by as much as 250€ per year at the level of the minimum wage.
Plan to balance the Social Security budget by 2020.
Plan to bring public deficit under the threshold of 3% in order to fulfil obligations set at the European level, and to reduce tax burden and government spending by 1 and 3 percentage points respectively in 5 years.
Transformation of the CICE, a tax credit for businesses, in a reduction of charges for employers that will be even more advantageous for businesses as employees at the level of the minimum wage will entail no charges for the employer. This reform is to come into effect on January 1st 2019.
Gradual reduction of the corporate tax from 33.3% to 25% by 2022.
Simplification of the tax on savings, which will become a flat tax at 30%.
Reduction of the tax on capital, which will only take into account immovable property, to favour investment.
A large investment plan of 50 billion Euros will be launched to invest in the ecological transition, healthcare, transports, agriculture and the modernization of public institutions.
- Press kit - The French social dialogue model overhaul
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KAM Man Ho
PR & Communications Manager
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