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Pay your team in France
Setting up payroll in France
Income tax and social security in France
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French legislation is known for being very complex and difficult to navigate for foreign employers. This does not only apply to local labor law and the countless collective bargaining agreements, but also to payroll rules and regulations. The 2021 Global Payroll Complexity Index has named France as the most complex country in the world to run payroll in.
However, the country has seen some legislative changes in the past few years which have lessened the reporting burden on employers with regard to income tax and social security as a new universal tax and social charges declaration system has been introduced.
Before employers can start processing payroll in France, they must undergo a series of registration processes with the local authorities, including social security bodies and tax authorities. Employers need to register with the French social security agency URSSAF. There are several regional centers and the registration must be done with the one closest to where the company is registered.
In case the company doesn’t have a permanent establishment in France, it’s the URSSAF closest to where the employee is based that is responsible. Every new employee needs to be reported to URSSAF via a hiring declaration (DPAE). In addition to the registration with URSSAF, employers also need to register with the additional pension fund they will contribute to for their employees.
As for tax registration, employers need to make sure they are registered as tax collectors which can be done via the website of the respective local tax authority. While it’s recommended to set up a local bank account to issue payments to employees, social security bodies and local tax authorities, French law doesn’t mandate employers to use a local bank.
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The French social security system is fairly complex and consists of a large number of different bodies and authorities. Contributions are made jointly by employers and employees. The tax system is progressive.
Income tax rates vary for resident and non-resident employees. Resident employees pay income tax according to a progressive tax regime which comprises five tax rates ranging from 11% to 45%. Individual income of up to EUR 10,225 per year is tax free (valid for the 2022 tax year).
Income exceeding EUR 250,000 is subject to a 3% surcharge (EUR 500,000 for couples). For income beyond the EUR 500,000 threshold (EUR 1,000,000 for couples), the surcharge is 4%. There are different tax deductions and allowances available for employees depending on their family status and on whether they have made a particular investment in the ongoing tax year.
In the beginning of 2022, the French government has adapted the personal income tax bands which are now set as follows:
2022 Tax Bands
Corresponding Tax Rates
The indicated tax thresholds are the same for single taxpayers and married couples with children but the calculation of the net taxable income works differently depending on the family status. For married couples and those with children, the net taxable income is divided into different shares (i.e. two shares for married couples without children, 2.5 shares for a couple with one child etc.) before being taxed according to the above given tax rates. Families with children thus pay less tax than childless couples or singles.
In 2019, France adopted the PAYE system for sourcing income tax. Instead of annual tax submittance, income tax must now be withheld directly by the employer and submitted to the local tax authorities via direct debit. In addition, a monthly declaration must be filed online which contains a summary of wages, income tax and deductions for each employee as well as information on social security contributions. This declaration is called DSN. The deadline for filing the DSN varies depending on the size of the company:
For companies of more than 50 employees: until the 5th of the following month
For companies of less than 50 employees: until the 15th of the following month
Payments are to be made either on a monthly or a quarterly basis (also depending on the number of employees). Since the introduction of the DSN, it is not necessary for companies to file a final declaration at the end of the tax year which equals the calendar year.
Employers are obligated to withhold social security contributions from their employees’ salaries as well as make their own contributions. For employees, contributions usually amount to between 20% and 23%, while employers have to contribute up to 45% of the employee’s salary.
The French social security system consists of various social security bodies and contributions include:
Basic social security coverage (sickness, maternity, disability etc.)
Social security debt reimbursement
Complementary pension fund
Complementary health coverage (not mandatory)
Employees only contribute to the public as well as to a complementary pension fund. They also need to pay a solidarity surcharge equal to 9.7%. There is a monthly threshold for social security contributions which is currently (January 2022) set at EUR 3,428 (EUR 41,136 per year). Non-resident employees can be exempt from social security payments.
Social security contributions need to be declared and submitted along with the employee’s income tax in the monthly DSN. Here is an overview of the social security charges on both employee and employer (rates valid for January 2022):
* Please note: The total estimate of the social charges on both employee and employer are not equal to the sum of the different percentages given (as different thresholds apply). Instead, they represent an average percentage calculated based on average employment costs.
Employees in France enjoy a high level of protection and a wide range of statutory benefits. These include:
Annual leave: 30 days per year, i.e. five whole weeks including Saturdays, plus 11 public holidays
Maternity leave: 16 to 46 weeks, depending on the number of births and the total number of children
Paternity leave: 28 days of which 3 must be taken immediately after birth
Parental leave: up to 2 years for one parent while the other parent can take 1 year of parental leave (needs to be taken before the child turns 3)
Sick leave: no obligation to provide sick pay to employees
For more information on employee benefits and other employment requirements in France (including severance pay and termination procedures), check out our Global Hiring Guide.
Since January 2022, the minimum wage in France is set at EUR 10.57 per hour which leads to a monthly minimum remuneration of EUR 1,603.12. Overtime (i.e. any hour worked beyond 35 hours) needs to be paid at a rate of 125% of the employee’s usual salary. For every hour exceeding a weekly threshold of 43 hours, overtime pay is 150%. Depending on the collective bargaining agreement, employees in certain industries are entitled to an annual bonus.
With the exception of seasonal workers, payroll in France needs to be processed on a monthly basis, with payments usually being made at the end of each month. It is not mandatory to issue payments via a French bank account. Employers are obligated to issue a valid payslip at the end of each pay period. Since 2017, both electronic or paper payslips are legally permitted. Furthermore, employers must keep record of payroll-related data for at least 5 years.
Learn about tax reporting, compensation laws, registration requirements and more in our free Payroll Guide for France.
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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