France’s highly educated and skilled workforce is quickly making this nation a favorite choice among businesses looking to open a branch in France and hire French independent contractors.
But when it’s time to pay your contractors, what steps do you need to take to comply with French labor laws?
This step-by-step guide will explain how to correctly classify contractors, put them on the payroll, fulfill their invoices, and remain compliant with the French Labor Code.
Step #1: Classify your workers correctly
French employees are protected under a wide variety of laws, and when you’re hiring workers in France, one of the first steps you need to take before you onboard them is classifying them correctly as either an employee or an independent contractor.
There are numerous governing bodies and pieces of legislation you need to be aware of when hiring in France. Governing bodies include the URSSAF. Relevant legislation includes not only the French labor code, but also EU laws and collective bargaining agreements.
A quick note before we move to the series of tests that will help you determine the correct classification: French laws permit independent contractors to classify themselves as either self-employed or micro-entrepreneurs. The contractor will have different tax obligations depending on which category they choose. However, this does not affect you as an employer. Your responsibility is to correctly categorize them as either an independent contractor or an employee.
The penalties in France for worker misclassification are quite severe. They may include:
- Holding you liable for paying back taxes and missed pension and social security contributions, as well as various penalties and fines
- Jail time
- A two- to 10-year ban on your ability to hire independent contractors
- Legal action taken against the company by the contractor for things like unpaid overtime, unpaid severance (if they were terminated), and up to six months’ salary if it is determined you knowingly and willfully misclassified them
French labor codes provide a series of tests to help you determine the proper classification for a new hire. They are extremely strict about proper classification, so make sure you pay attention to them and use them to draw up the right contract.
There are specific criteria for employers to use when they’re classifying a worker. These include:
- Mutuality of obligation: 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: The degree of control which the employing entity has over a worker’s hours and place of work.
- Other activities: 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: 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 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.
- 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 account for these in the case of employees.
Additionally, independent contractors can only be hired to perform work tasks you can’t accomplish with your current workforce, and they must not be subordinate to any employee at your company.
Step #2: Determine the best way to pay your contractors
After you’ve taken the necessary steps to properly classify your new hire as an independent contractor, it’s time to decide on a method of payment. The gig economy has exploded in popularity over the last few years, as has remote work, leaving employers with more choices than ever about how they’d like to handle payments.
Here are a few options you can explore for paying your international contractors:
- Bank wires. If you have a physical branch in France, you can open a French bank account and do direct deposit. If you only have a bank account in your own nation, you have the option to do a global wire transfer.
- International money orders. This is a time-tested way of sending money internationally, but there are much better choices. If you decide to pay contractors using international money orders, you’ll find yourself paying fees each time you send a payment, and you’ll also be subject to inconvenient maximums on the amount of money you can send at one time.
- Digital wallets or payment platforms. Many employers and independent contractors now opt to use digital wallets as their method of payment. This is a great option, but you may have difficulty finding a digital wallet or payment platform that’s available in both countries. Since you can’t, say, use PayPal on your end to put money in a contractor’s Venmo account, this issue could prove extremely frustrating.
- Global payroll services. Typically, contractors aren't included in payroll, since they aren't subject to the same withholdings as employees—instead, they invoice for their services, which goes through accounts payable for many companies. But with Rippling, you can pay French employees and French contractors, wherever they are, in a single pay run.
Step #3: Use global payroll software to process payments
As you saw in Step #2, there are multiple ways to pay contractors in France. But the fastest and simplest way is paying contractors through global payroll software.
With Rippling, you can pay employees and contractors, across the world, in a single pay run. Here’s a preview of how Rippling’s global payroll system works:
Step #4: Keep accurate records for legal purposes
Employers aren’t legally obligated to deduct taxes or offer benefits to independent contractors; the latter are responsible for paying their own taxes and purchasing their own health insurance and pension plans.
However, it’s still crucial to keep accurate records of each contractor’s information, as well as the contract you both signed, in case you find yourself in legal trouble.
Head spinning? One of the benefits of processing payments through a global payroll system like Rippling is offloading the paperwork—and letting us do the calculations and filing for you.
FAQs about paying contractors in France
Do you need to withhold taxes when paying contractors in France?
No. In France, independent contractors are expected to deduct tax and social security contributions from their pay themselves.
Does the French minimum wage apply to independent contractors in France?
No. French minimum wage laws do not apply to independent contractors.
Do French contractors get benefits?
No, independent contractors in France do not receive benefits from their employers. Only workers classified as employees do.
Can you pay contractors in France in your home currency?
While you must pay workers who are classified as employees in euros, independent contractors can be paid in whichever currency you and they agree on—the key word here is: agree. If the contractor doesn’t want to deal with conversion rates and other, similar hassles themselves, it is your responsibility to pay them in the currency of their choice.
Can you manually pay contractors in France?
Yes, and it's common for small business owners to manually process contractor payments in an attempt to cut costs. But this can be time-consuming, especially as your business grows and if you work with multiple contractors in France or across borders.
It's also important to note that manually processing payments comes with some risks:
- Compliance. Running payroll manually means assuming the risk of human error and omission. Protect yourself and your business with Rippling, which automatically enforces compliance with any applicable local laws—no matter where your contractors live.
- Security. Manual payroll processing also poses security risks, especially if you use spreadsheets or paper records. Sensitive employee information can be lost, stolen, or misused.
Make payroll automatic by using Rippling. Rippling syncs all your business's HR data with payroll, eliminating the need for manual data entry entirely. Employees and contractors all over the world get paid quickly (and compliantly) in a single pay run.
How do you turn a contractor into an employee in France?
While hiring independent contractors over full-time employees can come with financial benefits, sometimes you do need a full-time employee. The challenge is making sure all the legal requirements are in order: French employees are protected under national minimum wage laws, for instance, and they are also entitled to benefits.
With Rippling, you can effortlessly manage contractors—as well as quickly transition contractors to full-time employees—with legally compliant paperwork, benefits administration, payroll, and more. Rippling handles it all, so you stay compliant from onboarding to offboarding.
Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.