French government seeks to reduce number of short term contracts

After the publication of the reform of the Labor Code and while it has just initiated consultations to revise the unemployment insurance, the government is studying the implementation of a variable contribution rate according to the employment contracts for limit the recourse of companies to short contracts.


Contracts lasting less than one month have in fact been increased in fifteen years from 1.5 million per quarter to more than four million, according to a study by Unedic.


The bonus-malus scheme devised by the government should concern short-term contracts with a current contribution rate of 4.05% (4.55% for customary fixed-term contracts). It would be to apply a variable rate of 2% to 10% depending on the “behavior” of companies in hiring.


In this perspective, the more an employer will rotate its workforce, regardless of the nature of the contract (fixed-term, permanent, temporary, intermittent …), the more the employer contribution rate will increase. On the other hand, companies with low turn-over of their employees or relying on training to reconvert them in the event of inactivity should be subject to lower contributions.


Annual update to contributions


At present, the financing of the unemployment insurance scheme is ensured by a contribution of 2.4% for employees and 4.05% for companies (it was 4% up to as of 01 November 2017 before the application of a 0.5% surcharge for 3 years). By the end of 2018, the employee contribution rate should disappear and be replaced by a rise in the CSG.


For its part, the employer contribution rate should in future be updated every year according to their recruitment practices over the previous 3 years. The calculation of the contribution should thus take into account the compensation costs generated by the company over this period.


A bonus or penalty would then apply to the company depending on whether its compensation expenses exceed or are lower than the national average. Thus, a company that runs its workforce will contribute more than a company that retains its employees longer.


A graded contribution rate


Depending on the options under consideration by the government, contribution rates could vary from 2% for the most virtuous companies in terms of recruitment, to 10% for those who abuse the use of multiple short-term contracts.


The imagined device operates according to a logic of win / losers that should balance and that reminds the one applied for the branch accidents at work Social Security. The government also reserves the possibility of modulating rates according to the sectors of activity.


The sectors that would have the greatest fear of this new measure would be the hotel and restaurant trade and events, even if the latter should previously benefit strongly from the transformation of the CICE into lower employer costs. For their part, the sectors of banking, industry or insurance seem less affected by this potential reform.


A project that heightens employers’ fears


Last spring, the last negotiation of the Unemployment Insurance Agreement planned to postpone discussions on limiting the use of short-term contracts to professional branches. However, no negotiations have been started to date, the employers responsible for blaming the schedule of the presidential election even if it has not yet prevented them from renegotiating the Unedic convention in the spring.


This immobilism has no doubt prompted the government to take action with this bonus / malus proposal to change the behavior of employers and limit the precariousness associated with short-term contracts. The entourage of the Ministry of Labor, however, made it clear that it should be implemented gradually without affecting employment.


However, the employers’ organizations are very reluctant to this reform, especially the MEDEF arguing that the general interest would not be to defend certain sectors to the detriment of others, despite the fact that they are a minority.


The President of the Medef has protested against this reform project that he considers “counterproductive” and considers “an absurdity.” It considers that this will thus increase the use of companies to the services of auto-entrepreneurs, whose government has planned to double the turnover caps by 2018.


For its part, the national secretary of the GSC, the union executives, is rather favorable to this measure that takes the principle of the polluter pays. The Force Ouvrière union is also showing its satisfaction even if it is working on another proposal to limit the use of short contracts.