uroodqgvrfldoehqh wv - pwc · 2016-10-06 · french social security update 3d\uroodqgvrfldoehqh wv...

$: UROODQGVRFLDOEHQH WV - PwC · 2016-10-06 · French social security update 3D\UROODQGVRFLDOEHQH WV no. 89 Severance packages paid to senior managers: update to the BOFIP tax bulletin$
French social security updatePayroll and social benefits

no. 89

Severance packages paid to senior managers: update to the BOFIP tax bulletin 2

European Directive and acquisition of entitlements to paid leave during periods of absence 4

Difficult working conditions 5

Amendments affecting the relationship between contributors and the URSSAF 6

Overturning of case law by the court of cassation 9

The “Labour”Act is finally published 11

In brief 13

3rd quarter 2016

Severance packages paid to senior managers: update to the BOFIP tax bulletinYet another article on the tax treatment of severance packages paid to senior managers who are terminated – the third since the beginning of 2016 and we are only in the third quarter of the year. However, this is only to be expected given the fact that the French tax authorities have failed to update their guidelines, last amended in 2014, to take into account the reform to severance packages introduced by the Finance Act for 2016 and the Social Security Finance Act for 2016.

Update to the BOFIP tax bulletin

The official French tax bulletin (Bulletin Officiel des Finances Publiques-Impôts – BOFIP) provides an electronic version of the French tax authorities’ full guidelines, i.e., the tax authorities’ view on how legislation should be understood and interpreted.

While these guidelines had long been available in paper format, the shift to the digital format gave the tax authorities the opportunity to “tidy up” the guidelines and remove a large number of obsolete sections.

Accordingly, as from 26 May 2016, the BOFIP contained a new version of the guidelines on the legal and tax treatment of severance packages paid to the individuals referred to in article 80 ter of the French Tax Code (Code général des impôts). This new version supersedes the previous version and brings the guidelines into compliance with the Finance Act for 2016, which divided the maximum tax exemption threshold in half by reducing it from six times the annual social security ceiling to just three.

Surprise in the BOFIP

However, the update to the BOFIP included more than this basic formality: it aims to set out the tax authorities’ view on the law and in particular how it should be applied. With regard to the latter point, we were surprised to read the tax authorities’ announcement that the reduction in the maximum tax exemption threshold, as provided for in the Finance Act for 2016 passed on 29 December 2015, should apply to amounts paid as from 1 January 2015, irrespective of the date on which the individual’s duties were terminated, i.e., one-year retroactive effect (see BOFIP clarification of 26 May 2016: BOI-RSA-CHAMP-20-40-20-20160526).

Inconsistency with social security provisions

The inconsistency of the tax authorities’ position with the social security provisions in force is flagrant. Article 8 of the Social Security Finance Act for 2016, which modified the social security contribution exemption threshold for severance packages paid to senior managers, specified that: “Section I applies to compensation for the termination of an employment contract or corporate officer position notified as from 1 January 2016 and to compensation for the termination of employment contracts as provided for in article L1237-11 of the French Labour Code, for which a request for approval has been submitted as from said date”. Accordingly, there may well be three different periods rather than two (before and after 1 January 2016) for the legal and tax treatment of severance packages paid to de jure and de facto senior managers, as summarised in the table below.

French social security update | 89 | Payroll and social benefits 3rd quarter 2016 2

Severance packages paid to senior managers: update to the BOFIP tax bulletin 2European Directive and acquisition of entitlements to paid leave during periods of absence 4Difficult working conditions 5Amendments affecting the relationship between contributors and the URSSAF 6Overturning of case law by the court of cassation 9The “Labour” Act is finally published 11In brief 13

Legal and tax treatment of severance packages paid to senior managers in chronological order

Packages paid

Applicable treatment

Before 1 January 2015 2015 (1) After 1 January 2016 (2)

Tax exemption

Exemption from contributions

and CSGTax exemption

Exemption from contributions

and CSG

Exemption from s.s. contributions

Exemption from CSG/CRDS

Termination of corporate officer position

Six times the s.s. ceiling(3)

2 times the s.s. ceiling if ≤ 10 times the s.s.

ceiling(3)

3 times the s.s. ceiling(3)

2 times the s.s. ceiling

if ≤ 10 times the s.s. ceiling(3)


2 times the s.s. ceiling if ≤ 5 times the s.s. ceiling(3)

Termination of employment contract6 times the s.s. ceiling(3)



irrespective of the amount(3)



Combined compensation for termination of corporate officer position and employment contract






(1) Tax treatment applicable to amounts paid as from 1 January 2015 even if the termination was notified before that date.(2) Tax treatment applicable to terminations notified as from 1 January 2016.(3) In any event, the exemption shall apply within certain limits provided for in articles L242-1 and L136-2 of the French Social Security Code (Code de la sécurité sociale), and by reference, in article 80 duodecies of the French Tax Code.



European Directive and acquisition of entitlements to paid leave during periods of absenceThe Court of Cassation has handed down three decisions on this issue, which have taken stakeholders by surprise.

First decisions

Court of Cassation decision no. 11-22.285 of 13 March 2013, and no. 15-11.422 of 2 June 2016

The first was a fairly standard decision, underlining the fact that French law is not in line with the provisions of the European Directive as it does not guarantee that employees who are absent from work due to a common illness (Court of Cassation case no. 11-22.285 of 13 March 2013) or even due to an occupational illness lasting more than one year (Court of Cassation case no. 15-11.422 of 2 June 2016) will acquire entitlements to paid leave up to a limit of four weeks.

However, these decisions also explained that employees could not seek the conviction of their employer for failing to apply European law since employers were only supposed to apply French law until such time as the representatives of the French State brought French law into line with European legislation.

The only avenue open to employees was to seek the conviction of the French government itself for failing to transpose the European Directive into domestic law.

This was the conclusion of the Clermont-Ferrand Administrative Court in a recent decision (Clermont-Ferrand AC case no. 1500608 of 6 April 2016) in which it ordered the French government to pay damages to an employee who did not acquire the four weeks of paid leave.

Second decision

Court of Cassation decision no.1289 of 22 June 2016 (15-20.111)

The second decision is more surprising since it distinguishes between employers that are fully private companies and companies that perform public services on behalf of the French State.

For the latter, the Court of Cassation considered that the employers could not deny responsibility for failing to apply the European Directive since, as a “representative” as the State, it was as responsible for the State for not having transposed the Directive into French law and, consequently, for failing to comply with EU law. The Court of Cassation referred to this as the European Directive’s direct, vertical applicability.

The employee in question had been on occupational sick leave for more than one year and had lost all entitlements to paid leave benefits.

In light of the arguments adopted by the Court of Cassation, he won the case against his employer, who was ordered to pay him compensation corresponding to the four weeks of paid leave entitlements guaranteed under the 2003 European Directive, but not the fifth week, which is not provided for under European law.

The same applies to employees of private companies that perform public services, who are absent due to a non occupational illness.

This decision will be published in the Official Bulletin of the Court of Cassation (Bulletin officiel des arrêts de la Cour de cassation) with the references P+B+R+I, denoting the significance of the case and the attention it should receive from the legislator, although we already know that no amendments to the “draft labour law” are currently planned in order to reflect this decision.



Difficult working conditions

Entry into force of the final six risk factors

Despite a final and futile attempt by the MEDEF to postpone their adoption, the final six risk factors entered into force on 1 July 2016.

These are:• manual handling of heavy loads,• awkward postures, such as those

putting stress on joints,• mechanical vibration,

As well as exposure to:• hazardous chemicals, including

dust and fumes,• extreme temperatures,• noise.

To improve the management of declarations submitted by employers detailing the risk factors to which their employees are exposed, the managing body of the single monthly electronic payroll return (déclaration sociale nominative – DSN) system has published a user guide on the classification of the different risk factors in the DSN on its website DSN-Info.

The classification is largely based on the codes used as part of the social data declaration schedule (déclaration annuelle des données sociales – DADS) last year for employees exposed to the first four risk factors, namely:• work in hyperbaric chambers,• night work,• shift work,• repetitive work involving frequently

repeated high-speed movements.

Decree no. 2014-1159 of 9 October 2014, relating to employees’ exposure to certain occupational risk factors above given thresholds and the traceability of such exposure, establishes the intensity of the working conditions and the length of time they must be endured

for an employee to be deemed to have been “exposed” to one or more risk factors.

The government allowed each individual industry to determine a classification or benchmarking system (similar to the provisions in certain collective bargaining agreements to classify employees’ occupations) in order to simplify the assessment of each employee’s exposure to risk factors. However, negotiations in this area did not achieve the desired outcome.

Additional contributions

The Conseil d’Etat rescinded the section of the decree of 9 October 2014 relating to the fund to finance rights acquired under the Compte Pénibilité account (for employees with difficult working conditions, entitling them to professional training, part-time work or early retirement) as it set additional contribution rates that were below the minimum legal requirements.

Decree no. 2016-953 of 11 July 2016 published in the Official Journal of 13 July 2016 set out the new contribution rates to fund Compte Pénibilité accounts, which are applicable as from 2015.

Accordingly, the rate for employees exposed to a single risk factor has been set at 0.1% for 2015 and 2016 and 0.2% as from 2017.

The rate for employees exposed to multiple risk factors has been set at 0.2% for 2015 and 2016 and 0.4% as from 2017.



Amendments affecting the relationship between contributors and the URSSAFA recent decree (no. 2016-941 of 8 July 2016 published in the Official Journal of 10 July) provided for a sweeping reform of the relationship between contributors and the URSSAF. The changes are set out below in order of their date of entry into force, namely:• the day after their publication

in the Official Journal, i.e., 11 July 2016, or

• 1 January 2017.

Changes effective from 11 July 2016

Among the amendments that entered into force the day following the publication of the decree in the Official Journal, the rules governing inspections by the URSSAF stand out most. However these will only apply to audits initiated as from 11 July 2016 and not to those currently in progress.

URSSAF audits

The articles of the French Social Security Code (Code de la Sécurité Sociale) now provide as follows:• the period of time between the

issuance of the notice of audit and the first visit must be at least 15 days (until now, only a non-legally binding circular mentioned this 15 day time limit);

• in the event of an inspection of a legal entity (such as a company), the notice of audit must be addressed to the legal representative and sent to the registered office of the company or its main place of business; unless stated otherwise, the notice will apply to each establishment of the legal entity under inspection;

• the agent carrying out the on-site inspection may request that the relevant documents be ordered in such a way so as to enable the audit, which will be communicated to the individual or legal entity under inspection in advance;

• if the inspection covers electronic documents, the audited contributor shall, on the request of the agent, designate an authorised user to perform the necessary procedures using his or her equipment (article R243-59-1 of the French Social Security Code);

• the letter of comments sent to the audited contributor must set out the grounds for each adjustment and the legal or factual considerations on which they are based, as well as the amount of the corresponding assessment bases;

• pursuant to the right-to-reply procedure, the audited contributor may provide any clarifications or additional information deemed necessary, by adding other documents to the list of documents consulted for example;

• where the audited contributor replies to the comments within the 30-day time limit, the agent must specify in his own reply, adjustment by adjustment, those which will and will not be maintained.

The decree further specifies the conditions under which a previous audit that did not give rise to any comments may be used by the company to defend its position. This confirms past decisions of the courts which held that in order to be enforceable in a court of law, the URSSAF’s position during an earlier audit must have been taken with full knowledge of the situation and under exactly the same legal and factual circumstances (the new article R243-59-7 of the French Social Security Code). The decree also addresses the possibility of applying flat rate taxes (such as for undeclared labour) and the calculation methods for audits initiated as from 11 July 2016 (the new article R243-59-4 of the French Social Security Code).



Formal notice

Formal notices shall set out the reason for, nature and amount of the sums claimed by the URSSAF and the period to which they relate, and shall clarify for future information the relevant provisions of the French Social Security Code and the applicable surcharges and penalties. The decree also increases the amount of information that must be provided in formal notices issued by the URSSAF subsequent to an inspection, in order to ensure that contributors are better informed. Accordingly, such documents must now state:• the amounts set out in the letter

of comments, adjusted, where applicable, following exchanges between the audited contributor and the agent in charge of the inspection, with respect to the various annual periods under review;

• the reference and date of the letter of comments and, where applicable, of the last letter sent by the agent in charge of the inspection as part of exchanges subsequent to the issuance of the letter of comments.

Requests for relief

There are currently only a few cases in which contributors are not permitted to request relief from late payment surcharges and penalties (the amended article R243-20 of the French Social Security Code) relating to undeclared labour [articles L8221-3 and L8221-5 of the French Labour Code (Code du travail)].

Employers are no longer required to prove their good faith in order to be granted relief.

Changes effective from 1 January 2017

URSSAF audits

The decree provides that the charter of audited contributors (Charte du cotisant contrôlé), which must be referred to in the notice of audit, will become binding on the URSSAF as from 1 January 2017.

In addition, audits based on documents, which until recently only concerned contributors with nine employees or fewer, will apply to contributors with fewer than 11 employees as from 31 December (amended article R243-59-3 of the French Social Security Code).

The time limit for referring a case to the Amicable Settlement Board (Commission de Recours Amiable – CRA), a prerequisite before a case can be referred to the Social Security Court (Tribunal des Affaires de Sécurité Sociale – TASS) is to increase from one month to two months for formal notices issued as from 1 January 2017 (article R142-1 of the French Social Security Code).

Like the new requirements concerning the mandatory information to be included by the URSSAF in their replies to letters of comments from audited contributors, as from 2017, decisions issued by the CRA must also include additional information (amended article R142-4 of the French Social Security Code):• the amounts in the formal notice

that have been cancelled and those that remain payable, listed adjustment by adjustment,

• the appeal procedures available and the time limits for lodging such appeals.



Annual adjustment of contributions

The most significant change introduced by the decree relates to the annual adjustment of contributions. Employers may currently choose to:• apply the basic rule, i.e., wait

until the end of the year (or of the employee’s employment contract if the latter leaves the company during the year) before calculating and applying an annual adjustment (article R243-10 of the French Social Security Code); or

• adopt a gradual process, which involves adjusting the contributions on the employee’s payslip throughout the year.

Under the annual adjustment process, employers must make all adjustment payments, at the latest, by 31 January of the year following that in respect of which the contributions are payable, at the same time that they submit their social data declaration schedule (déclaration annuelle des données sociales – DADS).

With the introduction of the DSN system, the annual adjustment process will be abolished as from 1 January 2017 and replaced by a system of adjustment at the end of each payroll period, which is currently just an option.

The decree stipulates that employers shall correct any errors identified in their declarations for the previous months on the next reporting deadline, and pay the additional social security contributions before the same deadline. Any amounts paid in error shall be deducted from the amount of contributions, unless a repayment application has been filed.

Late payment surcharges and penalties

The decree provides that: Except in the event that the employer fails to include certain employees in the declaration or there are repeated inaccuracies in the salary amounts declared, the late payment surcharges and penalties provided for in articles R243-16 and R243-18 of the French Social Security Code shall not apply if the following (cumulative) conditions are met:

• the amended declaration and the related adjustment payment are sent by the first payment deadline following the initial declaration and payment deadline;

• the adjustment payment is less than 5% of the total amount of the initial contributions.



Overturning of case law by the Court of CassationThe Court of Cassation recently overturned case law in two key areas: an employee’s automatic right to compensation if no harm has been suffered and employer liability in cases of harassment.

In both areas the decisions were overturned in favour of the employer.

Employees no longer automatically entitled to compensation

The first decision was handed down in April 2016.

It has since been confirmed in other decisions and can be summarised as follows: just because an employer is late in paying an employee amounts owed to him, the employee is not automatically entitled to compensation, and must in any event provide evidence of the harm caused by the late payment.

The first such decision was handed down by the Social Security Chamber of the Court of Cassation on 13 April 2016 (decision no. 14-28293), and dismissed an employee’s claim for compensation for the harm suffered due to his employer failing to provide him with his payslips within the required time frame. The claim was based on a request for automatic compensation for harm suffered as a result of the late delivery of documents. For over ten years, in nearly every such claim brought before a court on the grounds of late delivery of documents (whether it be employment certificates, statements from the job centre (Pôle Emploi), etc.), the employee was awarded damages. The lower court took the view that the employee had not provided any evidence of the supposed harm (and for good reason, given that according to the relevant case law, until then the employee had not been required to do so), and dismissed the claim. The employee challenged this decision in the Court of Cassation but his case was dismissed following the Court of Cassation’s change of position.

This should help to considerably reduce the number of appeals lodged given that an employee is now required to have solid grounds for seeking compensation for harm suffered.

The position taken by the Court of Cassation has since been confirmed in another case (Court of Cassation case no. 14-27137 D of 8 June 2016).

The second decision concerned the late delivery of contract termination documents such as the statement from the Pôle Emploi (Court of Cassation case no. 15-15982 of 16 June 2016).

The third decision related to the late repayment of business expenses (Court of Cassation case no. 15-21400 of 23 June 2016).

The latest decision was handed down on 30 June 2016 (appeal no. 15-16066), further to a claim for compensation for the harm suffered as a result of an employer failing to observe the proper dismissal procedure. The French Labour Code clearly states that such matters should be handled by a lower court, which will rule on the case and, where applicable, award damages within the limit of one month’s salary.



The employee argued that in any event, the failure to observe the proper dismissal procedure caused him harm and as such should result in the employer being ordered to pay damages in accordance with article L1235-2 of the French Labour Code, and that by making the payment of damages conditional on providing proof of the harm suffered, the court of appeal was going beyond the provisions of the Code.

The Court of Cassation’s reply was very clear: “Whereas the lower court is responsible for establishing and assessing any such harm suffered; the court of appeal, which found that the employee had failed to provide any evidence to substantiate the supposed harm suffered, has, on these grounds alone, legally justified its decision.”

Employers no longer automatically deemed liable in cases of harassment

The second decision overturned by the Court of Cassation relates to the assessment of an employer’s liability in cases of psychological harassment (Court of Cassation case no. 14-19.702 FS-PBRI of 1 June 2016). The letters that follow the case number (FS-PBRI) suggest that this is a reversal of case law and indicate that it is to be widely published.

This decision marks the end of automatic (strict) liability for employers in cases of psychological harassment of an employee by another employee even if the employer has taken all necessary steps to put an end to such harassment. According to previous court decisions, the employer had an absolute obligation to ensure such matters were effectively resolved and could not in any way absolve himself from liability (Court of Cassation case no. 05-43.914 of 29 June 2006).

However, this case law had a highly undesirable effect: since employers were, in any event, deemed liable, they were more likely to overlook incidences of psychological harassment and less inclined to intervene to protect their employees.

By overturning this case law, the Court of Cassation instead enables employers to defend themselves by asserting their responsiveness and the measures they have taken to put an end to the harassment. The quicker and more efficient the measures taken, the better an employer can defend himself against the accusations made against him.

However, this decision does not call into question all Court of Cassation case law concerning employers’ obligations to protect the health and safety of their workforce. For example, on 26 May this year, the Court of Cassation handed down a decision that was equally as harsh as those that came previously concerning cases of violence between employees (Court of Cassation case no. 14 15.566 F-D of 26 May 2016).

The Court is of the view that employers are bound by an obligation to protect the health and safety of their workers and that they fail to satisfy this obligation if one of their employees is physically attacked by another employee, even if the employer has taken all necessary steps to put an end to such harassment.



The “Labour” Act is finally publishedDespite two applications being submitted to the French Constitutional Council for a priority preliminary ruling on the issue of constitutionality, the “Labour” Act is still largely intact. In fact, only the provision giving companies with fewer than 50 employees the option to record non-taxable provisions for the risk of payment of compensation for dismissal without real and serious cause has been removed from the Act.

The key reform of the “Labour” Act, which completely revises French labour law principles by giving company wide agreements precedence over industry-wide agreements and even the law, was passed. However, this does not mean that agreements can be entered into as soon as the Act is published in the Official Journal since many of its provisions are not scheduled to enter into force until a later date or until the publication of implementing decrees. The “Labour” Act, which was announced in the Official Journal of 8 August 2016, is therefore not fully applicable at this date.

Collective bargaining agreements

Term of the agreements

Until now, except where indicated otherwise, collective bargaining agreements were entered into for an indefinite term and could be terminated. From now on, their term will in principle be limited to five years, unless a shorter, longer or indeterminate period of time is expressly stated.

In accordance with a key principle of the law, in the event that an agreement was terminated, at the end of the period for negotiating a substitute agreement, each party retained their existing individual benefits where no substitute agreement was entered into. However, the “Labour” Act limits this to merely cover previous earnings.

Validity of agreements

Since company-wide agreements will prevail over the provisions of industry-wide agreements, the Act provides that they must, for security reasons, be signed by the majority unions in the company (i.e., those that received more than 50% of the votes in the last elections). If non-majority unions sign the agreement, they may request that a referendum be organised in the company in order to obtain the approval of the employees by a majority vote. If the company does not have a union, an agreement may be signed by an employee authorised for such purposes by a union and approved by a majority vote in a referendum.

Content of the agreements

Company-wide agreements are therefore given a prominent role in the “Labour” Act to deal with a number of issues, including working hours. The Act nevertheless specifies the areas in which it is not permitted to derogate from an industry-wide agreement pursuant to a company-wide agreement.

This is not new since it corresponds to the minimum guarantees already in place in the following areas:• minimum wages,• job classifications,• supplementary social protection,• pooling of training funds.

The “Labour” Act adds a further two subjects to the list:• the prevention of difficult working

conditions,• gender equality.



Hierarchy of agreements

With regard to working hours, although the Act does not call into question the 35-hour statutory working week, it gives priority to company-wide agreements. However, in other areas, it is important to carefully examine the links between the agreements entered into at the level of the group and those entered into at the level of the company since the most advantageous agreement for the employee is not always the one that will apply, and in order to ensure that the rules governing group companies are harmonised to the extent possible.

Redundancy

The list of valid causes of redundancy (dismissal for economic reasons) takes into account case law decisions that have validated the concept of necessary restructuring to safeguard the company’s competitiveness and the continuation of its business activities.

The “Labour” Act also provides the assessment criteria that must be met in order to justify the economic reasons if the employer reports economic difficulties. Pursuant to the Act, the employer must provide proof of a slowdown in orders or a decline in revenue compared with the previous year over one quarter for very small businesses, two quarters for companies with fewer than 50 employees, three quarters for companies with between 50 and 300 employees and four quarters for companies with more than 300 employees.

The provisions will enter into force on 1 December 2016.

Summary of other provisions

Extension of certain authorised leave periods

The statutory leave periods for certain family-related events have been extended: five days rather than two in the event of the death of a child and two days rather than one in the event of the death of a spouse, parent, parent-in-law, brother or sister.

Family caregivers are now only required to have one rather than two years’ seniority in order to be entitled to authorised leave. And business creation leave is now available in all companies with more than 200 employees (as opposed to 300 previously).

Extension of certain authorised leave periods

The period of protection against dismissal for new mothers following their maternity leave has been increased from four to ten weeks. This period will also apply to second parents and adoptive parents.

Expansion of categories of workers eligible for professional training contracts

On a trial basis until 31 December 2017, job seekers who were until now ineligible for the scheme due to being unfit for work or having a recognised disability status may now be hired under professional training contracts.

Abolition of systematic pre-recruitment medical assessments

Only employees with “high risk” jobs (to be defined by a decree) will now have to undergo a mandatory pre-recruitment medical assessment. All other employees will only be required to attend an information and prevention session.



Extension of the unemployment insurance agreement

As the social partners failed to agree on new unemployment benefit rules before 30 June 2016, by virtue of a decree dated 29 June 2016, the French government decided to extend the application of the current rules, i.e., the provisions of the 2014 unemployment insurance agreement, from 1 July 2016 until the unions come to an agreement and draft new rules.

Reminder

This extension will apply to workers who are involuntarily unemployed, provided that they:• already receive unemployment

benefits as defined in the 14 May 2014 agreement, at 30 June 2016,

• meet the conditions required to receive such benefits at the same date,

• meet these conditions as of 1 July 2016.

This extension will apply until the adoption of new rules to be negotiated by the social partners.

Unemployment insurance for freelance artists (intermittents du spectacle)

The unemployment insurance scheme for freelance artists is the only scheme for which the new benefit rules have been approved by the social partners.

Consequently appendices VIII and IX of the regulations of the French National Professional Union for Employment in Industry and Trade (Union nationale interprofessionnelle pour l’emploi dans l’industrie et le commerce – UNEDIC) concerning freelance artists were amended by virtue of a decree dated 13 July 2016

(2016-961, JO 14 July), which transposes the agreement signed on 28 April 2016 by all the social partners for the industry, and provides for:• access to benefits for both artists

and technicians who work 507 hours or more over a 12-month period,

• the lowering of the monthly ceiling of the combined amount of unemployment benefits/salary from 1.4 to 1.18 times the monthly social security ceiling,

• a 1% increase in the employer contribution, effective in two stages (0.5% on 1 July 2016 and 0.5% on 1 January 2017).

The decree will enter into force for employment contracts entered into as from 1 August 2016.

in brief



The impact of Brexit on social protection

The United Kingdom voted to leave the European Union in the referendum held on 23 June 2016.

The Centre of European and International Liaisons for Social Security (Centre des Liaisons Européennes et Internationales de Sécurité Sociale – CLEISS) issued a statement while its website was being updated.

It announced that during the forthcoming transition period while the terms and conditions of the exit process are negotiated, the European regulations on the coordination of social security systems will continue to apply between the United Kingdom and France as well as with other EU/EEA Member States and Switzerland.

This period will last for a maximum of two years as from the moment the United Kingdom officially notifies the European Council of its intention to leave.

French citizens residing in Britain and vice versa shall retain any social security entitlements arising from the application of these texts, and shall continue to acquire such entitlements under the same terms and conditions during the transition period. The current information provided on the CLEISS’s website concerning cross-border situations therefore remains valid.

Increase in the cost of the “Pass Navigo”

At its meeting of 13 July 2016, the Paris region public transport authority (Syndicat des transports d’Île-de-France – STIF) decided to increase the monthly price of the “Pass Navigo” travel pass for all zones in the Paris region from €70 to €73 as from 1 August 2016.

The STIF announced that this increase would shortly be accompanied by an increase in the transport contribution rates payable by employers with more than 11 employees in the inner suburbs of Paris, and a harmonisation of the rates applicable in the outer suburbs.

In addition, regional variations are to be introduced in the internal consumption tax on energy products (taxe intérieure de consommation sur les produits énergétiques – TIPCE) payable by motorists. The French Prime Minister recently announced that these measures would be included in the Finance Act for 2017.

Employer contribution to transport passes of full-time workers

All employers in the greater Paris region, irrespective of where their premises are based, must cover 50% of the cost of their employees’ transport passes for commuting to and from work.

Employer contributions to transport passes of part-time workers

If the number of hours worked by an employee is equal to or higher than half the statutory number of working hours (or the number provided for in the relevant collective bargaining agreement if lower), the employer is obliged to cover the same percentage of transport costs as it does for full-time employees.

Social security and tax treatment of employer contributions

The employer contribution to transport passes is exempt from social security contributions, even where specific deductions apply for business expenses. According to the URSSAF, if an employer chooses to contribute more than is legally required, such amounts shall remain exempt from social security contributions. However, only the mandatory employer contribution amount is tax-deductible. An employer cannot refuse to partially refund the cost of an employee’s transport expenses for commuting to and from work, even if the employee has, for personal reasons, chosen to establish his or her place of residence in a geographic region that is unusually far from the workplace (Court of Cassation case no. 11-25.089 P of 12 December 2012).



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PwC publishes regular social security policy updates.

This newsletter provides a summary of the regulations in force relating to payroll and employment contracts.

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This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. PricewaterhouseCoopers France, and/or any member of the PwC network may not be held liable for any decision taken on the basis of the information contained in this publication, or the consequences thereof. © 2016. PricewaterhouseCoopers Entreprises. All rights reserved.

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