Your End of the Year To-Do List

24 Nov 2017

The end of the year is drawing near, and there is a lot to do to be compliant with French HR laws and regulations.

While this is not exhaustive (as there also may be, for instance, requirements to consult with employee representative bodies), here is a useful end of the year HR to-do list for France.

Variable remuneration

Have you set up the plan rules?

Many companies have variable remuneration systems (bonus or commission plans), which are often created at group level and applied in France with minimal changes. Such systems may be problematic to enforce, as French requirements on variable pay may differ from those of other countries.

The good news is that a bonus or a commission plan for France can be set unilaterally by the employer, subject to any variable pay provisions contained in individual employment agreements. To change contractual provisions, an amendment to the employment contract is necessary.

Of course, in any event, the provisions of the plan and the employment contract should be consistent with one another. Failing that, the employer would have to apply the provisions of the one that is more advantageous for the employee.

We usually recommend drawing-up yearly variable remuneration plans, which specify applicable rules for the year (calculation rules, presence clause, etc.), instead of multi-year or indefinite term plans.

Setting targets means that the bonus is not discretionary

In France, discretionary performance bonuses are not prohibited but a bonus cannot be considered discretionary if it is based on the achievement of specific targets. Additionally, the discretion is not unlimited and must comply with the equal pay for equal work rule, which requires all employees in an equivalent position in relation to a benefit to be treated equally. Any differences in treatment must be justified by objective and pertinent criteria. Therefore, purely discretionary bonuses would be recommended for unique positions or high-level executives to avoid the issue.

It is time to set the targets!

If the bonus is based on the achievement of targets, these must be provided to the employee at the beginning of the reference period.

For example, if the reference period is the civil year, now is the time to set the targets for 2018. At the latest, this should be done within the very first weeks of 2018. After that, it may be too late, exposing the employer to claims by employees for the payment of their entire variable pay (especially in the event of termination), regardless of the achievement of targets, and/or, in the worst case, claims for constructive dismissal!

If the plan mentions that the targets are set unilaterally by management, the employer should be able to evidence that it informed the employee of the targets in a timely manner, but should not ask for his or her consent.

On the contrary, if the plan provides that the targets are set by mutual agreement, management should make sure the employee agrees to his or her targets in writing, to avoid future litigation on the enforceability of the targets.

In addition, management must remember that the targets must be attainable and that it is not possible to modify the targets during the year, unless there is an objective change in circumstances (e.g. transfer of the employee to a different business unit).

At the end of the reference period, the employee must be able to verify that the calculation of his or her variable pay was carried out in accordance with the set terms. Usually this is achieved by providing the calculation methods to the employee at the same time as the targets.

As a general rule, while the plan rules may condition payment upon the presence of the employee at the end of the reference period, it is not possible to deprive an employee of his or her variable remuneration because the employee was on notice before the end of the reference period or left the company after the end of the reference period but before the payment date.

Molière, not Shakespeare please!

All documentation, including the bonus plan and targets, must be provided in French. It does not matter whether the employee works in English on a daily basis.

In recent decisions, French courts seem to admit case by case exceptions to this rule, when the employee at hand was a foreign citizen with English as his or her mother tongue or when the documents were drafted by a foreign entity.

However, at this stage, to stay on the safe side, we would still advise caution and the use of French in all communications regarding variable pay.

Do not forget to involve employee representatives!

Employee representative bodies must be informed and consulted on variable remuneration plans prior to their implementation or modification.

Working time scheme: “forfait annuel en jours”

What’s that?

Under this scheme, working time is counted in days, not in hours, with a maximum of 218 days of work per year. The actual number of hours worked is not monitored.

In order to be valid, a “forfait annuel en jours” must comply with the following conditions:

• Firstly, there must be a collective bargaining agreement (either industry-wide or company-wide), that permits the use of such a scheme and sets forth specific provisions required by law, such as guarantees concerning employee workload, work-life balance and the right to disconnect. In case certain mandatory provisions are missing, they can be added by the employer via a unilateral decision.

• Secondly, the employment contract or an amendment thereto must provide for the use of a “forfait annuel en jours”, to prove the employee’s consent.

• Last (but not least!), the employer must make sure it complies in practice with the guarantees contained in the collective bargaining agreement, especially those regarding the monitoring of work days and employee workload as well as mandatory rest requirements.

Failing any of the above, the “forfait annuel en jours” may be deemed invalid by a court and lead to the payment of substantial overtime hours.

It is time for the “forfait annuel en jours” meeting!

Every employee under a “forfait annuel en jours” must have at least one meeting on this topic per year. At a minimum, this meeting must address the employee’s workload and work-life balance.

As the end of the year is approaching, HR should make sure that managers have held and properly documented these meetings.

During this meeting, the manager can also raise the topic of any outstanding rest days (frequently referred to as “RTT days”) and remind the employee that he or she should use them by the end of the calendar year. Ordinarily, any RTT days not used by the end of the calendar year are forfeited without compensation, unless accrued but untaken RTT days are transferred to a “Compte épargne temps” (time-saving account) pursuant to an applicable company-level collective bargaining agreement.

Alternatively, the employer and employee can sign an amendment agreeing that the employee will work more days that the number indicated in his or her “forfait annuel en jours” agreement, without exceeding a maximum number of work days per year (i.e., 235 days per year, unless an applicable collective bargaining agreement provides for a lower number), in exchange for the payment of additional financial compensation determined by law or an applicable collective bargaining agreement; The maximum term for such an amendment is one year.

Yearly performance reviews

Many companies organize performance reviews on a yearly basis. In this case, the purpose of the review should be to assess the annual performance of the employee and hear his or her comments and/or queries on his or her position. This review may be used to justify a promotion and/or the award of a performance bonus.

Ordinarily, the review should be carried out during a one-on-one meeting between the employee and his or her manager. While French should be the preferred language, if the employee speaks and regularly works in another language (such as English), the meeting could be held in this language. However, if the employee claims not to be fluent, we recommend having the written report translated into French.

It is crucial to ensure that the performance report genuinely reflect the employee’s performance. Indeed, in the event of a future dismissal for poor performance, the fairness of the dismissal would depend on past performance reviews. If the reviews are inaccurately positive, it may be difficult to justify the dismissal.

Healthcare insurance schemes must be updated

The transitory period, in place since April 2015, is coming to an end!

As of 1 January 2018, all companies must ensure that their private health insurance schemes (“régime de frais de santé” or “mutuelle”) comply with the legal requirement regarding responsible contracts (“contrat responsable”). Failing this, companies will lose social and tax exemptions related to their health insurance schemes.

The company may need to inform and consult the employee representative bodies on the changes to the health insurance scheme.