New measures have been announced granting additional small business relief on social security contributions.

Social Security Relief for Auto-Entrepreneurs

The first of these measures concerns those who set up a new auto-entrepreneur business in France.

This new business status has been a huge success in France, with around 120,000 business registrations since it was rolled out earlier this year.

It is clear that many expats in France have registered, and we know that there are plenty more hoping to relocate to France who propose to do so.

In order to further the development of this new interest in starting a small business, the French government have now granted some new start-ups additional relief from social security contributions.

The relief is available to those who start a business from the French unemployment register, who will be entitled to pay a reduced rate of social security contributions for the first three years of the business.

Even though you will not be entitled to unemployment benefit, provided you have been on the register for at least six months, and then start your own business, you can obtain relief from the payment of social security contributions.

The assistance operates through a scheme called ACCRE (l’aide aux demandeurs d’emploi créant ou reprenant une entreprise).

Those registering their business as an auto-entrepreneur will pay a rate equal to one quarter of the normal rate in the first year, one half of the normal rate in the second year, and three-quarters of the normal rate in the third year. From the fourth year onwards, you will pay the normal rate.

This rule is effective from 1st May 2009.

You can read more about the auto-entrepreneur business status in our pages on Starting a Micro-Entrepreneur Business in France.

Social Security Breaks for New Employees

In a further series of announcements, a small business can now benefit from exemption from the payment of social security contributions for new employees.

A French employer is liable to pay around half of an employee’s salary in social security contributions, (although the actual percentage amount depends on the size and nature of the business, as well as the status and remuneration of the employee).

As a result, the level of employer social charges is a huge deterrent to recruitment.

At the level of the mimumum wage the exemption will be 100%, which is then degressive on pay up to 160% of the minimum wage.

The minimum wage for an adult in France is currently €8.71 per hour, or around €1,321 per month.

In order to make application for this assistance, you need to visit your local French employment centre, called the Pôle Emploi, or you can download the application form.

There is also a similar package available for a business of any size in an urban or rural development zone.

Under this scheme an employer recruiting a new employee is relieved of paying most social security contributions, although they will still be required to pay contributions relating to the complementary pension, unemployment benefit, and accidents at work.

The net result is to reduce, by up to a half, the level of social charges an employer would otherwise be required to pay.

Whilst this is less generous to the employer than the 100% exemption above, it is more favourable to employees paid above the minimum wage.

Thus, an employer will still get the full benefit of this relief if the salary of the employee is not greater than 150% of the minimum wage. Where the salary of the employee is at least 240% of the minimum wage, then no relief is available.

In neither case is there any relief for the employee, who will still be required to pay around 25% of their salary in social security contributions.

The new exemption from social security obligations only lasts for a year, but in both schemes the employer is only obliged to engage the employee for a minimum of a year on a fixed term contract. The contract can be either full or part time.

All types of business activity are eligible, whether trade, commercial, agricultural or professional.

Those in a development areas seeking to benefit from this relief need to contact the Direction départementale du travail de l'emploi et de la formation professionnelle (DDTEFP) in their local préfecture.