Ending untaxed overtime: in an attempt to reduce the public
deficit, France's newly-elected parliament has reintroduced tax
on overtime by passing law n° 2012-958 of 16 August 2012
- Impact date: 1 August 2012
This measure is not a surprise as it is consistent with comments
made by François Hollande during the recent election that
untaxed overtime hours had encouraged companies to offer overtime
instead of taking on more staff, whilst unemployment had risen to
10 per cent of the workforce
The untaxed overtime hours had been introduced in 2007 by former
president Nicolas Sarkozy in ac-accordance with his slogan
"work more to earn more" to overturn the effects of
France's statutory 35-hour working week. Employees were
exempted to pay income tax on overtime hours and the amount of
social security contributions to be paid on this overtime hours
were reduced. As a result, French employees worked an average of
1,475 hours: ahead of Germany on 1,411 hours.
The reinstatement of taxes and social contributions by the law
of 2012 took effect in two steps:
as from 1 August 2012, the payment of overtime hours is fully
subject to income tax;
as from 1 September 2012, the payment of overtime hours is
fully subject to social contri-butions.
However, companies with less than 20 employees will be able to
keep the tax break on extra working hours.
Employers must organize a pre-employment medical examination
for all employees
- Impact date: 22 July 2012 (date of French Supreme Court
The French Supreme Court has held that, when hiring employees,
employers are required to organize a pre-employment medical
examination, even for employees on fixed-term contracts.
In this case, an employee had signed a series of fixed-term
contracts with the same employer. At the end of the employment
relationship, the employee (who suffered from depression), claimed
damages before the labour court based on the employer's failure
to carry out a pre-employment medical examination.
The Court of Appeal had previously ruled against the employee on
the basis that he could not prove that his illness had been caused
by the absence of a pre-employment medical. However, the Court of
Appeal's ruling was quashed by the Supreme Court, who found
that employers who fail to comply with their obligations to
organize pre-employment medicals necessarily create damage to the
employee. As a result, employees will now be entitled to damages
for this breach of the law.
Employers may be tempted to underestimate the role of medical
examinations in relation to labour law in France. That is a major
mistake as employers are not only required to organize
pre-employment medical examinations, but also to ensure that
employees on their payrolls have a medical examination every two
years or after a long period of absence from work in particular for
illness or maternity leave. In addition, medical examinations can
also be organized when requested by the employer or the
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