Like most European countries, France is currently experiencing a major demographic challenge due to its ageing population. With the baby boomers now reaching retirement age and with young people entering the labor market later on in life, the French social security system is at risk. In particular, the phenomenon of population ageing threatens the equilibrium, and in the long term, the sustainability of the French pensions system, as the latter is mainly financed by social security contributions paid on income from employment. The necessity to reconcile ageing with the need for longer working lives so as to preserve the social system has led the French government to adopt a new policy designed to promote the employment of seniors. The social security finance act for 2009 imposes on certain companies that they either conclude with the staff representatives or set unilaterally an action plan aimed at extending working careers and/or increasing the employment of seniors (I). It also provides for a new procedure of forced retirement, which results in pushing back the retirement age (II).
1. EXTENDING WORK CAREERS AND INCREASING THE EMPLOYMENT OF SENIORS
In order to promote the employment of seniors, companies with at least 50 employees, as well as those which, whatever their workforce, belong to a group having at least 50 employees, are required by law to either conclude a company- or group-wide agreement with unions or unilaterally establish an action plan relating to the employment of seniors by the end of 2009.
However, companies may be exempted from this legal obligation if their headcount does not exceed 300 employees and provided they are covered by an industry-wide agreement entered into during the triennial negotiations on forward-looking labor force, skills and working conditions management.
The collective bargaining agreement, or the action plan, which may be applied for a maximum of three years, must aim at maintaining employees aged 55 and over in employment and/or at hiring individuals who are aged 50 and over, and in that respect, provide for a target that is backed up with figures.
It must set the measures necessary to reach these objectives as well as to ensure a follow-up of the implemented measures. In addition, it must include three of the six scopes of action listed in the French Social Security Code, amongst which the improvement of working conditions, access to training and transmission of knowledge along with tutorship systems.
Companies or groups looking to secure their agreement or their action plan may ask the relevant administrative authority to assess whether or not they comply with the legal requirements. In the absence of a response from the relevant administrative authority within a 3-month period, the agreement or action plan is deemed to be compliant with the law. The 1% penalty will not apply until expiry of the agreement or action plan's period of application.
Indeed, the social security finance act for 2009 provides that failure to have an agreement or action plan by January 1, 2010 may result in the offending companies or groups being liable to pay a penalty of 1% of their total payroll to the old-age pension fund (Caisse Nationale d'Assurance Vieillesse).
The penalty is due for each full month during which the company or group is not covered by an agreement or action plan. It ceases to be due once an agreement or action plan compliant with the law is filed with the relevant authority.
2. PUSHING BACK THE RETIREMENT AGE
At the same time as promoting longer careers and increasing the employment of seniors, French legislation has created a mechanism that consists in pushing back the retirement age to 70.
Currently under French law, workers may retire, at the earliest, at the age of 60 if they have accrued the required pension annuities throughout the required contribution period, which is set to rise from 40 to 41 years by 2012, and at the latest at the age of 65.
Up until the social security finance act for 2009, employers were entitled to impose retirement on their employees who reached the age of 65, provided they were entitled to a full pension in accordance with Social Security regulations.
Such prerogative no longer exists. Indeed, since January 1, 2009, employers cannot impose retirement on their employees who reach the age of 65 without their prior consent.
Employers are now required to abide by a compulsory procedure, pursuant to which the employer must obtain the employee's consent to a forced retirement three months before his/her 65th birthday. The employee benefits from a 1-month reflection period to either accept or refuse the employer's decision to impose retirement on him/her.
If the employee agrees, the employer regains the right to impose retirement on the employee. Conversely, should the employee refuse, the employer has no other option but to keep the employee in employment. In such a case, and if the following year, the employer still wishes to pension off the employee, the employer must again obtain the employee's consent following the same procedure -- and so on, until the employee reaches the age of 70, provided of course that the employer still wishes to pension the employee off the following year. Otherwise, nothing needs to be done.
The social security authorities have stated that should the conditions for an imposed retirement not be met, the termination of the employment contract shall be regarded as a dismissal. The employee could then argue that such dismissal was either unfair or void.
However, the employer recovers the right to impose retirement as from the employee's 70th birthday.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.