The 2012/09/14 at 08:21
Is this the end of “travailler plus pour gagner plus” (work more to earn more), the motto of Nicolas Sarkozy’s five years as President of the French Republic? Since the start of September, France’s Corrective Finance Law for 2012 has put an end to tax and social contribution exemptions for overtime hours in businesses with over 20 employees. For businesses with under 20 employees, only the exemption of employer contributions has been maintained. VSEs and SMEs, particularly in the construction, hotel-restaurant and metallurgy industries, are unhappy with this change. “Our sector is primarily made up of businesses with under 20 employees,” explains Roland Héguy, President of the UMIH, (Union des Métiers et des Industries de l’Hôtellerie or Union of Hotel Trades and Industries). “Workers are doubly penalised as they will no longer benefit from salary contribution reductions and will pay higher income taxes. The upshot is that employers will find themselves in unbalanced situations as they continue to benefit from reductions in employer contributions. This is an uneasy privilege as explanations will need to be made.”
According to the Gorges (UMP)/Mallot (PS) parliamentary report, the tax exemption of overtime hours yielded an average of 450 euros per year to the employee. Its abolition is said to represent 980 million euros in extra State income in 2012 and 3 billion euros in 2013.
The reasoning behind the doing away with this measure relates to its negative impact on employment. According to Pierre Moscovici, Minister for the Economy and Finance, “when a company head was given the choice between overtime and recruitment, he would opt for the former.” Yet despite the reintroduction of taxation on overtime, VSEs and SMEs are not planning to hire more. According to a survey amongst 5,000 company head members in July this year, carried out by Novalto, a grouping of SMEs for purchase pooling, the measure is judged to be “surprising, even ineffective”. Indeed, for a large majority of these companies, overtime represents a more flexible and economical solution than recruitment to meet production objectives. In this way, the Novalto survey indicates that “69 % of company heads consider this new scenario to be unproductive as its consequence will be to diminish salaries, hence employee motivation, thus engendering a foreseeable drop in productivity”. On 10 September this year, during an interview with TF1 television channel, François Hollande pointed out that overtime hours would always be better remunerated. “When there are three million unemployed persons, how is it possible that the hours they work cost more than an overtime hour?” remarked the President of the Republic.