Case Study: US firm wants to hire someone in France
We often hear about a global market for skills, and in a connected world such as today’s, there should be no issue with where people are based and how they work together. The recruitment industry has evolved in this direction, and if this is something you would like to know more about, you can read or listen to our interview/podcast. Nevertheless, until the day when we have one global jurisdiction for employment law, we will have to live with the laws of more than 180 countries.
As a response to the conversations we have had, where the expectations of prospective workers are not always aligned to reality, we thought it worth focusing on one specific example as a case study. It’s about a firm based in the United States, which is looking for someone physically based in France. There are four options for the firm, which are set out below in order of increasing flexibility. We explain each of them from both the firm’s and the worker’s point of view.
Short-term in-house payroll
Here the worker is an employee of the US firm, but based in France. The US firm runs its own payroll based on US employment law, as if the worker were based in US. The worker is classified as “seconded”, albeit up to a time limit of around 6 months. For longer periods of time, French legislation will apply.
For the US firm, this is the easiest situation, but it needs to count the number of days worked in France, as well as the worker’s presence, very carefully. For short-term needs, this is fine, but is expensive and counter-productive in the long term.
For the worker, this is the easiest situation, but they will need to be very careful with the number of days worked. This option should only be used if they do not envisage working for a US firm for more than six months in a year.
Long-term in-house payroll
As in the previous option, here the worker is an employee of the US firm, and based in France. The difference here is the US firm runs its own payroll to conform to French employment law. That means it calculates the deductions, makes the payments to the right places at the right dates, and sends the payslips.
For the US firm, it maintains full control over all aspects of its payroll, which is likely to have the lowest overall processing cost. This requires dedicated French payroll expertise in the US, because the employee is subject to different laws and customs than US employees. This also means the US firm is responsible for compliance with French employment law. In the event of a problem or a misunderstanding, the firm will need a French-speaking physical representative to deal with the French authorities directly.
For the worker, they will have more time and energy to dedicate themselves to the job at hand, and will be in the classic end-of-month payslip situation. This payroll situation is conducive to growing long-term commitment on both sides, and fosters a sense of teamwork.
Outsourced payroll
Here the worker is the employee of the US firm, but based in France, as in the previous two options. However, the tricky bit of ensuring correct salary processing is managed by a France-based firm specialising in this kind of service. If the fee is sensible, it can be a win-win situation, but can quickly become a costly headache if problems arise.
For the US firm, it will maintain the employer-employee relationship, meaning more control over the work. It also means that the accountability for ensuring compliance with French employment law passes to the payroll firm. However, choosing the local payroll firm will require a lot of up-front time investment, especially as there is a large variance in fees and in quality. The risk of the payroll firm “forgetting to mention” something exists, and there will of course be a cost to rectifying that, irrespective of the level of intent.
For the worker, they will have more time and energy to dedicate themselves to the job at hand, though there is the risk that they might not be treated the best way by the payroll firm. This will needless to say affect their motivation. If the US firm cannot or does not want to get involved, it will be double trouble. Lack of transparency, hidden costs, and double charging have been seen on the market. One thing to beware of is US citizens in this case, who will be liable for federal income tax back in the US.
Personal company
The France-based worker owns their own company, meaning they are responsible for payroll in France, and by the same token, invoicing to the US firm. It’s probably the easiest relationship to maintain, as it is technically business-to-business.
For the US firm, there are no hidden costs because the worker sends invoices, which usually are based on time spent. Pre-agreed expenses may be charged as incurred. The fact there is no employer-employee relationship makes things like notice periods easier to manage, especially in an uncertain world. Also, if the US firm is smaller or less experienced, they might get into difficulty with currency fluctuations.
For the worker, the daily rate they charge could appear high to the US firm, and therefore unattractive. However, when you realise that the rate takes into account higher tax and social security costs, as well as some risk premium for the prospective worker, it is not something that is as exaggerated as you would think at first sight. Social security in France covers much more than in the US. If you would like to find out how to set up your personal company, read our article.
Unless both sides win, no agreement can be long-term.
Abeona can help you find the right staffing solution in terms of peace of mind, cost, and flexibility. For individuals and businesses, we can assist with administration, registration, and other tasks requiring in-country presence. This case study involves a US firm employing a worker in France, the setup will be similar for other European countries. Abeona has presence on and is specialised in the English, French, and Swiss markets, and we can work with your existing partners to ensure full coverage. We also speak the local language and know the business culture.
