With the growth of new flexible remote work methods, companies are sourcing talent globally and more frequently. Hiring a worker as an employee has been the traditional path, although it can be more complex when the employee resides in another country. But it is equally possible, and sometimes easier, to hire recruits as independent contractors.
The benefits of hiring contractors are easy to recognize:
- No long-term financial/HR commitment by the company
- Cost-effective when compared to paying employee benefits and entitlements
- Contracting is a B2B relationship, outside of typical labour laws
- A good way to give a recruit a ‘probationary’ period before hiring
- Can hire for short projects or on a repeat basis
- More flexible to scale up or down, or if different skill sets are needed as the company grows
Why hire remote workers in France?
In addition to the above reasons, there can be distinct advantages to hiring contractors in France. France is a strong economy in the European Union with an educated workforce, some of whom may be looking for more independence after leaving a job, or being made redundant due to the pandemic.
France is known to have a system of labour and employment protections that make hiring less attractive for foreign companies. Also, employer contributions can add significant costs to an engagement, which can be avoided when hiring a contractor. You just have to make sure that the contractor is truly operating as self-employed, and not portraying themselves as such just to get hired, only to claim employee status and rights later on.
How do I hire and pay a remote contractor in France?
If during recruitment, you have found a contractor that has the right skill set and level of interest, the next step is to decide how to hire and pay them from abroad. A few choices are depending on how the contractor organizes its business, and the company’s willingness to manage the risk of hiring an unknown worker.
Hire and pay them as a freelancer (auto-entrepreneur / micro-entrepreneur)
Many contractors will operate as freelancers or self-employed, which is officially referred to as a micro-entrepreneur in France. It is often the simplest business model for an individual contractor and offers them the freedom to contract with multiple clients over different time frames. They will simply invoice your company at agreed intervals based on time spent or project completion.
The downside for the company that hires a freelancer, is that you need to come up with a trusted method to confirm contract performance before payment. The freelancer runs a similar risk of not being paid after the work is completed. For this reason, it is best to set up shorter milestones or timeframes within the contract until some goodwill is developed.
Engage them directly with their limited company
Experienced French contractors may have their own limited company, a separate business structure that ‘leases’ the contractor to the client. This is not complicated for the client as invoicing and payment are direct with the limited company.
There is slightly more assurance when a contractor has a limited company. This is because they will be a registered business in France and can be more easily verified than a freelancer.
Hire the remote workers in France through an umbrella company (portage salarial)
A final method is to use an umbrella company, known as portage salarial in France. The French approach to portage salarial gives the contractor employee-like status, where they will receive government benefits.
The umbrella company is a third party and a French entity, that can do the following:
- Send invoices
- Facilitate payments
- Make tax withholding and social contributions for the contractor.
- Oversee the performance of the contract
- Sponsor work permits for contractors and remote workers in France.
This is an excellent method of hiring new freelancers as it eliminates much of the risk with cross-border contracts and payments. For a company that is new to hiring in France, they can help overcome any language barriers with the contractor.
What are my tax obligations when paying a contractor in France?
As a foreign company with no business or legal presence in France, you will have no tax obligations about hiring and paying the contractor. The contractor will be responsible for their French tax liability and filing, whether as a self-employed, limited company or through an umbrella company.
The only potential tax liability for the company is that of a permanent establishment, where the contractor is generating French revenue for the company, such as concluding local contracts. However, most typical remote work roles such as customer support, IT development, or marketing will not trigger permanent establishment.
What are the compliance risks when paying contractors in France?
The primary compliance risk is misclassification, where under French labour law the contractor is instead deemed to be an employee and entitled to all statutory benefits and protections. This can occur if you do any of the following:
- Pay the contractor a fixed, salary-like amount,
- Control their work schedule and methods
- Offer some type of benefits.
In that case, authorities might re-classify them and ask you to set up a local payroll through a legal entity to retain them. This could be done sometimes at the request of the worker. The best way to avoid this is to make sure your contractor invoices your company as a sole proprietor or limited company, and maintains an arms-length relationship, with control over their own time and work methods.
An umbrella company in France can minimize this risk, as the contractor already has employee status with a French entity.
How does Contractor Taxation help hire remote workers in France?
Contractor Taxation has a global network of umbrella companies, including in France, who are ready to hire the contractor. They can also administer all the tasks related to taxes, payments, and contributions. As a company looking to hire French contractors, you can recommend to the new hire that an umbrella company assists
Most contractors will be open to this, as it reduces the risk of non-payment with a new client. Also, it relieves them of the administrative burden of self-employment.
Please contact us if you are interested in hiring a French or ex-pat worker for your company, either as a contractor or formal employee.