After the law on ‘work, jobs and purchasing power’ adopted in August 2007, the French parliament adopted another law ‘promoting purchasing power’ on 31 January 2008. The latest measures concern employees and tenants. Elements with regard to the former include extra pay instead of days off work and earlier access to employee savings schemes. Both employers and trade unions are critical of the new law.
The French parliament (Assemblée Nationale) has adopted a new law aiming to promote purchasing power (Loi en faveur du pouvoir d’achat). The new regulation, adopted on 31 January 2008, follows another law from 21 August 2007 promoting work, jobs and purchasing power (Loi en faveur du travail, de l’emploi et du pouvoir d’achat, TEPA) (FR0709019I).
Main measures of new law
Extra pay instead of time off
The first measure of the latest law (in French) allows for a financial payment option instead of having days off work resulting from the law on the reduction of working time (journées acquises en raison de la reduction du temps de travail (journées de RTT)) (FR9806113F, FR0107170F, FR0210106F, FR0408108F, FR0502109F). Up to 31 December 2009, employees can choose to forego all, or part of, their ‘RTT days’; if their employer agrees, employees can work these days instead and be paid at least 10% more than their usual pay. If the RTT days were acquired before 31 December 2007, they will be exempt from social security contributions on condition that they are worked before 30 September 2008. If they were acquired after 1 January 2008, they will not be subject to income tax and employees will benefit from a total exemption of social security contributions, while employers will benefit from a flat-rate reduction in social security tax.
Easier access to employee savings schemes
The second measure concerns employee savings schemes (FR0011103F, see also the French contribution to the comparative study on Industrial relations in the postal sector). Amounts in mandatory profit-sharing financial participation schemes, which are normally not available for a period of five years, can be released – up to a value of €10,000 – before 30 June 2008, ‘following a simple request by the beneficiary’. These sums will be exempt from social security contributions and tax, except for the flat-rate 11% tax on financial income.
In companies with fewer than 50 employees, where financial participation schemes are optional and therefore not very common, heads of companies will be able to award an exceptional bonus of a maximum of €1,000, after signing a collective agreement. This bonus will be exempt from social security contributions, but subject to taxation.
Provisions for tenants
The other measures of the law concern tenants: the sum required as a deposit for an apartment will be reduced from two to one month’s rent. Rent increases will now be indexed only on the consumer price index and no longer on the building price index. The new provisions aim to halt rising rent increases.
Reactions of social partners
On the trade union side, the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT) believes that the law ‘is in no way a solution to the problem of purchasing power’. CFDT considers that the measure regarding RTT days is ‘scandalous’ as it will ‘increase inequalities between employees’, namely between a ‘minority’ of employees who will benefit from the measure and other workers. The General Confederation of Labour (Confédération générale du travail, CGT) highlighted the lack of consultation with the trade unions and demands ‘long-term measures for all employees with an immediate impact on purchasing power’. According to the General Confederation of Labour – Force ouvrière (Confédération générale du travail – Force ouvrière, CGT-FO), the measures may ‘increase purchasing power a little bit’ but cannot ‘replace structural measures, which increase pay and are essential in order to achieve a lasting increase in purchasing power’.
Meanwhile, the employers’ long-term objective is for any reference to the legal 35-hour working week to disappear; therefore, the new law is seen as an initial step in this direction. However, the President of the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF), Laurence Parisot, sharply criticised the measure making it possible to retrospectively buy RTT days that were accumulated in 2007.
Commentary
This law was adopted at a time when purchasing power seemed to be a major concern of the French population. It is not, however, certain that the government response was appropriate: according to an opinion poll that was published in the daily newspaper Le Parisien on 28 January 2008, 58% of French people would prefer to keep their RTT days and 57% consider that buying RTT days is an ‘ineffective’ way of increasing purchasing power. As far as financial participation is concerned, measures which were already introduced in 2004 and 2005 (FR0405103F, FR0505105F) reduce the impact of the new law, which will in fact lead to a decline in savings rather than an increase in purchasing power.
The possibility of buying RTT days, as well as the rules on overtime which were established by the TEPA law in the summer of 2007, lead to very complex and unstable regulations that run the risk of making collective bargaining in France even more impenetrable. Moreover, the new measure could turn out to be unfavourable for employment given the poor economic situation which seems to be on the horizon.
Michel Husson, Institute for Economic and Social Research (IRES)