By Philippe Desprès and Gide Loyrette Nouel
Gide Loyrette Nouel A.A.R.P.I.
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.
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.
In application of Article 87 of the social security finance act n°2008-1330 for 2009, all companies located in France and with at least 50 employees were required to enter into an agreement on the employment of seniors before January 1, 2010.
This agreement or action plan must namely include a figured objective to maintain employees aged 55 and over in employment and/or to hire individuals aged 50 and over. This is an obligation of results for the companies concerned.
The agreement must be entered into according to the standard rules of collective negotiations. Failing such an agreement, the company is required to conclude an action plan, to be submitted to its staff representative authorities before filing it at the latest on December 31, 2009. Small and medium-sized companies were granted an additional three months to implement, without penalty, such agreement or action plan.
Failure to have an agreement or action plan compliant with the applicable regulations may result in the offending companies being liable to pay a penalty of 1% of their total payroll to the French Social Security authorities (URSSAF) for the periods during which they are not covered by such agreement or action plan as provided for by law.
At the same time as promoting longer careers and increasing the employment of seniors, French legislation has created a mandatory mechanism, which consists in pushing back the retirement age to 70. Indeed, since January 1, 2009, employers can no longer impose retirement on their employees who have reached the age of 65 without their prior consent. However, they recover the right to impose retirement as from the employee’s 70th birthday.
