Zero charge at the minimum wage: the new deal for French companies

The new 4-point reduction in charges, effective since October 1, concerns 1.6 million employers and 9.8 million employees. At the level of the minimum wage, the cost of labor is now lower than in Germany. If the “zero charge” makes it possible to limit the consequences of a high minimum wage on the employability of low-skilled people, on the other hand, deductions increase sharply as one moves away from the minimum wage.

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France, weighed down by excessive labor costs? The recurring criticism of employers is less and less relevant with the policy of reducing charges implemented since 2014. Implementation of the tax credit for competitiveness and employment (CICE), responsibility pact, then transformation of the CICE in reduction of perennial contributions… The last stage of this rocket entered into application on October 1: it is what the government calls the “zero load” at the level of the SMIC.

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To be quite precise, employer contributions now amount to 6.69% of gross salary for minimum wage employees, according to a note from Bercy, consulted by “Les Echos”. Employers are still liable for a contribution of 1.44% for work accidents, a contribution for vocational training, the apprenticeship tax and the transport payment.

9.8 million employees affected

For companies with less than 11 employees, exempt from transport payment, employer contributions will now represent 2.84% of gross wages, instead of… 39.23% in the absence of relief. According to Bercy, these new provisions concern 1.6 million employers and 9.8 million employees.

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The transformation of the CICE into a reduction in charges would have no effect

Overall, minimum wage charges are 10 points lower than they were last year. Six points compensate for the extinction of the CICE, converted since January 1 into a reduction in charges on salaries below 2.5 SMIC (ie 3,803 euros gross).

The 4 additional points, which entered into force on 1 October, come from a decreasing reduction applied to remuneration below 1.6 minimum wage (ie 2,434 euros gross). This new reduction was made possible by the fact that the conversion of the CICE into a reduction in contributions had a favorable effect on corporate tax revenues, which the State decided to reinject into low wages. “This reduction in the cost of labor is concentrated on low wages, where it is most effective for job creation”, justifies Bercy in this note.

62 euros gain per month on minimum wage

In hard euros, this drop of 4 points translates for an entrepreneur by a gain of 62 euros per month on the remuneration paid to the minimum wage, or 744 euros per year. It plays up to salaries equivalent to 1.4 minimum wage (2,130 euros gross), where the gain reaches 21 euros per month (or 252 euros per year).

The hourly cost of labor in France at the minimum wage level thus drops below that of Germany and to a level close to Great Britain. This cost, however, remains 20% higher than that of Spain.

Effect of the minimum wage on employability

France is characterized by a higher minimum wage level than its European neighbors, but charges now lower than elsewhere. “The existence of a high labor cost at the minimum wage level excludes certain employees, particularly the less qualified, from the labor market, and the reductions targeted at low wages make it possible to limit the effect of a high minimum wage on their employees. employability “, explains Bercy’s economic report, annexed to the draft budget for 2020.

The side effect of this policy is that deductions increase sharply as one moves away from the minimum wage. If, at the level of the minimum wage, the weight of deductions in France is among the lowest, it is among the highest compared to our European neighbors for remuneration equivalent to 2 minimum wage. “This very differentiated situation between low wages and higher wages is a brake on wage growth”, alert this report.

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