A Spanish company looking to expand into the French market does not necessarily need to incorporate a French company immediately. Under certain circumstances, it is possible to hire an employee in France while keeping the employing company in Spain. This can be an attractive solution for testing the market or hiring your first sales representative in France. However, operating without a subsidiary does not mean operating without obligations: the Spanish employer must comply with the French rules applicable to its employee.
Can you hire an employee in France without setting up a subsidiary?
Yes. A Spanish company can directly employ someone working in France without first incorporating a French subsidiary.
The employee then works in France for an employer established abroad.
The French social security system expressly provides for this situation. When the employee works in France and is subject to French social security legislation, the foreign employer must complete the necessary registrations and formalities with the relevant French authorities.
This can be particularly useful when a Spanish company is beginning to develop the French market and wants to recruit its first employee before making a larger investment in France.
When does this approach make sense?
Consider a Spanish SME selling professional equipment and looking to expand sales in France.
It may want to hire a sales manager based in Paris, Lyon or Bordeaux without immediately incorporating a French company.
This first hire can help build a customer base, improve knowledge of the market and assess its potential before taking on the costs and formalities involved in setting up a subsidiary.
The French operation must nevertheless be structured correctly from the outset.
Employer obligations when you hire an employee in France
When you hire an employee in France, your Spanish company assumes the obligations applicable to an employer in France in relation to that employee.
It must therefore comply with the relevant French requirements concerning employment declarations, social security, payroll and employment law.
One of the first steps is to register the foreign employer with the appropriate French authorities.
The Urssaf Foreign Companies Service
Urssaf operates a dedicated Service Firmes Étrangères, or Foreign Companies Service, commonly referred to as the SFE.
It covers, among other situations, foreign companies with no establishment in France that employ one or more people working in France and subject to the French social security system.
The service handles employer registration, employment-related declarations, social security reporting and payment of contributions.
This allows a Spanish company to obtain the registrations required to meet its French social security obligations without incorporating a French company.
What employment contract is required?
When a Spanish business wants to hire an employee in France, the employment relationship must be structured in accordance with the French rules that apply.
The appropriate type of contract will depend on the circumstances: an open-ended contract, a fixed-term contract where the legal requirements are met, full-time employment or part-time employment.
The contract should cover the essential aspects of the employment relationship, including the employee’s role, remuneration, working hours, place of work, any probationary period and other applicable conditions.
It is also important to determine whether a French collective bargaining agreement applies to the employee’s activities.
French employment law matters
The fact that the employer is a Spanish company does not mean that an employee habitually working in France can simply be managed under Spanish employment practices.
Minimum pay, working time, paid leave, termination, health and safety and applicable collective bargaining agreements all need to be considered.
These issues should be addressed before the employment contract is signed.
Pre-employment declarations, payroll and social security
Like other employers subject to French employment obligations, the foreign company must complete the formalities associated with recruitment.
These include the French pre-employment declaration known as the Déclaration préalable à l’embauche, or DPAE.
Ongoing payroll management must then be put in place.
The employee must receive a payslip that complies with French requirements, while the employer must calculate and pay the applicable social security contributions.
The necessary social security declarations must also be filed.
Where are social security contributions paid?
When an employee is hired in France by a foreign company and is covered by the French system, social security contributions are payable in France.
A Spanish company must therefore factor these costs into its budget before it hires an employee in France.
The employer’s total cost is not limited to the gross salary offered to the candidate. Employer contributions, supplementary health insurance, obligations arising from collective bargaining agreements and other employment-related costs may also apply.
Calculating the total employment cost in advance is therefore highly advisable.
Occupational health and employee protection
Employer obligations go beyond the employment contract and payroll.
The employer must also arrange the employee’s occupational health monitoring. Under French rules, employers must have access to an occupational health and prevention service according to the applicable requirements.
A newly recruited employee will generally be subject to an information and prevention visit, with specific rules applying to certain jobs and situations.
The employer must also arrange the applicable supplementary employee benefits.
Supplementary health insurance and other benefits
Private-sector employees in France are generally covered by employer-sponsored supplementary health insurance, subject to the exemptions provided for by French regulations.
Additional benefits may also be required under the applicable collective bargaining agreement or because of the employee’s particular circumstances.
These obligations can initially seem complex to a Spanish company because they do not always have an exact equivalent in the Spanish system.
Hiring an employee in France is not the same as posting a worker
Before you hire an employee in France, it is important to establish whether the situation really involves a French hire or a temporary posting.
These are two distinct arrangements.
An employee recruited to work in France on an ongoing basis will normally be covered by the system applicable to their employment in France.
By contrast, a Spanish company may temporarily send an employee who normally works in Spain to carry out an assignment in France. This may qualify as a posting of workers.
Posting is a temporary arrangement
Under an EU-compliant posting arrangement, an employee may, subject to certain conditions, remain affiliated to the Spanish social security system while working temporarily in France.
This is documented in particular through the portable A1 certificate.
Posting should therefore not be used artificially to avoid French obligations where an employee has in reality been recruited to work permanently in France.
When should you consider setting up a French subsidiary?
The ability to hire an employee in France without incorporating a subsidiary is particularly useful when starting operations, but it does not mean that a French structure will never become appropriate.
As the business grows, several factors may make a French establishment attractive: increasing employee numbers, opening premises, rising French turnover, commercial requirements, banking relationships or the wider organisation of the group.
Tax considerations must also be taken into account.
The permanent establishment question
Not having a French company does not automatically mean that the Spanish business cannot have a permanent establishment in France for tax purposes.
The activities carried out in France, the employee’s authority, the company’s commercial organisation and the permanence of its French presence may all need to be considered.
This tax question is separate from the ability to employ someone in France without a subsidiary.
Employment, legal and tax considerations should therefore be assessed together.
How DA Communication helps you hire an employee in France
For a Spanish company, the ability to hire an employee in France without immediately incorporating a subsidiary can provide a flexible and effective way to develop the French market.
The key is to manage the local requirements correctly.
DA Communication supports Spanish companies with their French administrative and employment requirements, including employer registration, recruitment formalities, employment contracts, payroll, social security declarations, occupational health, supplementary health insurance and coordination with the appropriate professional partners.
Planning to recruit your first employee in France? Let’s discuss your project and identify the solution best suited to your situation.
