• Impact date: 1 August 2012

This measure is not a surprise as it is consistent with comments made by François Hollande during the recent election that untaxed overtime hours had encouraged companies to offer overtime instead of taking on more staff, whilst unemployment had risen to 10 per cent of the workforce

The untaxed overtime hours had been introduced in 2007 by former president Nicolas Sarkozy in ac-accordance with his slogan “work more to earn more” to overturn the effects of France’s statutory 35-hour working week. Employees were exempted to pay income tax on overtime hours and the amount of social security contributions to be paid on this overtime hours were reduced. As a result, French employees worked an average of 1,475 hours: ahead of Germany on 1,411 hours.

The reinstatement of taxes and social contributions by the law of 2012 took effect in two steps:

  • as from 1 August 2012, the payment of overtime hours is fully subject to income tax;
  • as from 1 September 2012, the payment of overtime hours is fully subject to social contri-butions.

However, companies with less than 20 employees will be able to keep the tax break on extra working hours.