France: Wage flexibility and collective bargaining
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On average, base pay and fixed bonuses still constitute the main part of earnings, especially for non-professional and managerial staffs. Variable payment systems generally became more widespread in the 2000s. However firms tend to favour mixed pay systems, combining individual and collective elements, and to apply different pay systems for professional and managerial staffs. Moreover, a lot of legislative and regulatory documents have more or less significantly changed the rules regarding employee savings schemes. The two most recent schemes (PEE and PERCO) are developing through collective agreements, namely in the car industry and in the banking industry.
Section 1. Variable pay: forms, basic data and trends
1) What are the main types of variable payments systems (VPS) used in:
a) manufacturing companies
The 2004-2005 REPONSE survey shows that, in the car industry, all establishments award part of professional and managerial staff's pay in the form of variable payments and 53% of them also do so for other employees. Almost all award individualised pay both for professional and managerial staff and also for other staff.
b) retail banks
In some occupations in retail banks, payment based on the number of products that are placed is particularly widespread. Companies in the finance sector both award bonuses and individualise pay more often than on average.
Employee savings schemes (cf. section 1.3) are widely used in the car industry and the finance sector (banks and insurance: 92.2% and 82.8% of employees respectively have access to at least one measure). Moreover, in both of these sectors, the highest proportion of employees (compared with other sectors) is covered by a Collective Pension Savings Plan (Plan d'Epargne pour la Retraite Collectif, PERCO): 18% and 17.2% respectively.
2) For each type of VPS, please provide information on their quantitative significance as a proportion of earnings.
| Base pay | 86.0 |
|---|---|
| Overtime or additional time | 1.1 |
| Bonuses and supplements : | 12.9 |
| - Seniority bonuses | 1.7 |
| - Monthly fixed bonuses (related to constraints of the job and family situation) | 1.8 |
| - Non-monthly fixed bonuses (13 th month; holiday and end-of-year bonuses; bonuses for each child at school at the beginning of the new school year; and so forth) | 4.7 |
| - Performance bonuses | 3.3 |
| - Other bonuses and payments | 1.4 |
| Total | 100 |
Field: employees in companies with 10 or more employees
Source: DARES, enquêtes annuelles ACEMO
Employee savings scheme payments (cf. section 1.3) constitute on average a bonus of 2,187 EUR (i.e. 7.5% of the total wages bill of the employees concerned).
3) What have been the main trends in VPS in recent years?
| 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | |
|---|---|---|---|---|---|---|---|
| Seniority bonuses | 2.2 | 2.1 | 1.9 | 1.7 | 1.7 | 1.6 | 1.7 |
| Monthly fixed bonuses (constraints of the job, family situation) | 2.5 | 2.3 | 1.9 | 1.8 | 2.0 | 2.0 | 1.8 |
| Non-monthly fixed bonuses (13th month; holiday and end-of-year bonuses; bonuses for each child at school at the beginning of the new school year; and so forth) | 5.0 | 4.8 | 4.8 | 4.5 | 4.5 | 4.6 | 4.7 |
| Performance bonuses | 2.5 | 2.7 | 2.9 | 3.0 | 3.1 | 3.1 | 3.3 |
| Other bonuses and payments | 1.2 | 1.2 | 1.2 | 1.3 | 1.2 | 1.2 | 1.4 |
| Total | 13.4 | 13.2 | 12.7 | 12.3 | 12.5 | 12.6 | 12.9 |
Field: employees in companies with 10 or more employees
Source: DARES, enquêtes annuelles ACEMO
According to the REPONSE survey, variable payment systems generally became more widespread during the period from 1998-1999 (date of the first wave) to 2004-2005 (table 3). Bonuses related to collective performance have increased more than other forms for both professional and managerial staffs and also for other employees. Bonuses related to individual performance and stock-options have only become more widespread for professional and managerial staff. In 2004-2005, 60% of establishments applied different pay systems for professional and managerial staff from those applied to other employees. Professional and managerial staff also more frequently did not have any increase.
| Non-professional and managerial staffs | professional and managerial staffs | |||
|---|---|---|---|---|
| 1998-1999 | 2004-2005 | 1998-1999 | 2004-2005 | |
| Non variable practices: | ||||
| General pay increases | 67.7 | 75.5 | 46.7 | 53.1 |
| Individualised increases (apart from bonuses) | 69.5 | 76.0 | 54.9 | 68.2 |
| Variable practices: | ||||
| - bonuses linked to individual performance | 52.4 | 55.2 | 49.6 | 63.5 |
| - bonuses linked to collective performance | 34.9 | 50.2 | 33.3 | 51.9 |
| Stock-options | 1.4 | 0.9 | 2.6 | 4.1 |
| No increase | 7.3 | 3.1 | 20.1 | 20.1 |
Field: establishments with 20 or more employees in the non-agricultural market sector.
Source: Enquête REPONSE
Mixed pay systems, combining individual and collective elements, are increasingly widespread (for professional and managerial staffs 58% of establishments in 2004 - 2005, compared with 46% in 1998-1999; for non-professional and managerial staffs 72%, compared with 63%). Totally individualised or totally collective pay systems are becoming less widespread. Moreover, in 2004-2005, 72% of establishments awarded both variable and non-variable pay increases for non-professional and managerial staffs and 61% for professional and managerial staffs.
In 2005, 54.1% of the 8.4 million employees in the non-agricultural market sector were covered by an agreement regarding employee savings schemes and have access to at least one such scheme. The earliest type of scheme is the most widespread (table 4) - in 2005, 42.8% of employees were covered by an agreement on participation, and 33.8% by an agreement on profit-sharing. Company Savings Scheme (Plan d’épargne entreprise, PEE) nevertheless concern 35.3% of employees and are becoming more widespread. Collective Pension Savings Plan (PERCO), which was created more recently, only concerns 3.8% of employees.
| Participation | Profit-sharing | PEE | PERCO | At least one scheme | |
|---|---|---|---|---|---|
| EB Manufacture of agricultural and food products | 53.5 | 37.8 | 34.7 | 2.4 | 58.3 |
| EC Consumer goods industries | 59.0 | 39.0 | 37.9 | 7.3 | 63.6 |
| ED Manufacture of motor vehicles | 82.6 | 83.0 | 8.1 | 18.0 | 92.2 |
| EE Manufacture of machine and equipment | 63.6 | 45.7 | 50.1 | 1.6 | 69.7 |
| EF Manufacture of intermediate goods | 63.0 | 48.8 | 45.4 | 1.8 | 71.7 |
| EG Energy | 31.9 | 91.9 | 94.7 | 4.1 | 97.1 |
| EH Construction | 27.9 | 12.1 | 19.8 | 1.6 | 35.0 |
| EJ Commerce | 45.1 | 32.4 | 33.2 | 5.9 | 50.3 |
| EK Transport | 39.5 | 30.1 | 47.9 | 1.0 | 66.6 |
| EL Financial activities | 75.8 | 75.1 | 79.7 | 17.2 | 82.8 |
| EM Real estate | 17.3 | 31.0 | 35.1 | 3.3 | 42.3 |
| EN Services to businesses | 43.9 | 36.7 | 32.0 | 2.3 | 64.4 |
| EP Services to individuals | 17.5 | 10.8 | 12.6 | 1.0 | 24.2 |
| ER-EQ Education, health, social action and associations | 11.6 | 8.1 | 8.4 | 0.3 | 16.8 |
| Total | 42,8 | 33,8 | 35,3 | 3,8 | 54.1 |
Field: non-agricultural market sector, except for temporary agency work and domestic work.
Source: Dares, enquête Acemo-PIPA 2006
In 2005, 6.6 millions (i.e. 78.7%) received a bonus related to participation, profit-sharing or an employer's top-up contribution to a PEE or PERCO.
Company size influences not only the access to employee savings schemes, but also the type of scheme(s) that are introduced: 11.1 % of employees in companies with fewer than 50 employees are covered by at least one employee savings scheme, compared with three quarters of employees in companies with between 50 and 499 employees and more than 90% of those in companies with 500 or more employees. In all, 91.4% of employees with access to such measures are employed by companies with 50 or more employees. In companies with less than 10 employees, they often only have access to one savings scheme.
Section 2. Wage flexibility and collective bargaining
Please state, for each sector,
i) whether it is governed by single or multi-employer collective bargaining arrangements;
Manufacturing is composed of many different sectors. National-level bargaining in the various sectors does not concern pay increases, nor the composition of pay.
In the banking sector, since the collective agreement that was signed on 10 January 2000, pay policy is defined solely at company level. Previously (in line with a collective agreement that dated back to 1952), the sector used to manage increases in 'banking points', which indexed real pay for all employees of banks belonging to the French Association of Banks (Association française des banques, AFB). Now, the sector only manages increases in minimum pay and each bank can adapt its own general increases.
Both the Savings and Providence Banks (Caisses d’épargne et de prévoyance) and the Crédit agricole come under specific collective agreements.
ii) the coverage (percentage of companies and employees) of collective bargaining;
In 2007, 97.7% of employees in the non-agricultural market sector are covered by:
- a collective agreement,
- staff regulations (statut), or
- a series of agreements covering almost all the areas of a collective agreement.
| Manufacture of agricultural and food products | 99.0 |
|---|---|
| Consumer goods industries | 98.8 |
| Manufacture of motor vehicles | 99.9 |
| Manufacture of machine and equipment | 99.3 |
| Manufacture of intermediate goods | 99.5 |
| Financial Activities | 98.7 |
Source: Bilan de la négociation collective 2006
iii) the percentage of the workforce that is female
In 2004, 29% of employees in manufacturing were women: 74% in clothing and leatherwear, 57% in pharmaceutical, perfumes and cleaning products and 47% in textiles, but only 14% in the manufacture of motor vehicles.
In the banking sector (commercial and high street banks), 55% of employees are women.
2a. Wage flexibility under multi-employer bargaining arrangements
1) In the sector(s), are there any recent instances of
a) sector agreement(s) which have provided for a wage freeze or wage increases below inflation?
b) ‘unauthorised downwards’ wage flexibility, whereby companies have effected wage freezes or wage increases below inflation which are not authorised by a sector agreement?
2) Is there scope for derogations from the wage norms established by the sector agreement(s) through mechanisms such as hardship, opt-out or discount clauses?
3) Is there scope for supplementary negotiations over wages at company level (two-tier negotiations) within the sector agreement(s)?
4) Are VPS regulated by provisions in the sector agreement(s)?
5) Is there provision in the sector agreement(s) for individual employees to make choices trading an element of wages against e.g. working time (hours/ holidays) or deferred income (pension contributions)?
6) Are there instances of any of the above forms of wage flexibility becoming the focus of industrial disputes?
7) Is there any evidence or debate about a gender dimension to wage flexibility, in terms of its effects?
2b. Wage flexibility under single-employer bargaining
1) Are there any recent instances in either/both sectors of wage freezes or wage increases below inflation concluded under company wage agreements, with unions and/or works councils?
No
2) In the relevant sector(s), are organisations without collective bargaining
a) any more likely to implement wage freezes or below-inflation increases to base pay?b) more or less likely to use VPS than organisations covered by collective bargaining?
No available data.
3) Are VPS in the relevant sector(s) regulated by provisions in company agreements with unions and/or works councils?
If yes:
a) what types of variable pay are covered by company agreements? b) what form does such regulation take? E.g. does it specify procedural rules? Does it specify the substantive dimension of variable pay? c) what, if any, recent changes have there been in the types of scheme covered by company agreements?
In the banking sector, all variable pay elements are determined by companies. Pay criteria and the grades of staff concerned are generally defined in company-level agreements.
New forms of variable payments involve employee savings schemes, especially the creation of PERCOs.
Savings and Provident Banks constitute a separate case in the banking sector. Variable payments were only introduced via an agreement that was signed on 16 September 2003. Until then, employees’ monthly bonuses were only related to their length of service and family situation. In 2004, a variable element was introduced for all sales and marketing staff, i.e. 70% of all employees. The variable element does not exceed 10% of pay and aims at rewarding each bank’s team both quantitatively and qualitatively. Since 2005, the variable element applies to all staff.
4) Are there any examples of company-level agreements concerning provision for individual employees to make choices trading an element of wages against either working time (hours/ holidays) or deferred income (pension contributions)?
a) details of the ‘cafeteria’ provisions involved, including the proportion of wages available for trade-offs; b) information on the take-up by employees covered by such agreements;
Besides rest days related to the transition to the 35-hour week (Reduction of working time - Réduction du temps de travail, RTT), the law provides for time-savings accounts (compte-épargne temps, CET) to receive increases in basic pay and also additional pay, as well as money from employee savings schemes: profit-sharing and participation, as well as available PEE assets. PEEs can also receive money coming from CETs. The 31 March 2005 law, which reformed the organisation of working time in companies, introduced a similar link between PERCOs and CETs.
Some company agreements on time-savings accounts enable employees to be paid instead of taking RTT days. This is the case at the Société générale, which negotiated such an agreement as soon as CET was created in 2000: staff can choose between time off or money for time saved up to a value of 62,136 EUR; it is automatically paid if the time-savings account exceeds the aforementioned sum.
5) Are there instances of any of the above forms of wage flexibility becoming the focus of industrial disputes in the applicable sector(s)?
In June 2007, the Société générale opened negotiations on overhauling performance-related payments (commissions) on the sale of savings products. Management proposed to incorporate 50% of commissions in fixed pay. The remainder would be in the form of a variable payment based on criteria to be negotiated. Five unions were against the proposals. After nine meetings, a petition and a stoppage, an agreement was reached at the end of October 2007. Finally, 70% of commissions will be incorporated in fixed pay. Guaranteed pay increases will be defined for financial advisors depending on their portfolio. A ‘statement of undertakings’ also lists the measures governing commercial policy and action.
6) Is there any evidence or debate about a gender dimension to wage flexibility, in terms of its effects?
In the banking sector, several company agreements have been signed since 2004 (the date of the national multi-employer agreement, FR0404104F): at BNP Paribas, Dexia, Crédit du Nord, Bred and Crédit Mutuel de Bretagne. The agreement on occupational gender equality and work-life balance at Bred (September 2005) is one of the most advanced. It guarantees career and pay advancement for women regardless of maternity leave: Bred agrees to provide those women concerned (on maternity leave in line with both the legislation and collective agreement) with a pay increase that is equal to the average of their own individual increases received during the three years preceding their maternity leave.
A sector-level agreement was signed on 15 November 2006 by the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT), the General Confederation of Labour (Confédération générale du travail, CGT) and the General Confederation of Labour – Force ouvrière (Confédération générale du travail – Force ouvrière, CGT-FO).
In spite of such agreements, women are still relatively disadvantaged in terms of bonuses, either because of the performance criteria used or because fewer of them occupy commercial posts.
Section 3. Views of social partners and government
3a Employers’ organisations
1) Under multi-employer bargaining arrangements, is enhancing scope for ‘downwards’ flexibility in basic wage levels (e.g. via hardship clauses etc.) a prominent objective for employers’ organisations?
The Movement of French Enterprises (Mouvement des entreprises de France, MEDEF) is still attached to sector-level collective bargaining.
2) Under multi-employer bargaining arrangements, is enhancing scope for ‘upwards’ wage flexibility through greater scope for supplementary negotiation at company level a prominent objective for employers’ organisations?
a) what specific proposals are being advanced?
For employer associations, it is necessary to reduce administrative constraints, taxation and wages costs, which weigh too heavily on companies. They do not make detailed proposals, because, depending on the sector, variable payment systems are not promoted in the same way, because of the different relations that employer associations have with unions. Nevertheless, employer associations consider that it is necessary to promote flexible forms of work and reduce wage-related compulsory costs.
b) what are the main reasons being advanced?
Employer associations consider that a fairer distribution of added value implies compensating employees in line with their involvement in the activity of their company.
c) is there any evidence of an organisational rationale or effect (e.g. retention or expansion of the employer association’s membership)?
No.
3) Is the promotion of wage flexibility through VPS a prominent objective for employers’ organisations?
a) which types of VPS are being promoted?
A large range of variable payments are being promoted:
- Flexible payments linked to collective and/or individual performance or objectives, payments that take the form mainly of bonuses;
- Deferred payments based on various employee savings schemes (profit-sharing and participation, PEE and PERCO) and stock-options, which are generally reserved for top management.
b) what are the main reasons advanced by employers’ organisations for promoting these different types of VPS?
Employer associations indicate that the seasonal nature of company resources, which are greatly affected by the situation of their activities at any one time, does not enable them to increase fixed pay in the way they would like to. Also, variable payments that are more or less related to individual performance are presented as being a fair system, which makes it more comfortable for companies to manage the payment of their employees.
4) At organisational level, in each of the two sectors, what are the key rationales leading companies to implement each type of VPS, as applicable?
In manufacturing – and particularly in high-tech sectors such as aeronautics - fixed pay levels are generally higher than average for the economy as a whole, and variable payments are used to meet the demand for recognition and increased pay.
In banking, variable payments are used to adapt payments both to the competition context (dramatic increase of distribution channels and competitors) and to the imbalanced age structure (base pay stagnation). However the use of commission has been challenged in some companies to favour more customer-oriented sale of savings products.
5) Have employers’ organisations considered or addressed any potential gender dimension to wage flexibility, whether in terms of rationale or effects?
Employers’ organisations have signed in 2004 the national intersectoral agreement on gender equality and gender balance in workforce composition (FR0404104F).
3b Trade unions
1) What is the position of trade unions towards proposals aimed at enhancing the scope for downwards wage flexibility?
Trade unions are fighting for pay increases to be part of fixed pay, thus reducing risks of job insecurity and the development of working poor. The unions denounce the perverse effects of developing employee savings schemes, for example, to the detriment of resources of the social security system because of exemptions for such payments. But they note the existence of variable payments, which employers are promoting, and therefore also negotiate collective agreements introducing variable payments.
2) Where applicable, how have trade unions sought to regulate use of any increased scope in sector agreements for downwards wage flexibility?
According to the information at our disposal, trade unions have sought to limit the development of variable payments to the detriment of fixed pay by:
- demands regarding fixed pay levels as determined in pay scales,
- and/or by trying to ensure that compulsory annual negotiations on fixed pay precede those on variable payments.
3) Under multi-employer bargaining arrangements, is enhancing scope for ‘upwards’ wage flexibility through greater scope for supplementary negotiation at company / organisational level a prominent objective for trade unions?
a) what specific proposals are being advanced?
Trade unions agree to discuss variable payments provided the issue of fixed pay is also examined. They are open to negotiating an increase in employees' income.
b) what are the main reasons being advanced?
Unions demand improved purchasing power for employees. They are ready to have discussions in this context.
c) is there any evidence of an organisational rationale or effect (e.g. retention or expansion of union membership)?
No.
4) What is the position of trade unions towards each type of VPS? What objectives have they pursued in negotiations and consultation over the introduction and operation of different types of VPS?
Each trade union has a more or less reserved position concerning variable payments. They each have principled positions in favour of fixed pay. However their practice is generally based on a more pragmatic, rather than dogmatic, approach regarding variable payments. Whether in sectors, depending on their affiliated unions, or in companies depending on their union sections, general practice is to pursue the objective of increasing overall pay.
5) Have trade unions considered or addressed any potential gender dimension to wage flexibility, whether in terms of rationale or effects?
Trade unions defend the idea that all employees should receive the same pay for the same work. All trade-unions signed the 2004 the national intersectoral agreement on gender equality and gender balance in workforce composition (FR0404104F).
3c Role of Government
1) Have there been any recent government policy initiatives to promote ‘downwards’ or ‘upwards’ wage flexibility, or variable payments systems?
Since 2001, more than ten legislative and regulatory texts have more or less significantly changed the rules regarding employee savings schemes. The 21 August 2003 law on pension reform created the PERCO. The most recent law (30 December 2006) concerns developing employee participation and share-holding. In order to promote employee savings schemes in companies with fewer than 50 employees, it created notably:
- an obligation for occupational sectors to negotiate an agreement on participation within the following three years;
- a profit-sharing project for employees working in companies working together on the same project, regardless of whether the companies are legally independent or not.
- have enabled twice blocked employee savings schemes to be immediately available for employees and thus contribute to increasing their income.
2) Are there any legal provisions which regulate any of the different types of VPS?
| Requirement | Implementation | Duration | Fiscal incentives | |
|---|---|---|---|---|
| Participation 1967 | Mandatory for companies 50 employees and over and with sufficient profits Sums calculated according to a statutory formula | Sectoral or company agreement | Sums blocked for 5 years minimum Cases of early access without relinquishing tax breaks | Employer exempted from tax and social contributions, sums deductibles from taxable profits Employee exempted from tax and social contributions after 5 years |
| Profit-sharing (Intéressement) 1959 | Optional | Company agreement (3 years) | Sums either immediately available or placed in a PEE or a PERCO and blocked for 5 years minimum | Idem |
| PEE 1967, 1986 PEI (PEE for several companies ) 2001 | . | If no agreement, employer’s initiative Funds managed by third parties | Sums blocked for 5 years minimum Cases of early access without relinquishing tax breaks | Possibility for employer and employee to make additional contributions, with legal upper limits |
| PERCO 2003 | Mandatory if a PEE exists for 5 years | Company agreement Possibility to create a PERCO between several companies For employees, joining PERCO is optional At least three funds with different investing profiles | Minimum 10 years Sums blocked until retirement Cases of early access without relinquishing tax breaks | Possibility for employer and employee to make additional contributions, with legal upper limits (twice those for PEE) |
3) Are there any fiscal incentives aimed at promoting the take up of different types of VPS?
See 2).
4) Have there been any significant developments in wage flexibility, as broadly defined in the introduction, in the public sector in recent years?
In recent years, individual and variable payments are tending to develop in state-owned companies and industrial and commercial entities (établissements publics à caractère industriel ou commercial).
The implementation of the Framework Law on Budgets (Loi organique des lois de finances, LOLF) favours merit to be taken into account in civil service. Since 2004, governmental directors receive a variable payment (up to 20%) according to preset goals. Several ministries (Justice, Equipment, Finance) have implemented components of merit increase. However this meets with lots of difficulties and with the strong opposition of trade-unions.
In September 2007, President Sarkozy mentioned payments individualisation in its project for overhauling civil service.
5) Has the government considered or addressed in any way the potential for forms of wage flexibility to have differential impacts according to gender?
The 23 March 2006 Law on gender pay equality aims to abolish gender pay discrepancies within five years as part of the process of strengthening industrial relations dialogue (FR0504106F). It has in particular neutralised the effects of maternity leave and forced to mention the breakdown of the company’s stock-option scheme by gender of employee.
Commentary by the NC
Pay moderation, which has predominated since the introduction of the 35-hour week, is now being challenged. Increases in fuel prices during the past two years have reinforced demands for greater purchasing power. Two recent measures intend to boost the variable element of pay:
- the 21 August 2007 law promoting work, employment and purchasing power set new rules for overtime payments;
- the bill on purchasing power currently under discussion makes it possible to transform RTT days into money and exempting them from employee and employer contributions. Moreover, blocked sums related to participation will be available between 1st January and 30 June 2008 (maximum 10,000 EUR by employee) without relinquishing tax breaks.
Annie Jolivet and Benoît Robin, IRES