France: Social partners agree changes to unemployment insurance scheme

A new agreement on the rules for unemployment benefit was reached by the social partners at cross-industry level on 14 April 2017. However, French President Emmanuel Macron intends that the State will take over management of unemployment insurance from the social partners, ending bipartite management which has existed since 1958.

Background to new unemployment rules

Unlike most aspects of social protection, unemployment benefits, along with the supplementary pension schemes, are entirely managed by the social partners. This is done at national and interprofessional level through a national collective agreement which is renegotiated every three years. At the start of 2016, the government extended the previous agreement for one year because the social partners were unable to reach a new agreement. After several meetings, the social partners reopened negotiations in the hope of reaching an agreement by the end of March 2017, before the second round of the presidential elections in May. Faced with the threat that the State would take control of unemployment benefits, a change proposed by several presidential candidates in the 2017 election, the main challenge was to demonstrate that the social partners could effectively run the scheme on a parity basis.

Main terms of the agreement

Fixed-term contracts were a key issue in the negotiations, which aimed to reduce the unemployment insurance deficit (€3.6 billion in 2017; €3.9 billion in 2018). The number of these contracts increased steeply from 1.6 million per quarter in 2000 to almost 3.9 million per quarter at the start of 2016. The trade unions wanted to reduce their use, with the General Confederation of Labour–Force Ouvrière (CGT–FO) suggesting the introduction of a bonus/penalty system to encourage employers to hire staff under permanent contracts. The French Democratic Confederation of Labour (CFDT) suggested a gradual contribution scale depending on the length of the contracts. However, these proposals failed, due to strong opposition from employers in certain sectors who make extensive use of short-term contracts.

Nevertheless, a compromise was reached, which firstly involves the launch of negotiations in those sectors which most heavily rely on fixed-term contracts. The aim will be to find solutions that can secure career paths and, where appropriate, regulate the use of fixed-term contracts. Secondly, employers have agreed to an increase in their contributions to unemployment insurance. A special contribution of 0.05% will be made for the duration of the agreement (maximum of 36 months). On the other hand, the additional contribution for very short fixed-term contracts (up to three months), introduced in 2013, has been scrapped because it has been found to be ineffective in tackling job insecurity.

The biggest savings will be made in relation to older people. Currently, people aged 50 and over who register as unemployed enjoy a longer benefit period than other age categories (24 months). The social partners have decided to apply this maximum period of 24 months to those aged between 50 and 52 years. Between 53 and 54 years, the benefit period will be reduced to 30 months, but will remain at 36 months for those aged 55 and above.

These new rules should generate, starting in 2022, new savings of €885 million per year and an additional revenue of €270 million. 

Agreement almost unanimous

The agreement has been accepted (PDF) by the three representative employer organisations:

  • the Confederation of Small and Medium-sized employers’ organisation (CPME), representing small and medium-sized companies;
  • the Movement of French Enterprises (Medef) representing medium-sized and the largest companies;
  • the Union of Local Businesses (U2P), representing self-employed people such as doctors, lawyers, architects and craft workers.

It was also signed by four of the five representative trade union confederations:

  • French Confederation of Professional and Managerial Staff–General Confederation of Professional and Managerial Staff (CFE–CGC);
  • CFDT;
  • the French Christian Workers’ Confederation (CFTC);
  • FO.

The General Confederation of Labour (CGT) refused to sign it.

Officially signed on 14 April, the agreement was approved by the government on 4 May, just before the final round of the French presidential election on 7 May. The new rules will come into effect on 1 October 2017 and will last for three years. The social partners are pleased that they were able to steer this process through, despite the complex political context in which certain presidential candidates were proposing State control of the unemployment insurance system.

Commentary

With the victory of Emmanuel Macron in the presidential election, the future of the bipartite unemployment scheme is under threat. The new President promised during his election campaign to change the rules of the current insurance scheme. He claims that unemployment insurance should also be open to employees who have resigned (once every five years) and to those in independent professions. Therefore, the scheme should be financed only by the State budget and social contributions should end, with the aim of reducing labour costs.

With this potential structural change, the social partners would lose their right to have sole control over the unemployment scheme management. It is expected that the scheme will be managed instead by a tripartite mechanism with the government having the final say. The new President has also announced his willingness to reinforce control over job-seekers and to introduce a bonus-malus mechanism to increase the costs for employers who choose to use short-time contracts. According to the government agenda, this reform should be introduced sometime at the beginning of 2018.

 

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