Effective 1 July 2021, France will begin determining the unemployment insurance rate paid by employers on a Bonus-Malus system. The first adjustment of employer contributions under the Bonus-Malus system will begin 1 September 2022 and will be calculated from the end of the employment contract or temporary assignments noted between 1 July 2021 and 30 June 2022.
The new system replaces the system under which an employer paid a standard unemployment insurance rate of 4.05%. Under Bonus-Malus, the employer's rate can increase (Malus) or decrease (Bonus) to reflect the number of contracts that are terminated at the company and result in a claim to Pôle Emploi for unemployment benefits within three months of the termination. The Bonus-Malus will apply to companies with 11 or more employees in sectors of activity where the average separation rate is greater than 150%. Under Decree No. 2021-326 of 30 March 2021, ordinary resignations, the end of apprenticeships, and certain other contracts are not taken into account.
The sectors affected will be specified in a future decree. The new system takes into account the COVID-19 pandemic and excludes employers most affected by the crisis.
The bonus or penalty applied to the employer's unemployment tax rate will be calculated based on the comparison between the separation rate of the companies concerned and the median separation rate of their sector of activity. The bonus can result in a rate as low as 3%, with a penalty rate as high as 5.05%.
More information about the Bonus-Malus unemployment insurance reform is available on the website of the Ministry of Labor, Employment and Integration, which is responsible for execution of the new scheme.
Edward Kowalski, Esq., is Manager, Payroll Information Resources, for the American Payroll Association