The business of hotels, cafes, and restaurants is inherently fluctuating and very often seasonal.
This is why the law has authorized them to use short-term contracts, particularly temporary contracts, which can last only a few days.
The government wanted to limit the use of these contracts, which generate the right to unemployment benefits, provided the required number of hours or days have been reached.
It assumes that many companies in the sector abuse this right, because:
– seven out of ten hires are on fixed-term contracts of less than one month, and nearly a third of all fixed-term contracts signed do not exceed one day.
– In ten years, these short-term employment contracts of less than one month signed by employees in the hotel, café, and restaurant sector have increased from 1.5 million to 3.8 million.
– The hotel, café, and restaurant sector has 740,000 employees who are unemployed after these contracts end, potentially contributing to the unemployment insurance deficit.
The reform, which will be implemented starting January 1, 2020, concerns seven sectors where the “separation” rate—that is, the rate of contract terminations or end-of-contracts—exceeds 150%.
This is the case for the hotel and restaurant sector, which has a rate of 210%. In other words, for every employee hired, there are two contract terminations per year that could lead to the payment of unemployment benefits.
This reform does not currently apply to the construction sector, where the separation rate is 128%, nor to the performing arts sector, where it is 118%.
- How does the “Bonus-Malus” system work?
It applies to the termination or cancellation of short-term contracts (replacement, seasonal, temporary, etc.) as well as the termination of permanent contracts.
All types of contracts will therefore be included, even temporary work, which will be charged to the user company, i.e., hotels, cafes, and restaurants, with the exception of resignations and apprenticeship and integration contracts.
Only companies with at least eleven employees are affected, not those with fewer than eleven employees for the time being, which would represent 15 to 20% of hotels, cafes, and restaurants.
Currently, the standard employer contribution rate for unemployment insurance is set at 4.05%.
The new system is as follows: the employer’s unemployment insurance contribution will vary between 3% and 5% of the total payroll for Hotels, Cafés, and Restaurants (and not just the payroll calculated on short-term contracts).
Pôle emploi (the French public employment service) will compare the separation rate of a Hotel, Café, or Restaurant with the average separation rate calculated for the hospitality sector.
In addition, a €10 tax will be paid by a Hotel, Café, or Restaurant each time it uses a fixed-term contract for specific purposes.
The amounts paid as a penalty will offset the amounts granted as a bonus in the same sector.
Companies will only pay a penalty – or receive a bonus – from January 1, 2021, as 2020 is the reference year for establishing the number of separations.
The bonus or penalty borne by companies will be calculated based on the rate of contract terminations recorded over a given period (most likely one year or more) that resulted in registration with Pôle emploi (the French public employment service).
The penalty will disproportionately affect hotels, cafes, and restaurants by increasing unemployment insurance contributions, thus encouraging them to explore alternative work arrangements.
The aim of the “bonus-penalty” system is to combat precarious contracts, but not only that, as terminations of all contracts, even permanent ones, are affected. The primary objective is to finance the unemployment insurance deficit.
In practice, this measure is discriminatory for hotels, cafes, and restaurants, as well as for the six other sectors concerned, because all other sectors are excluded. However, the building and construction sector is very significant and relies heavily on fixed-term contracts for specific purposes on a daily basis, with many site-based contracts lasting very short periods. The same is true in the entertainment sector where the number of fixed-term contracts for the same employee can reach 500 in a single year!
This situation creates a distortion of competition.
The reform therefore penalizes the hotel, café, and restaurant sector. Hotels, cafés, and restaurants that use temporary staffing agencies will be penalized in the same way because the employment agency will consider that the client company is the one that concluded the contract, whereas it is actually the temporary staffing agency.
In practice, this reform pushes hotels, cafés, and restaurants to outsource services to their customers to avoid this financial penalty.
For example, instead of hiring housekeeping staff, hotels will use one or even several external service providers (e.g., cleaning, catering, and restaurant services), which will be responsible for the social security contributions of the employees working in the hotel.
It is even conceivable that hotels, cafés, and restaurants could use the services of a self-employed individual who provides such a service, since the social security contributions would fall to them. Using the services of a self-employed individual presents the risk for hotels, cafes, and restaurants of having the arrangement reclassified by an employment tribunal as an open-ended employment contract. In this case, since no prior declaration of employment was made, this service is likely to be penalized as undeclared work, not to mention the penalties for wrongful termination of an employment contract that the hotel, cafe, or restaurant would face.
One solution would be a mobility contract with a platform, an intermediary between hotels, cafes, and restaurants and employees on short-term contracts. This platform would hire the employee, who could then work in several hotels, cafes, and restaurants. Professional associations in the hotel, cafe, and restaurant sector could negotiate with the French employment agency, Pôle Emploi, a system of intermittent work in the restaurant industry to provide security for employees in this sector.
Another, more viable solution would be a shared-time permanent contract between an employee and an employer group. Groups of this kind already exist (e.g., RESO…). For example, a chambermaid has a full-time (or even part-time) permanent contract with this group of employers, and she works for each of them under the same permanent contract.