France unveils 'Jobs Act' to boost hiring at small firms
By Ingrid Melander
PARIS (Reuters) - France announced on Tuesday a set of measures to encourage small firms to hire by making labor rules more flexible and cutting costs, a move welcomed by business groups but condemned by some within the ruling Socialist party.
The package aims to tackle unemployment which, stuck above 10 percent, is a major challenge for President Francois Hollande. He has said he will not seek a second term in 2017 if unemployment has not dropped by then.
"Today's measures are meant to lift the constraints ... and make life easier for small and very small firms and encourage them to hire," Prime Minister Manuel Valls said. Small firms "can hesitate to hire because they feel there is too much uncertainty, too much complexity."
The changes will be closely watched by France's EU partners as a test of Hollande's commitment to reform. The European Commission, the IMF and OECD think-tank have all said that making it easier to hire and fire should be the top priority for France.
The measures concern about half of France's employees and over 2.2 million firms, the government said.
As part of the package, higher tax and social security contributions that usually kick in at various thresholds up to 50 staff will be waived for the first three years after the thresholds are passed.
In addition, penalties for unfair dismissal will be capped according to time in the job, salary, and the size of the firm. The government hopes this will reduce legal uncertainty and shorten labor tribunals.
"These measures mirror some of what we had proposed and go in the right direction," Thibault Lanxade, in charge of small and medium-sized firms at France's biggest employers' group Medef, told Reuters. "But many measures do not go far enough to create a 'confidence shock' for jobs."
Labour unions and people on the left of the Socialist party were upset by measures, which went further than they had expected and came just days after the party reaffirmed its support for Hollande with a carefully balanced policy statement.
It seems that "as soon as the congress is over we're going back to the Manuel Valls-Emmanuel Macron line," one of the rebel backbenchers, Laurent Baumel, told Reuters, referring to the Prime Minister and Economy Minister's pro-business measures.
"There is a problem, and we won't be complicit to this gap between words and deeds."
Among other measures, small firms will be allowed to renew short-term contracts twice instead of just once, provided the total duration stays within the existing 18 months limit- a move that allows employers to avoid making the employee concerned permanent and therefore more difficult to fire.
Firms that hire their first employee, either on a short-term contract of more than 12 months or on an indefinite contract, will receive a 4,000 euro ($4,517.60) subsidy for contracts signed between June 9, 2015 and June 8, 2016.
The government called the scheme "a Jobs Act, the French way," in reference to Italy's labor reform, which Prime Minister Matteo Renzi credited on Wednesday for strong jobs growth.
(Reporting by Ingrid Melander, Julien Ponthus and Emmanuel Jarry; Editing by Andrew Callus and Dominic Evans)
