France has a simple and effective contract termination procedure called ‘termination by agreement’ (‘rupture conventionnelle’) that meets the needs of employers and employees alike. This new procedure for terminating contracts by mutual consent has proved to be very successful. In 18 months, nearly 250,000 agreements have been signed – over 600 per day! Employers and employees are clearly convinced by this new type of “amicable divorce”, which offers both flexibility and security.

Termination “flexicurity”

‘Termination by agreement’ has the advantages of flexibility, security and simplicity. The employee can receive unemployment benefits and the employer does not need to provide a reason for the termination. Both parties agree on an end date for the contract and no specific advance notice is required. A termination payment is made equal to what would be provided as a redundancy payment…

Tax relief of more than 20% on average

The abolition of the local business tax in the French government’s 2010 budget represents one of the most important tax reforms of recent years in France. Overall, businesses stand to gain significantly from this reform, as the current tax burden on companies established in France will be reduced by €6.3 billion (before the effect on corporate tax is taken into consideration). In 2010, the introductory year, these tax cuts will be even larger (€12.3 billion).

In practical terms, the cost to companies of making productive investments will be reduced by more than 20% on average for an investment made over 10 years. For industry, tax relief will amount to 32%, while for SMEs the benefits of this reform are even more tangible: companies with a turnover of less than €3 million will see their tax bill reduced by 50-60% (source: French Ministry for the Economy, Industry and Employment).