In France, paid leave indemnity follows specific calculation rules that can result in employees earning more during holidays. Here is what employers need to understand.
One of the questions we hear most often from employers in France is this: “Why is my employee’s payslip higher this month? They were on holiday.”
The answer lies in how paid leave indemnity is calculated under French law, and specifically in the two-method rule that applies to every employer.
Two methods, one rule !
French law requires employers to calculate paid leave indemnity using two different methods, and then apply whichever result is more favourable to the employee.
The first method is :
- The one-tenth rule (règle du dixième) : the indemnity is calculated as one-tenth of the total gross remuneration received by the employee over the reference period.
The second method is :
- The salary maintenance rule (maintien de salaire) : the employee receives the remuneration they would have earned had they continued working during the leave period.
The employer must calculate both and pay whichever is higher. This is not optional, and it is not at the employer’s discretion.
Why this leads to higher pay during holidays ?
The one-tenth method takes into account all remuneration earned during the reference year, including :
- Bonuses,
- Commissions,
- Overtime pay,
- And other variable elements.
If an employee earned significant variable remuneration during the year, their one-tenth calculation may exceed what they would have earned by simply staying at work.
This is the most common reason why employees appear to earn more during their holidays than during regular working weeks.
Where employers go wrong ?
The most common error is applying only the salary maintenance method by default, without checking whether the one-tenth method would be more favourable.
A second common error is failing to recalculate when an employee’s situation changes.
The most common error is applying only the salary maintenance method by default, without checking whether the one-tenth method would be more favourable. A second common error is failing to recalculate when an employee’s situation changes.
The consequences of getting it wrong
An employee who was paid less than the legally required indemnity during their holidays has a valid claim for the difference. It is one of the most common sources of disputes at the time a contract ends.
The bottom line
Paid leave indemnity in France is more nuanced than it appears. The two-method rule exists to protect employees, and applying it correctly requires accurate records of all remuneration elements throughout the reference year.
Accurate payroll is not just about paying the right salary. It is about applying the right rules at every step.
Article written by briogate.com – Stay up to date with French labor law changes.