Pros and cons of doing business in France for global companies

July 19, 2022

doing business in France

Companies looking to thrive in the international market have ample opportunities in France. But the advantages of doing business in France—like its connection to the wider EU market—also carry some caveats, like high labor costs.

If your business is considering expanding into France or hiring in France, it’s crucial that you weigh all of the advantages and disadvantages.

Pros of doing business in France

Let’s explore four key benefits of entering the French marketplace.

1. Considerable consumer access

Companies that expand into France can take advantage of one of the country’s most attractive selling points—its large consumer population. Frances's economy boasts impressive statistics:

  • The French economy is the third largest in Europe
  • The buying force is populated by 67.3 million domestic consumers
  • French residents have buying power, with consumer expenditures rising each year
  • The unemployment rate is low and steady, ensuring large-scale cash flow

It’s also important to note that businesses expanding into France also have access to the wider European Union market. But an increased resident pool isn’t the only benefit of EU commerce:

  • The Euro is a strong, stable currency recognized throughout the world market
  • Ongoing EU reforms continue to improve economic strength and stability
  • EU citizens are diverse, and brands can market to numerous consumer profiles

Thus, companies that expand into France will be met with a large, monied potential client base, increasing the likelihood of profits and widespread brand exposure.

2. Transportation infrastructure

France’s transit system renders it highly accessible. Both domestic and international travel are well-developed and reliable, giving residents and foreigners alike significant power to travel and ship goods when needed.

Both French employees and businesses can benefit from this EU country’s highly developed infrastructure for travel and transportation. France touts a number of impressive transit metrics:

France’s transportation systems don’t just move people throughout the country and abroad—they give businesses the ability ship, import and export goods with ease.

In addition, France’s public transit network increases its economic health, creating three significant results:

  1. Ample job opportunities for transit workers help to stimulate France's economy
  2. Residents have substantial access to a wide geographic range to seek work
  3. French citizens can use public transit to seek brick-and-mortar marketplaces

3. High-quality social services

When employees have access to social safety nets and public services, they benefit from increased financial stability. French spending on social services is the highest in the world, and the government prioritizes equal, nationwide availability of high-quality social infrastructure.

French citizens benefit from countless public and government-funded services, including:

  • A social security system that provides health insurance, maternity and paternity leave pay, pension contributions, unemployment protections and benefits, and family allowances (financial support for families with children)
  • Job training opportunities
  • Free public education system for children ages 3 to 18
  • Subsidized, low-cost higher education
  • Free online and brick-and-mortar libraries
  • Sliding scale costs for nurseries

Such large-scale public benefits are a boon for French employers. Because French workers largely don’t have to worry about healthcare costs, financial strains of childcare, or education access, their wage concerns don’t have to accommodate an expensive cost of living.

4. A diverse, skilled workforce

Employers  hiring in France can benefit from the country’s population diversity and highly skilled workforce.

French law prohibits public censuses from distinguishing citizens based on race, largely preventing the government from compiling data on racial characteristics. But private survey organizations estimate that over 10% of the French population identifies as a racial or ethnic minority. As of 2010, 27% of newborns in metropolitan areas were born to at least one foreign-born parent.

Inclusive hiring can be a benefit for employers because:

  • Employees from different backgrounds bring unique ideas and perspectives to the table
  • Diverse workplaces help foster tolerance and healthy working relationships
  • Employees from various backgrounds can help businesses sell to a diverse market

If your company begins hiring in France, you’ll likely also notice the generally high skill levels and qualifications of French employees. France regularly invests in its workforce training infrastructure, most recently allocating €15 billion to employment efforts and skills acquisition systems. But barring ongoing investments, French workers are set up for success because they have access to:

  • Free, robust public education systems during childhood
  • High-quality government services, including job training opportunities
  • Low-cost higher education, which can provide in-depth industry knowledge

France takes pride in its diverse, skilled workforce, continuing to develop improved initiatives and systems that prepare French residents for the domestic and global job market.

Cons of doing business in France

While doing business in France certainly offers benefits, there are also drawbacks. Let’s explore four potential hurdles for businesses looking to expand into France.

1. Language barriers

France is not primarily English-speaking, and multilingualism isn’t widespread in the country. So, if businesses and employers that operate in the country do not speak French, they will need to consider a few specific elements that contribute to language barriers:

  • The official language of the EU is English, but the French population generally exhibits language pride, primarily speaking the French language in both personal and professional contexts
  • There are at least 75 regional languages spoken in France, and French dialects can significantly vary depending on an employee’s home region
  • Only about 37% of the French population speak English, putting primarily English-speaking countries at a disadvantage if they’re not equipped to translate or otherwise facilitate multilingualism in their operations

Before hiring in France, companies that don’t currently employ any French-speaking workers should create a plan for conquering potential language incompatibilities.

2. High labor costs

Hiring in France can be an expensive proposition for the following reasons:

The workforce is highly skilled. The more qualified a worker is, the more valuable they are to a company’s operations. This reality can lead to higher base wages for French workers since the country’s education and job training initiatives are so impactful.

Taxes are high. While widespread benefits reduce employees’ financial strain, taxation foots the bill for these extensive protections. Employers must account for high individual taxes when determining employee wages.

Employee benefits. Employers must provide a slate of employment benefits to their French workers, and these can come at a significant cost. Some examples include maternity and paternity leave, vacation pay, sick leave and death insurance.

French employees are entitled to significant public services and mandatory benefits, both of which can make it considerably expensive to hire workers in France.

3. High business tax rates

Businesses also contribute significantly to the country’s tax base, paying a relatively high corporate income tax rate compared with the rest of the world economy, at 28.4%. In comparison, other countries’ corporate tax rates are as follows:

  • 21% in the U.S.
  • 19% in the U.K.
  • 25% in China
  • 20% in Russia
  • 26.47% in Canada
  • 35% in Argentina
  • 9% in Hungary

In addition to corporate taxes, French businesses must pay other taxes, including:

  • Property taxes
  • Payroll taxes
  • Consumption taxes for goods and services

These high taxes can add up, potentially cutting into a business’s bottom line. If your company is looking to expand to a country with relatively low corporate tax requirements, France may not be your ideal market.

4. Foreign businesses face complicated establishment laws

Business entity establishment laws in France can be complex, and companies looking to expand in the country should be mindful of two nuances:

  • An entrepreneur or company must open a bank account to operate a business in France and corporate banks require minimum capital investments
  • Establishment and employment are very tightly regulated, creating significant red tape

In addition, France imposes specific regulations on niche industries like hairstyling, modeling and medicine. Employers should be prepared to fully understand how compensation in France works and submit extensive licenses and qualifications before they can begin the establishment process.

The complexity of entity establishment doesn’t have to be a deterrent, however. If a company wishes to hire employees in France, they can partner with an employer of record, a third-party company that will employ international workers on their behalf.

Expand your global business to France

Doing business in France gives foreign companies access to a prosperous market, but it can come at a cost. Fortunately, companies with global ambitions can tap into the French workplace without establishing a legal entity by using a France employer of record.

An employer of record can streamline your international hiring in the following ways:

  • It can legally employ workers around the globe, bypassing your company’s need to establish an entity
  • It hires, onboards and (when necessary) terminates international employees per specific home country requirements, ensuring HR compliance
  • It helps employers manage international hiring complexity like payroll and benefits requirements, even processing payroll using each employee’s home currency

Instead of establishing an entity in France, businesses aiming to increase their international impact or global employment in France should consider using an employer of record in France.

Want to learn more? Speak with a global solutions adviser today to learn how an employer of record like GEO can help you navigate international and remote hiring.

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