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 While growth in the euro zone second largest economy has started
picking up, unemployment is stuck above 10 percent. President
Francois Hollande has said he will not seek a second term in 2017 if
unemployment has not dropped by then.
Small firms "can hesitate to hire because they feel there is too
much uncertainty, too much complexity," Prime Minister Manuel Valls
said.
"Today's measures are meant to lift the constraints ... and make
life easier for small and very small firms and encourage them to
hire."
The changes will be closely watched by France's European Union
partners as a test of its 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.
As part of the package of measures unveiled on Tuesday, higher tax
and social security contributions that usually kick in at various
thresholds up to and including 50 staff will be waived for the first
three years after the thresholds are passed.
Small firms will be allowed to renew short-term contracts twice
instead of just once, provided the total duration of short-term
contracts stays below 18 months in total - a move that allows
employers to avoid making the employee concerned permanent and
therefore more difficult to fire.
Firms that hire an employee for the first time, 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 from the
state over two years. That measure will be valid for contracts
signed between June 9, 2015 and June 8, 2016.
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Penalties for unfair dismissal will be capped according to the
duration of employment, level of salary and the size of the firm.
The government hopes this will reduce legal uncertainty and cut the
duration of lengthy labor tribunals.
The measures target France's 2.1 million "very small" and 140,000
"small and medium sized" firms.
They will cost the government about 200 million euros, Economy
Minister Emmanuel Macron said.
For the French government, Tuesday's measures are "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 and Julien Ponthus; Editing by James
Regan and Andrew Callus)
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