49: The Magic Number For Companies In France

May 10, 2012 3:50 pm

When thresholds are decided, one has to be very careful. For example, if you have a different tax rate for a 250,000 plus income, many people are going to declare incomes in the 240,000 range. Worse, some people might declare 249,000 – a classic example is what we spotted today, France:

“Here’s a curious fact about the French economy: The country has 2.4 times as many companies with 49 employees as with 50. What difference does one employee make? Plenty, according to the French labor code. Once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.

French businesspeople often skirt these restraints by creating new companies rather than expanding existing ones. “I can’t tell you how many times when I was Minister I’d meet an entrepreneur who would tell me about his companies,” Thierry Breton, chief executive officer of consulting firm Atos and Minister of Finance from 2005 to 2007, said at a Paris conference on April 4. “I’d ask, ‘Why companies?’ He’d say, ‘Oh, I have several so that I can keep [the workforce] under 50.’ We have to review our labor code.””

Statistics Source: BusinessWeek

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