The Kernel’s Paris correspondent Roxanne Varza explains why France’s notorious labour laws might not be the disaster for start-ups that they seem.
When people think of France, several images typically come to mind. For the culturally inclined, France is the land of delicious cheese, wine and baguettes, with a rich history of famous thinkers and artists, from Molière to Renoir. But ask any foreign businessman what he thinks of France and you’re likely to get a knowing chuckle, because the French workforce is internationally notorious for its strikes and labour laws.
But it turns out that French labour laws are not so different from those of other European countries. In 2007, France’s adoption of the loi TEPA greatly changed the terms of the famous 35-hour work week, making it far easier for employers to handle overtime. In addition, French companies enjoy the same ability to hire and fire within the first six months of employment that companies in the US love to boast about, thanks to the période d’essai that precedes all work contracts.
When comparing European countries, foreigners often have the impression that things are dramatically easier in other territories, but this isn’t always the case. Germany, for example, practices the same six month trial period as France. But while things may seem more luxurious for an employer in the UK, “employment at will” is yet to be officially implemented, and Brits have five fewer vacation days than the French per year.
If nothing else, you should kiss those heinous “French people don’t work” stereotypes good-bye.
Ah, but what about getting rid of troublesome employees? Letting someone go can be extremely costly in France, especially for foreign entrepreneurs who don’t know how to navigate the system. In fact, many US companies admit that they have passed over acquiring French companies because of inflexible labour laws around downsizing.
Ron Pragides, Senior Director of Mergers and Acquisition for Salesforce in San Francisco, has specifically said that despite one acquisition in 2008 (InStranet, a “French” company with headquarters in Chicago), the company has avoided acquiring France-based companies because of the complex labor laws. Still, Pragides says that, for the right company, they would do it again.
American companies like Amazon, Twitter, Groupon and eBay have not been shy in acquiring companies from other European countries. Amazon purchased the British LOVEFiLM and Spanish BuyVIP, which admittedly could have been France’s Vente-Privée, had things been different.
Twitter spent $50 million to purchase TweetDeck from the UK, and Germany’s Samwer brothers have perfected the art of selling German-made web companies to their American competitors. So where does that leave France?
Despite the headache, foreign firms do acquire French-based companies. A recent example is Rakuten, a Japanese company, which purchased Priceminister for some $200 million back in 2010. Another is LivingSocial’s acquisition of French Groupon competitor Dealissime, for “an amount greater than €10 million”.
But when Google’s Eric Schmidt was asked to comment on why Google had never bought a French company at last year’s LeWeb event in Paris, he casually dodged the question, saying that Google’s new French office would hopefully change that. Really, Eric.
Congratulations, you’re fired
Regardless of the fact that the labour laws may mean fewer acquisitions for French companies by foreign buyers, they do \ have a positive impact on entrepreneurship, believe it or not!.
In fact, a majority of entrepreneurs actually start their companies with the money they receive after they’ve been “let go”. It’s what Teleportd chief executive Gabriel Hubert and dozens of other French entrepreneurs refer to as the “ANPE Ventures” trend. (ANPE is the acronym for the National Employment Agency.)
Entrepreneurs often start companies with the money they make from their rupture conventionnelle, or negotiated departure, which in France can amount to quite a bit.
Former employees of successful French companies like DailyMotion, Viadeo and Deezer have gone on to use their severance payments as a way to bootstrap their own companies, which is seen as an attractive alternative to risk-averse venture capitalists and naïve ISF investors. Startups like Kontest, Sonuts.net, JobProd and ALittleMarket have all been created with severance payments in this manner.
Who says the French don’t know how to bootstrap?
Evidently, French entrepreneurs are managing to make sense of the labour code that baffles so many abroad. So, once again, the next time someone tells you it’s impossible to fire in France, just remind them: by hiring in the Republic, they could inadvertently be investing in a potential start-up some day.