International Business The Number That Many French Businesses Fear By LIZ ALDERMANJULY 23, 2014 ÉGUILLES, France — Philippe Plantier, a seasoned French mountaineer, was rappelling down a cliff more than a decade ago when the inspiration struck: He could turn his passion for climbing into a business. Starting from his garage, he opened a small firm in the heart of Provence that now does a brisk local business on vertiginous industrial structures, with rappellers painting suspension bridges or belaying over mammoth nuclear cooling towers. There are few heights to which Mr. Plantier and his workers will not ascend. But there is one number he refuses to go above: 49. When his employee head count reached that figure, he stopped hiring. Taking on a 50th person would unleash nearly three dozen French labor regulations that he estimates would cause operating costs for his company, Travaux Grande Hauteur, to rise by about 4 percent. That could mean the difference between making and losing money, he says, in a business whose profit margins are as thin as his climbers’ margin for error.So in a tactic used by hundreds of other employers in a country with some of the European Union’s most extensive labor requirements, he has sought to conquer by dividing. Rather than expand his company, he set up a second, and then a third, all capping the work force at fewer than 49 employees. Like-minded business owners are the reason France holds the curious distinction of having more than twice as many companies with exactly 49 employees, as it does those with 50 or more. Economists say France’s 50-plus labor rules, which require employers to implement stringent and costly job protections — including a workers’ council with labor union delegates, a health and safety committee, and annual collective bargaining — are one reason the eurozone’s second-largest economy runs an unemployment rate more than twice Germany’s. Worker councils do exist in various forms in some other European Union countries, including Spain, where employers also say the additional costs from having more than 50 employees discourages business expansion. In the United States, businesses do not face as many workplace regulations, but their costs do tend to rise after the 50th employee, mainly because of additional health care obligations. But in France, because of the potential for union activism and a multitude of other additional regulations, crossing the 50-employee threshold is seen as particularly onerous. “The idea was not to pass 50,” Mr. Plantier, a wiry, energetic man, said as muscled workers wielding climbing gear bustled about. “In France, regulations and costs become almost overwhelming once your company reaches a certain size. It’s a disincentive to hire, and it holds the country back.” “France must reform,” said Jacques Attali, an adviser to French governments and the author of a landmark 2008 report on the French labor market, which warned that the thresholds stunt growth and employment. “If not, we will all be singing while the ship goes down.” With the economy stagnant, President François Hollande has sought to avoid that outcome. Recently, he sought to encourage hiring by trimming the country’s 3,200-page labor code, in part by making it easier for companies to shed workers or cut pay and working hours during downturns. This month, he went further and proposed lifting or temporarily suspending the 50-plus set of obligations to stoke job creation. But as Mr. Hollande toils under the lowest opinion-poll rankings ever for a French president, he risks a clash with some members of his Socialist party and powerful labor organizations. When he recently held a conference in Paris to address unemployment, the two main unions — the Confédération Générale du Travail and Force Ouvrière — boycotted it. They assailed the threshold reform plan as an effort to weaken collective worker representation, saying there was no proof firms would create more jobs under a deal. Employers had already broken pledges to set hiring targets in exchange for 30 billion euros, or $40.5 billion, in payroll tax breaks, Thierry Lepaon, the general secretary of the C.G.T., said at the time. Raising the employee ceiling would dilute trade union rights and employers’ responsibilities, dealing “an unprecedented blow to democracy and to social democracy in particular,” he said. Proponents say the 50th-worker threshold is meant to protect employees and give them some say in managing the company. The workers’ council can object, for instance, if bosses are thought to be spending money inefficiently, or flouting workers’ rights. “Workers’ councils can be good because they allow personnel representatives to help change the economic situation of the enterprise,” said David Askienazy, a partner at AM+DA, a French employment consulting practice. “If this relationship is well managed, it can help the boss understand employees’ concerns better.” But employers say the requirements also hurt business. A 2012 study by the London School of Economics showed that the cost of additional rules for 50-plus companies in France was equivalent to about a 5 to 10 percent increase in wages. “There is a strong disincentive to grow,” the study concluded. Half an hour north of Éguilles, Tanguy Roelandts, the founder of Puyricard, a maker of luxury French chocolates, faced such challenges when his business started booming a decade ago. He enlarged staff, training employees in the artisanal methods of handmade bonbons, calissons and other confections. The firm was like a family, he said, with annual sales of about €10 million. But after he hired his 50th employee, “it didn’t go well,” Mr. Roelandts said. The change added about €32,000 to Puyricard’s annual operating costs, and Mr. Roelandts said he wound up spending half his time dealing with administrative issues and state bureaucracy. Recently, for example, the government required him to calculate how much chocolate he could ration for France in case of a war, a task that took days. “That’s 50 percent of my time spent trying to apply rules that don’t advance the business, and that detract me from finding new products and markets,” he said. But the biggest problem came when Mr. Roelandts created the works council, which French employers have long argued can raise workplace tensions in a country where unions often strike, and have even held bosses captive to prevent layoffs. Although none of his employees were unionized, Mr. Roelandts said, unions contacted Puyricard workers and enrolled them when he set up the council. “Suddenly we found ourselves in a brutal discourse, and the dialogue became very different,” he recalled. “It was a misfortune to have passed the 50 mark,” he added, though he said he had come too far to scale back. “Let’s be clear,” Mr. Roelandts continued. “The situation in France has become so complex, that many company owners decide not to grow. They get to 50 people and say, That’s enough.” Back in Éguilles, Mr. Plantier said there was ample reason to keep payroll below 50 at each of his work sites. “In France, there is this image of the boss as a thug, and if he’s successful, it’s because he’s exploited workers,” Mr. Plantier said. Eschewing a union-led workers’ council could avoid such tension in a small firm where he had worked closely with employees for years, he reasoned. Of course, he said, it was hardly efficient to run three separate operations, instead of having all of his employees on one payroll. “Splitting it up complicates management, organization and a whole lot of other things,” said Mr. Plantier, who set up two annexes elsewhere in Provence, so far with 15 employees in each, by registering them under slightly different company names. Occasionally, he said, his organization has lost business because it cannot assign enough workers at various sites to meet demand. “Employees will say, we have a lot of orders, we need to hire more. And I tell them we can’t,” Mr. Plantier said. “They accept it, but they say it’s a shame.” Today, Mr. Plantier said, many French companies have taken the same route he has. “Unless things change,” he said, “France will be left behind while the world passes us by.”
Posted on: Thu, 24 Jul 2014 08:48:59 +0000
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