Manager with an employment contract: the best social regime

Social regime

Being the manager of the executive officer of a company in France obviously has a lot of perks. However, often, your social regime won’t be as good as that of a regular employee; you won’t always be insured against unemployment, for example. As such, it can be very worth your time to combine your function as the director with an employment contract, if it is possible.

Summary:

  1. The conditions for combining a social mandate and an employment contract
  2. Entitlement to unemployment benefits for company directors
  3. What happens if one of your function changes or is terminated?

1- The conditions for combining a social mandate and an employment contract

It is only possible under certain conditions:
  • The executive must exercise functions distinct from his social mandate under a contract of employment.
    In practice, unfortunately, it can be very difficult to prove that when the company is small. Indeed, technical functions are often part of the functions of the executive in small structures.
  • The executive must receive an additional remuneration because of this employment contract.
    Of course, this amount must be considered normal for the functions exercised.
    As such, they essentially have a double remuneration, one under his employment contract and the other from his social mandate.
  • The executive must have an employer they are legally subordinated to.
    Because of this condition, it is virtually impossible for a majority manager (a manager holding more than 50% of the shares) to have such a contract. After all, they basically have full reign over any management decisions of the company.
  • The executive must not enter into a contract of employment for the purpose of infringing the law.
    (These conditions have been established by the case law)

Something to keep in mind: an egalitarian manager (one who holds exactly 50% of the shares) who fulfils these conditions can ask for an employment contract. However, the Unedic (the National Union for Employment in Industry and Trade) still won’t grant them insurance against unemployment.

If any of these conditions aren’t fulfilled, asking for an employment contract unfortunately becomes impossible.

What’s the procedure to get this contract?

This contract for the benefit of a company executive is subject to the regulated agreements procedure.
If the company is an SA (Public Limited Company), it authorization needs to be obtained before the contract is concluded. If it’s an SAS (Single-Member Company) or an SARL (Limited Liability Company), it can be obtained afterwards.

If the employment contract happened before the functions of executive were even given, what happens to it?
  • It’s suspended during the term of office, unless otherwise agreed. At the end of his term, it will again be automatically applicable
  • It can be stopped
  • It may be declared invalid

2- Entitlement to unemployment benefits for company directors

These are all the different possible situations for a director with an employment contract:

Social representativeAffiliation to the unemployment insurance scheme
SARL (Limited Liability Company)
Minority managerYes
Egalitarian managerNo
Majority managerNo
Non-associated managerYes
Partner (majority / egalitarian / minority)Yes
EURL (one-person limited liability undertakings)
Sole shareholderNo
Sole managerNo
Non-associated managerYes
SA (public limited company) with a board of directors
AdministratorYes, if the employment contract is made before the social mandate (1)
Director General Administrator
Chief Executive OfficerYes, if the employment contract is made before the social mandate
Non-director general managerYes
SAS (Single-Member Company)
PresidentYes
Officer appointed in the by-lawsYes
SNC (partnership)
AssociateNo
Managing partnerNo
Non-associated managerYes
Scop (cooperative companies)
associateYes
leaderYes

(1) Employee-director of SA: the cumulation of these functions is only possible if:

  • the employment contract of this employee is prior to his appointment as director,
  • the number of directors with an employment contract in the company does not exceed one-third of the directors.

A director of an SA, with fewer than 250 employees and an annual turnover not exceeding € 50 million or whose annual balance sheet total does not exceed € 43 million, may become an employee if his work contract corresponds to an actual job.

Directors who become employees of the SA are taken into account in assessing whether the number of directors related to the company by a contract of employment does not exceed one-third of the directors in office.

3- What happens if one of your function changes or is terminated?

The social mandate and the employment contract obey their own rules: the modification or termination of the employment contract does not, therefore, affect the social mandate, and vice versa.
A former corporate officer may also conclude a contract of employment with his predecessor company, except in the case of fraud.