Budget: the Minister of Labor is considering a “fundamental reform” of reductions in employer contributions on low wages

Labor Minister Jean-Pierre Farandou is considering a “fundamental reform” aimed at “general relief”, reductions in employer contributions on low wages from which companies benefit, he said on Wednesday before the Social Affairs Committee of the National Assembly. The government has included in its Social Security financing bill (PLFSS) for 2027 measures aimed at curbing the cost of these exemptions from social contributions, which despite a reform in 2025 “remain very dynamic”, reaching “a level well above the period before the post-covid inflationary shock”, according to the bill.

In addition to these measures, “I think I will take the initiative of setting up a working group on general reductions,” declared Jean-Pierre Farandou, who was heard on Wednesday by the committee on the PLFSS. “The general reliefs are a lot of money, 75 billion euros, it’s considerable; it is an effect on the cost of labor (by reducing the cost of low wages, editor's note), since it is designed for that (...) but it has a big disadvantage, which is that it creates a trap for the minimum wage,” continued the minister. “There is an unintended effect which occurs in salary increases,” he noted, this low cost not providing an incentive to increase salaries. “Besides, even the employers say it, they are ready to discuss that, let’s discuss it, let’s look at how we can make a fundamental reform,” he added.

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Looking for savings on work stoppages

Jean-Pierre Farandou also indicated that he had just sent a letter to the social partners this Wednesday to call on them to “sit around a table” and find a billion euros in savings on work stoppages. He also defended the government's plan to totally or partially freeze retirement pensions in 2027, except those less than or equal to 1,260 euros. “The cumulative effect of the indexation of pensions on inflation since 2020 costs 50 billion euros in 2027 alone” and the requested effort, of 5.5 billion euros in savings, “seems balanced to me,” he said.

For after 2027, the PLFSS carries “an idea, in the making”: “I propose that we think about a system of annual negotiation of the revaluation of pensions”, with the social partners, suggested Mr. Farandou. “It is not illogical to ask companies, which pay employer contributions” and employee unions, “which pay employee contributions, to participate in these discussions, (...) the last word remaining with the State, which would take its responsibilities,” he said.