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Social Security Shake-Up in France

Tuesday 17 February 2009

Making the return to work more attractive than remaining on benefits is the key objective of changes being introduced to the French social security system.

One of the cornerstones of the social security system in France, the Revenu Minimum d'Insertion (RMI), is to be abolished.

For the past twenty-five years, the RMI has served as the guarantee of a minimum subsistence level for anyone in France who was not otherwise entitled to unemployment or sickness benefits, or simply on a very low income.

The RMI was also entirely non-contributory, so anyone with legal residence in France had an entitlement to the benefit.

Since its creation, the number of beneficiaries has increased substantially, from 400,000 to over 1 million in 2008.

It is now accused of creating a dependency trap for those who receive it, for critics argue it penalises too severely those who do eventually find employment.

As a result, it is to be replaced by the Revenu de Solidarité Active (RSA), the main aim of which is to ensure that any take-up of employment translates itself into a financial gain, rather than an immediate loss of benefits.

Accordingly, in future, finding employment will result in a reduction in RSA of 38 centimes per euro of RSA, leaving a net increase in income to the recipient of 62 centimes per euro. Indeed, during the first three months of new employment or training they would be able to retain full entitlement to RSA.

This means that those who take employment will be able to enjoy a higher regular income.

If a recipient took part-time employment, then the RSA would continue to remain available indefinitely to ensure a minimum income floor.

As under the present system, unemployed recipients will also be required to more actively pursue employment opportunities, or a form of training, for which personalised assistance and special employment contracts will be available.

However, in future, if an RSA claimant refuses two offers of ‘reasonable’ employment, then the benefit can be withdrawn.

Whilst the non-contributory nature of the form RMI system has been retained, there are tougher tests of eligibility based on residence and nationality.

As is presently the case, those from outside of the European Union will be obliged to demonstrate at least 5 years legal residence in France, whilst those from within the EU must have been legally resident for at least three months.

However, in the case of those from within the EU, no entitlement to RSA will be available for those who entered the country as inactive persons, and who have maintained that status.

Accordingly, those from the EU who take up employment or run a business, and then later become involuntarily unemployed would be eligible to receive the benefit.

Likewise, those in employment or business, but whose income is below the minimum subsistence level, would also be entitled to RSA.

The current minimum subsistence level depends on the composition of the family, ranging from €447 for a single person, €671 for a couple, and €940 for a couple and two children.

The additional cost of the new system is estimated be around €1.5 billion a year, which in part is to be funded by an increase in the social charges payable on rental, capital gains and investment income.

The RSA is scheduled to become operational from 1st July 09, an earlier implementation of the change from January 2009 having been abandoned due to expenditure constraints.

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