The social regimes are often contrasted when choosing the status of the company’s manager. In broad outline, the presidents and general managers of stock companies and the presidents of simplified corporations are considered as « similar to employees » (general social security scheme), whereas the managers holding the majority of shares in limited liability companies, the partners of General Partnerships, the individual entrepreneurs and the sole partner of a single-shareholder limited liability company are called Self-Employed Workers (affiliated to the social security scheme for self-employed workers (RSI), or equivalent health insurance scheme for self-employed workers (RAM)).
The equivalent to employees’ scheme is deemed to be more costly than the one of the self-employed workers (TNS). Indeed, the global contribution rate to the equivalent to employees’ regime is estimated to 80% against 45% for the self-employed workers’ regime. However, it is appropriate to specify that the tax bases are potentially different. So, in the regime of the self-employed workers is included the part of dividends for the managers holding the majority of shares and which exceeds 10% of the share capital plus the annual average current account balance. Nevertheless, these two schemes don’t have the same advantages. Therefore, it is appropriate to consider carefully the services offered by each of them.
We suggest a fast comparison of these two systems with regard to the services of unemployment insurance, health insurance and administrative formalities.
• Unemployment insurance
In principle, neither the equivalent to employees’ workers, nor the self-employed workers contribute for the unemployment within their directorship mandate.
The equivalents to employees are affiliated to Pôle Emploi (French employment agency) but pay only on the part of their wages corresponding to a work contract. Yet it is possible to subscribe optional unemployment insurances whether the manager doesn’t meet the criteria of Pôle Emploi: it is the case when there is no subordination link.
The self-employed worker has to subscribe a private insurance by himself. Several entities offer this service, as the Social Guarantee of Company Managers (GSC), April Assurance, or the Association for the Protection of Independent Company Owners (APPI). We specify that this service is very expensive.
• Social security coverage
With both the schemes, the hospital fees are refunded at 80% of their amount.
Concerning the daily allowances: the equivalents to employees benefit from capped sickness and maternity allowances. Under the regime of the self-employed workers, only storekeepers and tradesmen are entitled to daily allowances in case of hospitalization, sickness or accident. In this way, liberal professions are not compensated. In the event of maternity, rest allowances and flat-rate daily subsistence benefits are allocated under both the regimes.
We therefore note that the equivalents to employees are entitled to sickness benefits regardless of their profession: on the contrary, the self-employed workers will be able to obtain it only if they are storekeepers of tradesmen (as opposed to liberal professions for example).
But the gap widens more and more in matter of coverage for accidents at work, as the regime of the employees covers all the costs, whereas the regime of the self-employed workers don’t support it at all. We can mention some professions as the tradesmen have, and which are at greater risk of having an occupational accident.
The basic pension is mandatory for both the systems as well as the complementary pension. In this case,there are differences again concerning the amount of the services: in fact, the amount of the retirement pension is more advantageous under the regime of the employees or similar. For example, a person having received constantly a wage of 2000 € during 41,5 years will have a pension of 1 281 €/month with the regime of the self-employed workers, against 1 530€/month for an employee or similar.
Although more expensive, we note that the employee status, depending mainly from the URSSAF (general social security system), allows obtaining more attractive services that the self-employed worker status. Moreover, the additional cost generated by opting for the regime of the employees or similar can be paid off by arbitration between wage and profit distribution for determining the manager’s salary.
• Administrative management
The administrative red tapes which the French administration is often blamed for is a factor taking a stronger hold in the management of a company. Here again, significant differences between the two systems have to be taken into account when choosing the social status of the manager.
Concerning the general regime (URSSAF), there are three formalities that the employer must comply with. First, he has to submit a Preliminary Declaration of Hiring (DPAE) for each new hiring. Then, he has to submit, quarterly, the Social Charges Statement (DUCS), in order to declare and pay the due charges. We notice that this becomes a monthly obligation whether the company has at the minimum 10 employees. Then, annually, it is required to submit the Declaration of Social Data (DADS), which allows listing the employees hired by the company, and the total amount of the paid salaries.
Le social security scheme for self-employed workers (RSI) requires the annual submission of the Social Declaration of the self-employed workers (DSI): its purpose is to declare the entrepreneur’s incomes, allowing in this way the calculation of the due mandatory social charges. So the charges are paid on an anterior basis, or a flat-rate basis in case of a beginning of activity, then the RSI carries out an adjustment in November of the following year: it is the adjustment contribution demand. This system can generate cash-flow problems whether there is an important gap between the provisional contributions and the end-year adjustment.
On the contrary, the scheme of the employees allows paying the actual contributions according to the received salaries, without any adjustment at the end.
We also note that in the event of bankruptcy, the self-employed workershall remain liable of social charges in his/her personal capacity.
Often, there are difficulties in the relationship between the entrepreneur and the RSI: several testimonies mention demands of contributions to pay of different amounts, constant reminders from their part whereas the debt is not correctly established, or simply errors of calculation. Many self-employed workers are also talking about real situations of harassment for what concerns the payment of social charges.
The differences between the two regimes have to be assessed on a case-by-case basis: the choice of the social security regime will depend in particular on the manager’s profile, who could prefer a lesser social protection for a lower amount of contributions, whereas another one would prefer the administrative flexibility with the scheme of the employees and similar compared to the difficulties experienced with the RSI.
Whatever the option chosen, we precise that it is always possible, under conditions, to transform the Limited Liability Company in a Simplified Stock Corporation (and vice versa), in order to be able to opt for the most appropriated social security regime for the manager and his company situation.