How to Calculate Payroll for an Employee on Annual Days Contract Hired Mid-Year?
Why Does Hiring an Employee on an Annual Days Contract Mid-Year Pose Payroll Calculation Difficulties?
The annual days contract, governed by Articles L.3121-58 and following of the French Labour Code, constitutes a work-time arrangement reserved for autonomous executives and certain employees whose working hours cannot be predetermined. When an employee under an annual days contract is hired mid-calendar year or during the reference year, two distinct calculations must necessarily be performed by the payroll department:
- The proration of the salary for the first incomplete month of work;
- The proration of the number of days to be worked for the remaining fiscal period.
These two operations follow strict rules, often misunderstood, and ignorance of which may expose the employer to wage claims and disputes before the industrial tribunal. This article details the mandatory methodology, supported by formulas and a complete numerical example. For an overview of payroll mechanisms, refer to our complete payroll guide.
What is the Mandatory Method for Prorating the Salary for the First Month of an Employee on an Annual Days Contract?
Contrary to what some payroll software may default to, the proration of the salary for the first month of an employee on an annual days contract is performed exclusively on a calendar days basis. It is formally prohibited to resort to prorating based on business days, working days, the thirtieth or thirty-first day of the month.
The applicable formula is as follows:
Salary for the month = Monthly remuneration − (Monthly remuneration ÷ Number of calendar days in the month × Number of calendar days not worked before hiring)
This formula derives from the combined application of Articles L.3242-1 (monthly pay) and L.3121-58 et seq. of the French Labour Code. The use of calendar days is justified by the fact that the annual days contract deviates from hourly count of working time: the reference to calendar days is the only neutral and compliant approach to the very nature of the contract.
Why Are Other Proration Methods Prohibited?
The thirtieth (or thirty-first) day rule stems from jurisprudence applicable to employees whose working time is counted in hours. Applying it to an employee on an annual days contract would create an artificial distortion, sometimes favorable or unfavorable to the employee, depending on the actual number of calendar days in the month of hiring. Likewise, prorating on working days or business days is unsuitable for the annual days contract, which relies on counting worked days and rest days throughout the year, not following a weekly logic of five or six days.
The Cour de cassation (French Supreme Court) has repeatedly reminded that annual days contracts must be interpreted strictly and that any calculation method not provided for by the applicable collective agreement or by law may be challenged (Cass. soc., June 29, 2011, n° 09-71.107). It is therefore imperative to adhere to the calendar days method, which is the only one compliant with the texts.
How to Calculate the Number of Days to Work for the Remaining Fiscal Period After a Mid-Year Hire?
The second calculation concerns determining the number of days the employee must actually work between their hiring date and the end of the reference fiscal period (usually December 31 for a fiscal year aligned with the calendar year). This operation follows a mandatory five-step method (a → e) detailed below.
Step (a): Determine the Remaining Calendar Days in the Fiscal Period
This involves counting the total number of calendar days from the hiring date (inclusive) to the last day of the reference fiscal period (inclusive). For example, if hired on April 15 with a fiscal year aligned with the calendar year, the count is from April 15 to December 31, totaling 261 calendar days.
Step (b): Subtract Weekly Rest Days
Next, all Saturdays and Sundays (or weekly rest days stipulated by the collective agreement) included in the period are deducted. Article L.3132-1 of the French Labour Code guarantees a weekly rest of at least 24 consecutive hours, along with 11 hours of daily rest, totaling 35 consecutive hours. For our example from April 15 to December 31, we typically identify 74 days of weekly rest (Saturdays and Sundays).
Step (c): Subtract Public Holidays Coinciding with Normally Worked Days
Only public holidays falling on normally worked days (generally Monday to Friday) are subtracted. Public holidays that fall on a Saturday or Sunday do not need to be deducted since they have already been neutralized in Step (b). The articles L.3133-1 and L.3133-7 to L.3133-12 of the French Labour Code set forth the list of legal public holidays. For the period from April 15 to December 31, for example, we identify 6 public holidays falling on working days (May 1, May 8, July 14, Ascension Thursday, August 15, November 1, December 25 depending on the year).
Step (d): Subtract Pro-Rated Paid Leave Entitlements
The employee hired mid-year acquires pro-rated rights to paid leave according to Article L.3141-1 of the French Labour Code. These rights must be estimated and deducted from the number of days to be worked. For an employee hired on April 15, the rights accrued for the remaining reference period are calculated pro rata temporis. If the employee has not accrued any usable paid leave (first year of hiring without carrying over), this step may yield zero, but it must still be formally recorded in the calculation.
Step (e): Subtract Pro-Rated Rest Days from the Contract
The rest days linked to the contract (often referred to as