Overtime: markups and legal calculation

Introduction

Overtime is one of the most sensitive subjects in French employment law. Between calculating the annual allowance, applicable markup rates and recent tax and social exemptions, both employers and employees sometimes struggle to understand the rules. A calculation error can expose the company to URSSAF adjustments, or even costly employment tribunal disputes. This article reviews the legal framework in effect in 2026, the calculation methods to apply and best practices to adopt for securing overtime management in your organisation.

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Definition and general framework of overtime

What is an hour of overtime?

An hour of overtime is any hour of actual work carried out beyond the legal weekly duration of 35 hours (article L. 3121-28 of the Labour Code). It is distinct from additional hours, reserved for part-time employees, and on-call duties, which follow a different regime.

The count is carried out on a calendar week basis (from Monday 00:00 to Sunday 24:00), unless a collective agreement provides for another reference framework, notably in case of annualised working time.

The annual overtime allowance

The annual allowance represents the maximum volume of overtime hours an employer can require from an employee without authorisation from the labour inspection authorities. Since the law of 20 August 2008, this allowance is fixed by company or sector-wide collective agreement. In the absence of an agreement, it is set at 220 hours per year (decree n° 2004-1381).

Beyond the allowance, the employer must:

• Obtain the opinion of the social and economic committee (CSE);

• Pay a mandatory rest equivalent (COR), the rate of which is 50% for companies with 20 or fewer employees, and 100% above that.

Maximum durations not to be exceeded

Even in the presence of overtime, absolute maximum durations apply:

• 10 hours of actual work per day (unless exemption);

• 48 hours per week (absolute maximum);

• 44 hours on average over a period of 12 consecutive weeks.

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Calculation of overtime markups

Legal markup rates

In the absence of a collective agreement, the Labour Code (article L. 3121-36) sets the following markup rates:

• 25% for the first 8 weekly overtime hours (from the 36th to the 43rd hour);

• 50% from the 44th weekly hour onwards.

A company or sector-wide agreement may lower these rates, with a floor of 10%, or conversely raise them. It is therefore essential to check the applicable collective agreement before any calculation.

Practical calculation method

The basic hourly rate (THB) serves as the starting point. It is obtained by dividing gross monthly remuneration by the number of reference monthly hours (151.67 hours for full-time 35h/week work).

Calculation example:

• Gross monthly salary: €2,500

• THB = 2,500 / 151.67 = €16.48 / hour

• Overtime hour at 25%: 16.48 × 1.25 = €20.60

• Overtime hour at 50%: 16.48 × 1.50 = €24.72

This calculation applies to all elements of remuneration of a general and permanent nature (basic salary, seniority bonuses, etc.), excluding reimbursement of professional expenses.

Replacement of payment by a replacement rest compensator

Article L. 3121-33 of the Labour Code authorises the replacement of increased payment by a replacement rest compensator (RCR), provided that a collective agreement provides for it, or failing that, with the employee's agreement. The RCR must be equivalent in value: an hour of overtime at 25% markup entitles to 1h15 of rest.

This option is particularly popular in companies wishing to limit payroll while retaining staff through additional free time. The electronic signature for HR facilitates the formalisation of these individual and collective agreements, guaranteeing complete traceability of consents.

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Tax and social exemptions in 2026

The "Work, employment, purchasing power" (TEPA) scheme

Resulting from the TEPA law of 21 August 2007, renewed and strengthened by the law of 16 August 2022 (article 2), the exemption scheme continues to apply in 2026:

• Income tax exemption: remuneration paid in respect of overtime hours is exempt up to an annual limit of €7,500 gross (ceiling applicable since 1 January 2019);

• Reduction in employee contributions: reduction rate set at 11.31% (standard rate, which may vary depending on the fund);

• Flat-rate deduction of employer contributions: applicable only to companies with fewer than 20 employees, at a rate of €1.50 per overtime hour.

These benefits constitute a powerful lever for encouraging overtime without excessively increasing the cost for the employer or tax burden for the employee.

Application conditions and caution

The exemption does not apply:

• To fictitious overtime hours (absence of actual work);

• To hours worked under a part-time contract (additional hours regime);

• When collective working hours have been reduced to benefit from the scheme (anti-abuse clause).

URSSAF regularly checks the consistency between DSN declarations and working time records. A rigorous time tracking system, coupled with electronic signature tools in the company to validate timesheets, considerably reduces the risk of adjustment.

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Documentary obligations and time tracking

The hours register and the DSN

The employer is required to keep a precise record of actual working hours for each employee (article L. 3171-4 of the Labour Code). This record may take the form:

• An electronic clocking system;

• Weekly timesheets signed by the employee;

• Time management software.

Overtime hours must be declared in DSN (National Personal Declaration) with the appropriate remuneration nature codes. A coding error may result in refusal of the exemption by URSSAF.

Formalisation of agreements and amendments

Any change in working hours, any agreement on the replacement of payment by rest or on exceeding the allowance must be formalised in writing. Tools using electronic signature compliant with the eIDAS regulation allow you to legally secure these documents, guarantee their integrity and prove the informed consent of both parties.

To go further with HR digitalisation, the comprehensive guide to electronic signature details the signature levels suited to each type of document.

Time management in modulation and annualisation agreements

In companies that have implemented annualised working time (article L. 3121-41 and following), overtime is no longer counted on a weekly basis but at the end of the reference period (generally the calendar year). Hours exceeding 1,607 annual hours (annual legal duration) are then classified as overtime and give rise to the corresponding markups and exemptions.

This complex organisation requires reliable reporting tools. Integrated HR SaaS solutions, such as those compatible with electronic signature solutions for HR, allow you to automate these calculations and reduce the risk of human error.

Legal framework applicable to overtime

The regulation of overtime in France is based on a dense corpus of legislation and regulations, articulating national employment law and EU principles.

Labour Code:

• Article L. 3121-28: defines overtime as any hour worked beyond 35 weekly hours;

• Article L. 3121-33: governs the replacement of payment by a replacement rest compensator;

• Article L. 3121-36: sets the legal markup rates (25% and 50%) in the absence of a collective agreement;

• Article L. 3121-41 and following: governs the procedures for annualisation of working time;

• Article L. 3171-4: requires keeping a record of actual working hours.

Regulatory texts:

• Decree n° 2004-1381 of 20 December 2004: sets the supplementary annual allowance at 220 hours;

• Decree n° 2021-1246: specifies the procedures for reduction of employee contributions on overtime.

Founding laws:

• Law n° 2007-1223 of 21 August 2007 (TEPA law): establishes income tax exemption and contribution reduction;

• Law n° 2008-789 of 20 August 2008: reforms the allowance and opens the way for collective agreements on working time arrangements;

• Law n° 2022-1158 of 16 August 2022 (purchasing power law): maintains and adapts TEPA exemptions for 2022-2026.

European Directive:

• Directive 2003/88/EC of the European Parliament and of the Council, of 4 November 2003, concerning certain aspects of the organisation of working time: imposes maximum durations (48h/week on average), daily rest of 11 consecutive hours and weekly of 35 hours, to which overtime must comply.

Legal risks for the employer: Failure to pay or correctly markup overtime exposes the employer to an action for salary recovery before the Employment Tribunal (limitation of 3 years), as well as to URSSAF adjustment which may include late payment increases (between 5% and 10%) and penalties. In case of concealed work (article L. 8221-5 of the Labour Code), criminal penalties may reach 3 years imprisonment and €45,000 fine. Formalising and tracing all agreements relating to working time in writing is therefore an elementary precaution requirement.

Usage scenarios: managing overtime in the company

Scenario 1 — An industrial SME with seasonal peaks in activity

An SME in the manufacturing sector employing approximately 80 employees faces recurring production peaks from September to November. Without a modulation agreement, overtime accumulates quickly beyond the legal allowance of 220 hours for several operators. By implementing an annualisation agreement signed electronically by staff representatives and validated by all affected employees via a dematerialised signature platform, the company reduces the number of weeks exceeding 43 hours. Result: the cost of 50% markups decreases by around 30% over the financial year, and administrative formalities related to CSE consultation are traced and filed in less than 48 hours instead of 5 working days.

Scenario 2 — An accounting firm during the tax season

A firm bringing together around fifteen employees sees its teams working between 15 and 20 hours of overtime per week from January to May. Management decides to opt for replacement of payment by a replacement rest compensator (RCR) to limit the impact on cash flow. Each individual RCR agreement is submitted to the employee via an SaaS electronic signature platform, which automatically generates pre-filled documents and preserves proof of consent. Administrative processing time drops from 3 days to less than 2 hours per monthly cycle, and the firm eliminates any risk of subsequent dispute over employee consent.

Scenario 3 — A multi-site distribution group facing URSSAF inspection

A retail chain with around thirty stores and approximately 400 employees is subject to URSSAF inspection concerning the application of TEPA exemptions. The inspector requests supporting documents for overtime hours declared in DSN for the past 36 months. Thanks to a system of weekly timesheets signed electronically by each store manager and archived in the digital safe of the platform, the company produces all supporting evidence in less than 24 hours. No adjustment is made. By comparison, a similar company without a digital traceability system had, in an analogous case published by URSSAF in its annual report, suffered an average adjustment of €45,000 accompanied by late payment increases.

Conclusion

Managing overtime in France requires precise mastery of calculation rules, applicable markup rates and exemption schemes in effect. Between the 220-hour allowance, the 25% and 50% markup thresholds and the €7,500 tax exemption cap, each parameter counts. To this must be added a rigorous documentary obligation: every agreement, amendment or timesheet must be formalised, signed and kept as evidence.

Certyneo helps you secure this administrative management through electronic signature solutions that comply with eIDAS, designed for HR teams and senior management. Automate the signature of your modulation agreements, your fixed-hours contracts and your overtime timesheets. Discover our rates and start for free on certyneo.com.