French Government Pulls Back on Unemployment Insurance Reform, Aiming for €400 Million Savings Through Negotiations

The French government has withdrawn its controversial plan to tighten unemployment insurance regulations, initially proposed by François Bayrou, in response to formal requests from labor unions and employer representatives. Labor Minister Jean-Pierre Farandou revealed that the government will retract the 2025 financial framework if social partners promptly commence negotiations on short-term contracts and mutual termination agreements by the end of January 2026.

Minister Farandou has sent a letter urging trade unions and employer organizations to begin interprofessional negotiations to achieve annual savings of at least €400 million, focusing notably on conventional terminations—amicable contract endings that currently represent a significant portion of unemployment benefit expenditure. In 2024, 515,000 individual conventional terminations were signed, costing €9.4 billion, which accounts for 26% of unemployment benefits.

This new negotiation approach replaces the previous government target aiming for substantial savings of €2 to €2.5 billion annually between 2026 and 2029, which failed to materialize due to stalled discussions by the November 15 deadline. On November 14, five unions and two employer organizations called for the withdrawal of the initial financial framework, proposing negotiations instead on conventional terminations and short contracts.

A meeting scheduled for Wednesday at Unédic will mark the formal launch of these discussions, although employer groups Medef and the Union of Proximity Enterprises (U2P) currently opt out of participation. Minister Farandou emphasized that if negotiations do not comply with the timeline and goals, the government may need to reassess its responsibilities given the worsening public finances.

The conventional termination system, established under the 2008 labor market modernization law, allows workers to amicably end permanent contracts while retaining unemployment benefits, representing a key focus area for the reform effort.

With the government signaling flexibility and readiness to negotiate, this development underscores an important shift toward collaborative policymaking in managing unemployment insurance sustainability amidst financial strain and labor concerns.