Hire Employees in Réunion

Réunion is a French overseas department, so French social security and labour law apply directly. The framework will be familiar to anyone who has hired in mainland France, the reliefs will not.

Two routes exist. A French entity gives direct employment with URSSAF registration; an Employer of Record removes that setup and acts as legal employer.

The key relief follows the establishment, not the head office. The LODEOM exemption applies to remuneration paid to employees attached to an establishment in Réunion even where the company’s registered office is in mainland France. So a metropolitan employer opening a Réunion site qualifies on the same terms as a local one.

Employer contributions can fall to nothing. Under the LODEOM reinforced competitiveness scale, there is total exemption from employer contributions up to 2 SMIC. Above that the relief decreases, becoming nil at 2.7 SMIC of annual pay.

That is a very unusual shape. Most systems apply a rate and then cap the base; here the rate itself is removed at the bottom of the range and phased back in.

Three exemption scales exist, applying according to sector of activity, company size, turnover and location, the ordinary competitiveness scale, the reinforced scale, and a third. Which one applies to you is a matter of eligibility, not choice.

The reinforced scale reaches, for example, businesses of 11 employees and more in eligible sectors, research and development, tourism including associated leisure activities and hotels, agri-nutrition, air transport and nautical activities among them.

LODEOM applies to employees on the staff register and counted in the local establishment’s headcount. It excludes company officers paid for their corporate mandate, and employees already under a non-cumulable exemption.

Break-even rule of thumb: EOR fees begin to exceed the running cost of a French entity somewhere between 15 and 25 employees, later than most markets, because the exemption can suppress employer cost substantially at lower salary levels. See EOR vs Entity.

LODEOM and the réduction générale cannot both be applied, the employer chooses. That choice is a real commercial decision rather than a formality, and it should be modelled per employee rather than set once for the payroll.

The general reduction is degressive up to 3 SMIC and replaced the former Fillon reduction. LODEOM is total to 2 SMIC and nil at 2.7. Which is better depends on where a given salary sits.

The scope of contributions covered by LODEOM has been widened and aligned with that of the general reduction, which narrows the gap between them but does not remove the need to compare.

Réunion sits alongside Guadeloupe, French Guiana, Martinique, Saint-Barthélemy and Saint-Martin in the LODEOM scheme. Mayotte joins from 1 July 2026 under an adapted regime.

Public enterprises majority-controlled by the State, industrial and commercial public establishments and certain mixed public bodies are outside the scheme.

Gross monthly salaries in euros. Because relief tapers between 2 and 2.7 SMIC, employer cost rises progressively across that band rather than in a single step.

Benchmarks below are gross monthly salaries in euros. Employer cost depends heavily on where the salary sits relative to the SMIC, because the LODEOM exemption tapers between 2 and 2.7 SMIC.

Payroll runs monthly through URSSAF, on the standard French cycle.

The 2026 annual social security ceiling is €48,060. Several contributions are calculated within that limit rather than on full pay, so it needs to be current in your payroll system from January.

A 2026 change works in Réunion’s favour. The reduction of employer health insurance and family allowance rates has been abolished generally, but it is retained for employers benefiting from specific degressive exemptions, including LODEOM.

So overseas employers keep a relief that mainland employers have lost. Above the applicable threshold the family allowance contribution rate is 5.25%.

Income tax is administered under the French system, with withholding at source.

French income tax applies, with withholding at source. Rates and bands follow the national schedule.

French labour law applies in full. The statutory working week is 35 hours, and the French national holiday calendar applies with the addition of Abolition of Slavery Day on 20 December.

The SMIC used for the LODEOM calculation is the value in force for the employment period, so a mid-year revaluation changes the exemption thresholds during the year.

Collective agreements, notice periods, dismissal procedure and works council obligations all follow the French Labour Code.

Contracts follow French requirements as to form and content.

Establish which LODEOM scale applies before quoting, since sector, size, turnover and location all bear on it, and compare against the general reduction for each salary level.

Ensure employees are properly registered on the staff register of the local establishment, the exemption depends on it.

The statutory week is 35 hours, with overtime rules following the Labour Code.

Overtime affects the exemption calculation, not just the wage bill. Because LODEOM relief is expressed against multiples of the SMIC, additional pay can move an employee across the 2 or 2.7 SMIC thresholds and change the employer cost disproportionately.

Overtime hours themselves benefit from social contribution relief under conditions.

Réunion observes the French national holiday calendar, with Abolition of Slavery Day on 20 December as a local addition.

Réunion observes the French national holiday calendar plus Abolition of Slavery Day on 20 December. Dates are set out below.

Employees receive the full French social protection package, health insurance, family benefits, pensions, unemployment insurance and work injury cover.

That is worth stating plainly, because the LODEOM exemption does not reduce the employee’s entitlements. The relief is a subsidy to the employer, not a reduction in cover.

Supplementary retirement contributions are payable to the complementary pension institution alongside URSSAF contributions, on the same basis as the general reduction.

Salaried sea fishermen in the overseas departments have their own exemption for old age, health, family allowances and CSG-CRDS, with a 50% abatement below 150% of the ceiling, a degressive abatement between 150% and 250%, and no abatement above 250%.

Termination follows the French Labour Code, with notice, procedure and severance as in mainland France.

Final pay including accrued leave is due on separation and must be reflected in the URSSAF declaration for the period.

Because the exemption is calculated on annual remuneration relative to the SMIC, a termination part way through the year requires the calculation to be regularised rather than simply stopped.

Réunion is part of the European Union, so EU nationals have freedom of movement. Third-country nationals require authorisation under French rules.

The location test is the establishment, not the employer. LODEOM applies to remuneration paid to employees attached to a Réunion establishment even where the company is headquartered in mainland France, so the relief is available to metropolitan and foreign-owned businesses alike, provided the establishment is local.

The euro is the currency, and payroll runs on French systems and deadlines.

Choosing the wrong relief is the main risk. LODEOM and the réduction générale cannot both apply, and the better option depends on where each salary sits relative to the SMIC.

Assuming metropolitan rules is the second. The 2026 abolition of reduced health and family allowance rates does not apply to LODEOM beneficiaries, so a mainland payroll template will overstate cost here.

Misidentifying the applicable scale is the third, three exist, turning on sector, size, turnover and location.

Note also that the SMIC used is the one in force for the employment period; that company officers paid for their mandate are excluded; and that Mayotte enters the scheme only from 1 July 2026.

Establish which LODEOM scale applies to your sector, size and turnover, then compare it against the general reduction at each salary level rather than choosing once.

Keep the €48,060 ceiling and the current SMIC updated in payroll from January, register employees on the local establishment’s staff register, and remember the relief follows the establishment rather than the head office.

Do not apply a mainland French cost template, the 2026 changes preserved reliefs here that were withdrawn elsewhere.