Fixed-term or permanent employment in a startup: which contract for which need?

During hypergrowth, the right contract makes the difference between controlled agility and costly litigation. French employment law offers two main tools: the CDI (permanent contract, the default) and the CDD (fixed-term contract, the exception). Here is how to choose safely, optimise costs and protect your assets.

CDI and CDD: the legal framework for startups

In France, the CDI is the normal and general form of employment relationship (Code du travail, art. L1221-2), according to Legifrance. A CDD is possible only in specifically listed cases (art. L1242-2) and must be in writing with an explicit reason; otherwise it is reclassified as a CDI (Service-Public, CDD/CDI guidance: Service-Public).

The 2017 ordinances allowed certain sectors to set the maximum duration, the number of renewals and the waiting period for CDDs, within statutory limits, as the Ministère du Travail recalls. These rules also fall within the European framework (directive 1999/70/CE) aimed at preventing abuse of fixed-term contracts (EUR-Lex).

For practical guidance for young businesses, Drieets Île-de-France summarises the pitfalls startups should avoid: “DIRECCTE discusses employment law with startups”.

When and why to choose a CDI in a startup

Choose a CDI if:

• The need is permanent (product, technology, recurring sales or lasting support functions).
• You aim for retention and a strong employer brand (no end-of-contract insecurity payment, career paths).
• The role involves deep familiarity with the product and transfer of know-how.

Probation and key CDI clauses

• Probationary period typically: 2 months (employees), 3 months (supervisors/ETAM), 4 months (executives), renewable if provided for by the collective agreement/contract (see Service-Public).
• Confidentiality and intellectual property: essential in R&D/product. INPI provides reminders of good practices for protecting creations and software within a business.
• Non-compete: valid if limited (time/geography/functions), essential to protecting legitimate interests, and accompanied by financial compensation (see Service-Public).

When and how to use a CDD without risk

Reserve CDDs for a temporary, objectively justified need :

• Replacement (maternity leave, illness or training leave).
• Temporary increase in activity (feature launch, seasonal peak or marketing operation).
• Defined-purpose contract in specific statutory cases (e.g. exceptional export order, overseas assignment), in accordance with art. L1242-2 (Legifrance and Service-Public).

Duration, renewals and waiting periods

• Maximum duration (including renewals) is generally 18 months, extended to 24 months for certain cases (e.g. export order, overseas assignment), and sometimes 9 months (e.g. awaiting a permanent employee, urgent safety work), according to Service-Public.
• Renewals: up to 2 by default (some sectors may adjust this), as the Ministère du Travail recalls.
• Waiting period between two CDDs for the same position: generally 1/3 of the CDD duration if > 14 days, 1/2 if ≤ 14 days, subject to statutory exceptions (e.g. replacement, seasonal work). Refer to the legislation and your sector’s rules (Legifrance).

Formalities and mandatory particulars

• Written contract delivered to the employee within 2 working days after hiring; otherwise reclassification may be possible (Service-Public).
• Particulars: precise reason, end date (or minimum duration), role/classification, remuneration, working time, probationary period (if provided for), name of the person replaced, etc. (Ministère du Travail).

Probation and compensation

• CDD: maximum probation of 1 day/week of the contract (cap of 2 weeks if ≤ 6 months, otherwise 1 month), according to Service-Public.
• End-of-contract payment (insecurity payment) is generally 10 % of total gross remuneration, subject to exceptions (including an offered CDI accepted/refused, seasonal contracts, or an agreement reducing it to 6% with access to training); see Service-Public.

Risks in cases of abuse

• Reclassification as a CDI for an imprecise reason, use outside statutory cases or a chain of CDDs for a permanent need. The employee may apply to the Conseil de prud’hommes.
• Costs: back pay, compensation, damages and possible additional contributions (see URSSAF).

Legal alternatives to consider according to need

• Agency work (temporary work) for short activity peaks or scarce skills.
• Work-study arrangements (apprenticeship/professionalisation) to train people in your technology stacks, with public support detailed on Service Public Pro.
• Internship (under an internship agreement) for supplementary educational assignments, without replacing a permanent position (Service-Public).
• Project/operation CDI if your sector permits it (2017 Ordinances framework), ending on completion of a project (Ministère du Travail).
• Freelance: useful for one-off expertise. Watch for a relationship of subordination and the risk of reclassification as employment and contribution reassessment (URSSAF).

Quick decision checklist

1. Define the need: permanent => CDI; temporary => CDD (L1242-2 reason).
2. Check sector rules: duration/renewals/waiting periods may be adjusted (see Ministère du Travail).
3. Budget: a CDD includes the insecurity payment (10%) and onboarding training; a CDI costs less over the long term.
4. Draft a complete contract (mandatory particulars, IP/confidentiality clauses and a proportionate non-compete).
5. Declare (DPAE, DSN) and apply the relevant collective agreement (URSSAF).
6. Secure processes and evidence (job descriptions, organisation chart and activity-peak schedule).

Need an experienced perspective to decide quickly? Discuss your firm's AI transformation. And for compliant templates tailored to your sector: Explore AI and law resources.

Quick decision matrix: startup use cases

• Building a core product feature (continuous roadmap): CDI.
• Launching a 3-month acquisition campaign: CDD for a temporary increase in activity (explicit reason).
• Replacing a Product Manager on maternity leave: replacement CDD (name the person replaced).
• 8-week security expert assignment: freelancer or agency work (check the absence of subordination).
• Time-bounded customer project where sector rules permit: project/operation CDI.

Common mistakes to avoid

• A generic CDD reason (“extra help”) not linked to a specific statutory case.
• Chaining CDDs for a permanent need (high reclassification risk).
• Forgetting the waiting period between two CDDs for the same position.
• Neglecting IP/confidentiality clauses for code/algorithms.
• Briefing a freelancer like an employee (imposed hours, hierarchical reporting => URSSAF risk).

Further reading

See our related guides: Your startup’s first employee: legal obligations, Services agreement and The legal steps for creating your startup.