The French law of 29 November 2023 introduces a new obligation for companies employing between 11 and 50 staff to set up a value-sharing scheme, subject to these companies generating a certain profit level. This measure is introduced on an experimental basis for five years until 29 November 2028.
These new provisions will apply to tax years commencing after 31 December 2024.
The measures apply to businesses with at least 11 employees that are not required to set up a profit-sharing scheme.
Only companies that have recorded a net taxable profit of at least 1% of turnover for three consecutive years will be affected by this new measure. Moreover, for the tax year following these three years, these companies must not already be covered by one of the following value-sharing mechanisms: profit-sharing, bonus-sharing, contributions to a savings plan, or value-sharing bonus.
Businesses targeted by these new provisions will be required to implement one of the following value-sharing schemes by 2025:
- Profit-sharing, according to the legal or derogatory regime.
Profit-sharing involves the redistribution of part of the company’s profits to employees. The law sets the formula for calculating profit-sharing, but for companies with fewer than 50 employees, the company can use a derogatory formula. Even in its derogatory form, profit-sharing is linked entirely to the company’s financial results and cannot be based on performance targets, unlike incentive schemes.
- Incentive schemes, through the conclusion of an incentive agreement (or via a unilateral decision under certain conditions) or application of an incentive scheme concluded at the industry level.
Incentive schemes enable employees to be associated with the company’s performance. They involve paying employees additional compensation to achieve goals defined according to specific criteria. The formula used to calculate the incentive is determined freely by the parties in the company agreement, but it must be random.
- Contribution to an employee savings plan (PEE, PEI, PERCO, PERCO-I, PERE-CO, PERE-CO-I).
Contributions are added to an employee’s voluntary payments or sums from profit-sharing, incentive schemes, or value-sharing bonuses paid into an employee savings plan. Contributions are collective.
- Value-sharing bonus. The value-sharing bonus can be set up either through a company agreement concluded according to the procedures of an incentive agreement or through a unilateral employer decision after consultation with the Social and Economic Committee (CSE).
All these measures benefit from a favourable social security regime. The sums paid in the frame of these value-sharing mechanisms are exempt from social security contributions subject to certain conditions.
Furthermore, the bonus payment is subject to achieving the goal set for incentive and profit-sharing schemes. This can be an opportunity to set up a system that associates employees in achieving shared company goals.
