Preamble 

Profit-sharing is an optional scheme that consists of paying each employee a bonus linked to the company’s performance or results.

A real tool for employee remuneration and retention, profit-sharing offers a very advantageous tax and social framework for both the employer and the employee.

 

1. Scope

The introduction of profit-sharing is optional regardless of the company’s workforce, nature or legal form.

Profit-sharing must be collective in nature, i.e. all employees included in the scope of a profit-sharing  agreement must be able to benefit from it. Only a seniority condition is provided (3 months maximum).

In companies with fewer than 250 employees that usually employ at least 1 employee (even part-time) in addition to the manager himself, managers may be eligible for profit-sharing.

2. Implementation 

2.1 The profit-Sharing agreement

The introduction of profit-sharing is done by means of a collective agreement.

The profit-sharing agreement is  concluded for a period of 1 to 3 years  (compared to 3 years for an agreement concluded before 09 December 2020) and may be tacitly renewable.

The closing date is the last day of the first half of the calculation period following the date on which it takes effect, under penalty of sanctions.

As an exception, companies with fewer than 11 employees, without a union delegate or elected member of the Social Economic Committee (« CSE ») may set up by unilateral decision a profit-sharing scheme for a period of between 1 and 3 years. This possibility of setting up a profit-sharing scheme by unilateral decision of the employer has been extended to companies with fewer than 50 employees under certain conditions.

2.2 Filing and control of agreements

The profit-sharing agreement must be filed on the TéléAccords platform within 15 days of the closing date.

A system for securing the tax and social exemptions attached to the sums paid in respect of employee savings is exercised on the basis of control by the administration.

3. The calculation of profit-sharing 

3.1  The profit-sharing bonus

The profit-sharing must be random and must result from a free calculation formula, included in the agreement, but linked to the results and/or performance of the company. The calculation formula may be supplemented by a multiannual target.

The distribution of the profit-sharing bonus may be:

• Uniform , i.e. all employees receive the same amount
• Proportional to employees‘ salary or time of attendance
• Combination of 2 or 3 of these criteria.

 

3.2 The matching contribution

The matching contribution is an optional payment made by the employer in addition to the profit-sharing when the beneficiary chooses to pay the amount into a savings plan. Its amount is freely determined by the employer within a certain limit. Thus, the contribution may not exceed 3 times the amount that the beneficiary pays into the savings plan, nor be greater than 3,519.36 euros.

 

3.3 The profit-sharing supplement

L’employeur peut accorder un supplément d’intéressement qu’il détermine librement en plus du versement de l’intéressement et de l’abondement. Il s’agit d’un outil de motivation et de récompense pour les salariés.

Le supplément d’intéressement bénéficie des mêmes exonérations fiscales et sociales que l’intéressement. 

La répartition du supplément est identique à celle du versement de la prime d’intéressement, à défaut d’accord distinct.

3.4 The overall ceiling

The total amount of bonuses distributed to beneficiaries, including, where applicable, the profit-sharing supplement, must not exceed 20% of the total gross salaries paid to all employees of the company.

The amount received, by an employee per year, in respect of profit-sharing may not exceed 75% of the annual social security ceiling.

 

4. The social and tax advantages of profit-sharing

On the corporate side, a number of social and tax advantages exist:

• The sums awarded in respect of profit-sharing are exempt from social contributions.
• For companies with less than 250 employees, the social lump sum contribution (« forfait social ») has been abolished.

On the employee side, the sums received as part of the profit-sharing are subject to the « CSG » and « CRDS » but are exempt from employee contributions and income tax.

NB: if the employee has opted for the immediate receipt of profit-sharing, these sums will be subject to income tax.

Example of a comparison of costs for the payment of a standard bonus and a profit-sharing bonus:

Classic bonus:  100 euros : -25% of social contributions and +40-45% of employers’ contributions
 = Total received by the employee 75 euros – Income taxes.

Profit-sharing bonus: 100 euros: no employer contributions and social lump sum = total paid by the employer 100 euros and total received by the employee 91 euros + x% of possible investment interest.

 

 

 

 

 

 

                                                                                                                                                                        ***

This fact sheet contains summary information. Please contact us for advice tailored to your situation. We cannot be held responsible for any misinterpretation.

 

Contact

Claire APPELGHEM

Head of HR/Employment Law

Claire.appelghem@groupe-aplitec.com

01 40 40 38 38