For financial years beginning on or after January 1, 2025, companies with at least 11 employees that are not obliged to set up a profit-sharing bonus (i.e. mainly companies with between 11 and 50 employees) will be required to set up a value-sharing scheme as soon as they achieve a net taxable profit equal to at least 1% of turnover for 3 consecutive financial years.
To facilitate the widespread introduction of value-sharing schemes in small and medium-sized businesses, the French legislator has set up an experimental scheme for a period of 5 years which comes into effect on January 1st, 2025. The experiment will run for 5 years and will end on November 29, 2028.
Impacted businesses are those incorporated in the form of a company.
The obligation is to set up at least one of the existing legal value-sharing schemes during the financial year following the end of the 3 consecutive financial year period, if the company is not already covered by such a scheme when the condition relating to net taxable profit is met.
| The net taxable profit is the taxable profit used for taxation at the standard rate of corporate tax in France, minus the amount of corporate tax. |
This experimental obligation applies to fiscal years beginning as of January 1, 2025. The three previous fiscal years (i.e. 2024, 2023 and 2022 for calendar years) are taken into account when assessing compliance with the condition relating to the achievement of net taxable profit.
| A foreign company with permanent establishment(s) in France, that makes social security and tax filings in France, is also impacted by the experimental scheme. |
Among the profit-sharing schemes that can be set up are:
- voluntary profit-sharing bonus (participation);
- non-mandatory profit-sharing plan (called in French “intéressement”);
- employer “matching” contributions to a “PEE”, “PEI”, “Perco” or “PERECO” plan, i.e. company savings / retirement schemes.
- the distribution of a value-sharing bonus (“PPV” French Scheme) – please, refer to our newsletter https://hiconnect.com/the-value-sharing-bonus/)
If the company chooses to set up a voluntary profit-sharing bonus (“Participation”) or a non-mandatory profit-sharing plan (“Intéressement”):
the unpredictable nature of these schemes means that it cannot presume future results. Consequently, these schemes will not necessarily generate the payment of a bonus.
In the case of company savings / retirement schemes or value-sharing bonus (“PPV” scheme):
no fixed minimum amount is required for the payment of an employer’s contribution to a company savings / retirement scheme or a value-sharing bonus. The payment of even a small amount is sufficient to meet the obligation. Regarding the value-sharing bonus, it can be reserved for employees whose remuneration does not exceed a certain salary cap (i.e. does not exceed 3 times the minimum statutory salary. This minimum statutory salary is currently equal to €1,766.92 per month).
How to set up one of the above schemes?
Voluntary profit-sharing bonus (“Participation”), non-mandatory profit-sharing plan (“Intéressement”), company savings / retirement schemes:
Implementation by a company-level collective agreement if there are Trade Union delegates or Employee Representatives (“CSE”) in the Company. If there is no Employee representation in the Company, the implementation is made through a Unilateral Decision of the Employer (“DUE”). It is also possible to proceed by a ratification by employees.
Value-sharing bonus (PPV French Scheme):
Implementation through a Unilateral Decision of the Employer (“DUE”) or it is also possible to sign a company-level collective agreement.
N.B.: Under certain conditions, an approved industry-wide agreement (CBA-level agreement) may be used to implement one of the above schemes.
Should you have any questions, please do not hesitate to contact us.
Customers benefiting from the EMS recurring service will be contacted directly for further information about this experimental scheme.