France: New mandate proposed for profit sharing/value sharing

Employer Action Code: Monitor

Bill 1272 seeks to transpose the provisions of a recent national inter-professional agreement into law. The bill’s provisions on profit-sharing would require companies with 11 or more employees to establish some form of profit-based reward scheme on a temporary basis, subject to future assessment of the success or failure of the mandate after five years. Currently, mandatory profit sharing (participation) applies to companies with 50 or more employees. According to the Ministry of Labor, while overall roughly 39% of the workforce received payments from participation plans in 2020 — 34% benefited from voluntary (intéressement) schemes — only 6% of workers in companies with between 10 and 49 employees were covered by participation plans (most commonly as part of a collective bargaining agreement – CBA) and 12% by intéressement plans. The bill was approved by the National Assembly on June 29, 2023, and is now with the Senate for review.

Key details

• From 2024, companies with between 11 and 49 employees and after-tax profit of at least 1% of revenue for three consecutive years would be required to introduce some form of profit-based reward scheme. This may take the form of participation or intéressement plans; a “value-sharing bonus” (prime de partage de la valeur – PPV), which is a tax-favored bonus scheme introduced in 2022; or a qualified company retirement savings plan, such as a PEE or PER plans.  
• Companies with 11 to 49 employees would be able to introduce participation plans with payment formulas that derogate (positively or negatively) from the standard required design, if agreed with employees or their representatives by the end of June 2024.
• Companies with 50 employees or more and at least one union representative would be required to negotiate the treatment of “exceptional profits” (specific to each employer and defined in consultation with workers) as part of an existing profit-sharing plan or value-sharing plan.
• PPV payments would remain (through 2026) tax-exempt and free of social security contributions for staff earning up to three times the monthly minimum wage in companies with fewer than 50 employees (currently PPV payments are tax-exempt but will be subject to social security contributions from 2025). The annual ceiling on tax-favored PPV payments (3,000 euros, or 6,000 euros if a profit-sharing plan is in place or there are under 50 employees) would be unchanged.
• A new type of voluntary bonus would be introduced, linked to increases in the value of the company (plan de partage de la valorisation de l’entreprise – PPVE) over a three-year period, based on a statutory formula, for all employees with a year or more of service. Bonuses payable, if any, could equal up to 75% of the annual social security ceiling at the time of payout. Employees would be able to opt to defer bonus payments into a qualified retirement savings plan on a tax-favored basis.
• The ceiling for granting “free shares” to employees would be increased from 10% of the total share capital to a range of 15% to 40%, depending on the size of the employer and other criteria.

Employer implications

If approved, the bill would significantly increase the number of employers subject to mandatory profit sharing (or an approved alternative) and would introduce several tax-favored reward options that could — among other things — be used in tandem with company savings plans for retirement. Profit-sharing and savings plans have long been used by employers as part of a broader ecosystem both to encourage employee savings and to secure tax-favored treatment of profit-sharing payments (among other things), resulting in complex reward systems. As such, employers should already be considering the impact on both their obligations as well as their current practices.