Employee Profit-Sharing

The profit-sharing agreement allows employees to be financially involved in the performance of your company. This employee savings mechanism is implemented through an agreement between the company and its employees or their representatives.

Which Companies Can Implement a Profit-Sharing Agreement?

• This scheme is open to all companies, regardless of their activity type or legal form, as long as they have at least one employee who is not a business leader.
• It is also available to a group of independent companies that have financial and economic ties.

Who Can Receive the Profit-Sharing Bonus?

• All employees holding an employment contract can benefit from the profit-sharing agreement. A seniority clause of a maximum of 3 months is possible, but it does not affect the calculation of the bonus.
• For companies with fewer than 250 employees, and as long as the agreement allows, the following can benefit from profit-sharing: business leaders, collaborating or associate spouses (marriage or civil partnership), and certain corporate officers: presidents, general directors, managers, or members of the management board.
• Employees of an employer group under certain conditions.

What Are the Implementation Modalities?

• Through collective negotiation: within a convention or collective agreement concluded at the company or branch level.
• Specifically:
• Agreement between the business leader and representatives of the employee organizations representing the company.
• Agreement within the works council or social and economic committee.
• Following a referendum adopted by a two-thirds majority of the staff. In the context of specific negotiations, the agreement can provide for automatic renewal for a period of three years.

What Conditions Must Be Met to Benefit from Exemptions?

• The agreement must be submitted within 15 days following the deadline for its conclusion by the most diligent party to the DIRECCTE.
• The profit-sharing agreement must have a random and variable character.
• The calculation of bonuses must refer to a single year, and the Pacte Law adds the requirement to integrate multi-year objectives linked to the performance and results of the company.

What Are the Calculation, Distribution, and Capping Modalities?

• The calculation of the total amount of profit-sharing to be distributed to employees is defined in the profit-sharing agreement by the evaluation criteria and triggering thresholds.
• Fixed bonus payments cannot be included in the agreement; it must retain a variable and uncertain character.
• The distribution of profit-sharing is specified in the agreement: it can be uniform, proportional to salary or time worked, or a combination of several of these criteria.
• The maximum profit-sharing bonus for an employee is set by the Pacte Law at 75% of the PASS (Annual Social Security Ceiling), which is €32,994 for 2023, similar to participation.
• For the company, the total amount of profit-sharing bonuses must not exceed 20% of the gross payroll.
• Bonuses paid into the Company Savings Plan (PEE) or Collective Retirement Savings Plan (PERCO) can receive a contribution from the company if this is provided for in the agreement.

What Are the Deadlines to Respect: Payment and Availability?

• Payment must be made no later than the last day of the fifth month after the closure of the fiscal year concerning the profit-sharing.
• If a PEE exists, amounts are allocated there by default (to the defined or most secure fund), unless the beneficiary requests to receive this amount within 15 days after being informed or to deposit it into a time savings account if one exists in the company.
• In the case of allocation to the PEE, the profit-sharing bonus is available after a period of 5 years, unless there are grounds for early release.
• In the case of allocation to a PERCO, the amounts are locked until retirement, except in cases of early release.

When Can Profit-Sharing Be Recovered?

• Unless there are grounds for early release, the employee recovers their savings in the form of capital at the end of the unavailability period.
• For a PERCO, the exit can be in the form of capital or an annuity.
  Employees can retain the amounts paid beyond the unavailability period and request release on another date.

What Is the Taxation for the Company?

The company that pays a profit-sharing bonus will be exempt from employer contributions, and the bonus will be deductible from taxable profits under certain conditions.