Interest

Verified 25 July 2024 - Directorate for Legal and Administrative Information (Prime Minister)

Profit sharing is an optional wage savings scheme that allows employees to participate in the performance or performance of their company. We present the applicable rules.

Profit-sharing is a wage savings plan that allows employees to receive a bonus commensurate with the performance of their company.

The aim of this scheme is to encourage employees to become involved in the achievement of the company's objectives.

It is established by agreement between the company and the employees or their representatives or by unilateral decision of the employer.

The agreement or unilateral decision shall lay down, in particular, the method of calculating the profit-sharing and the rules for apportioning the benefits among employees.

The document introducing the award shall be effective for the period specified therein, even if the employees' representatives are replaced. For example, in the event of a change in the legal situation of the company following a merger with another business.

Employees and managers

Incentive payment is not mandatory.

But if a company decides to implement it, it affects all employees, including company managers.

However, employees may be required to have a seniority in the company (maximum 3 months).

Self-employed managers and their spouses

In companies with a number of employees included between 1 and 249, the incentive arrangement may also include the following self-employed managers:

  • Head of a company that is not a legal person
  • Spouse or Civil partnership partner of the head of company who is not a legal person, if he has the status of collaborating spouse or the status of associate spouse
  • Chairman, Managing Director, Managing Director or Member of the Executive Board of a company that is a legal person.

Warning  

A company with a single employee who is also president or managing director or manager or member of the Executive Board may not sign a profit sharing agreement.

Each company may decide to introduce an incentive arrangement, irrespective of its legal form, its number of employees or its field of activity.

An experiment in progress since the 1er December 2023, which is to last five years, imposes on certain companies in the social and solidarity economy a value-sharing obligation which may take the form of an award.

These are the companies of the social and solidarity economy which meet the following four criteria:

  • Minimum 11 employees
  • Excess profit or loss of at least 1 of the revenue for 3 consecutive financial years
  • No net tax profit
  • Existence of a branch agreement providing for the mechanism.

Tools

The way in which the profit-sharing is implemented varies according to the size of the company:

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Company of less than 50 employees

Interests may be established by a unilateral decision if the company is not covered by an approved branch agreement and does not have a trade union representative or a social and economic committee (ESC).

In this case, the employer must file, with the unilateral decision, a report of absence less than 4 years old which proves that it has not been referred to it by a representative body of the staff.

The employer may also introduce the incentive payment unilaterally despite the presence of the employees' representatives, in the event of a failure of the negotiations.

In this case, a record of disagreement must be drawn up to prove that the staff representatives were indeed consulted. These minutes must record the proposals made by the employer and the employees' representatives.

If a ESC: titleContent exists in the company, the employer must submit his interest project to him at least 15 days before filing it with the administrative authority.

The system of incentives introduced by a unilateral decision may have a duration of between 1 and 5 years. It has the same value as an interest established by an agreement.

Where the employer wishes to alter on its own initiative a system of incentives which it has introduced by unilateral decision, it must comply with the same rules as when the system was first introduced.

Other situation

Incentives must be established by a company agreement.

The agreement is concluded for a period of between 1 and 5 years.

Preparation of the Agreement

Each company is free to define its own profit-sharing agreement, provided that a collective agreement containing the mandatory clauses is concluded with the employees' representatives.

However, the company may also use a standard profit-sharing agreement or a profit-sharing agreement of its professional branch.

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Company Agreement

The Incentive Agreement may be entered into in one of the following ways:

  • Collective labor agreement or agreement
  • Agreement between the employer and representatives of representative trade unions
  • Agreement within the EESC
  • Draft agreement proposed by the employer and adopted by referendum by a majority of 2/3 of the employees.

The company can use a template to download:

Standard Model Incentive Agreement

Branch Agreement

Any company may apply an incentive arrangement concluded at industry level, once the industry agreement has been approved.

The companies wishing to implement the approved branch agreement shall conclude a company agreement to that effect, incorporating the terms of the branch agreement.

The sectoral agreements are presented in the following online service:

Incentive agreement of the professional branch

Companies with less than 50 employees may opt for the application of the branch agreement using a unilateral employer accession document, if the branch agreement so provides. But with two conditions: the content of this document must be in accordance with the agreement of the professional branch of the company and this branch agreement must offer only one template.

Content of the Incentive Agreement

The incentive agreement must include the following elements:

  • Introduction setting out the reasons for the agreement, the choice of the method of calculating the profit-sharing and the justification for the allocation criteria
  • Staff information and agreement verification system
  • Period for which the agreement is concluded (generally 3 years, with tacit renewal)
  • Establishments concerned
  • Forms of interest retained
  • Methods of calculation of the profit-sharing and allocation criteria
  • Payment Dates
  • Conditions under which the Social and Economic Committee (ESC) or a specialized committee has the necessary means of information on the conditions of application of the terms of the contract
  • Procedures for the settlement of any disputes arising from the application of the Agreement or its revision.

Informing the employee

Each company must provide its employees with a payroll savings booklet that presents the payroll savings schemes set up within the business.

In addition, the incentive agreement must provide for a system for informing employees and verifying the implementation of the agreement.

Each time an employee receives a bonus payment, the employee receives a separate card from the pay slip. This sheet shall specify in particular the amount of the rights allocated. In the annex, the sheet contains a note recalling the calculation and distribution rules provided for in the profit-sharing agreement. This card may be delivered electronically.

When the employee leaves the company, he or she receives a summary statement of all sums and transferable securities saved or transferred. This document shall specify whether the custody account keeping are covered by the company or by deduction from assets.

FYI  

If the employee is a beneficiary of the profit-sharing agreement or could benefit from it after departure, the company must continue to inform him of his rights.

Mandatory Deposit

After the agreement chosen by the company has been negotiated with the employees or their representatives, then completed and signed, it must be deposited on the website of the Ministry of Labor:

TeleAccords, company Collective Agreement Filing Service

Control

Incentive agreements filed by the companies from 1er january 2023 are no longer subject to the formal control of the DDETS: titleContent, but only for the substantive control of recovery agencies.

The substantive check must be carried out by the social security collection agency on which the company which has lodged the agreement depends.

The DDETS: titleContent shall forward the incentive agreement to that body upon receipt.

Substantive monitoring is carried out to ensure that the terms of the agreement submitted comply with the law.

The recovery agency shall have a maximum period of 3 months to request the amendment of the provisions of the agreement which are contrary to the law.

The remainder of the procedure depends on whether the organization has submitted a change request or not:

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Request for change made

If the recovery agency requests the amendment of certain clauses within the three-month period, the company must make the amendments before it can benefit from the agreement.

No change request

If the recovery agency does not request any changes within the three-month period, the company may benefit from the social and fiscal advantages of the agreement for the current accounting year.

If the collection agency does not request any amendment to the agreement for a period of 5 months, the company may even retain the benefits for subsequent accounting periods.

Accreditation

Incentive agreements which entitle companies to join and their amendments may be approved by the Ministry of Labor.

The request for authorization must be made to the services of the Ministry of Labor by the representatives of the employees or by the company managers.

For group of companies, group of establishments and inter-enterprise agreements, the application for authorization must be made by the legal representative of the group.

A receipt is issued to the depositor.

An applicant for authorization shall lodge a copy of the agreement with the Registry of the Labor Court of the place where it was concluded.

The examination of the application for approval must be carried out within four months of the date of submission of the agreement or its amendment.

This period may be extended by two months.

The company must be informed of the extension.

Each company must provide its employees with a payroll savings booklet that presents the payroll savings schemes set up within the business.

In addition, the incentive agreement must provide for a system for informing employees and verifying the implementation of the agreement.

Each time an employee receives a bonus payment, the employee receives a separate card from the pay slip. This sheet shall specify in particular the amount of the rights allocated. In the annex, the sheet contains a note recalling the calculation and distribution rules provided for in the profit-sharing agreement. This card may be delivered electronically.

When the employee leaves the company, he or she receives a summary statement of all the money and securities saved or transferred. This document shall specify whether the custody account keeping are covered by the company or by deduction from assets.

FYI  

If the employee is a beneficiary of the profit sharing agreement (or is eligible for the profit sharing agreement after leaving the company), he must continue to be informed of his rights.

Incentive

The interest is derived from a calculation formula linked to the company's performance or performance.

The profit-sharing agreement shall specify the calculation formula and the criteria for apportionment among employees.

The distribution may be 

  • uniform, i.e. all employees receive the same,
  • proportional to the salary or time spent by each employee,
  • or combine several of these criteria.

The amount of the premium shall be capped.

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For an employee

The employee profit-sharing premium may not exceed 75% the annual social security ceiling, or €34,776 for 2024.

For a company manager and his or her collaborating or associate partner

Managers and spouses of employees

The interest premium for company managers and their spouses or partners of employed Civil partnerships may not exceed 75% the annual social security ceiling, or €34,776 for 2024.

Managers and spouses of self-employed managers

The profit-sharing premium for managers of companies and their spouses or partners of self-employed Civil partnerships may not exceed the highest annual salary paid in the company in the preceding year.

Spouses of unpaid managers

The Incentive Agreement may provide that spouses and partners of unpaid Civil partnerships of directors who have the status of a collaborating or associate spouse shall also receive the Incentive.

In this case, the amount of the premium may not exceed one quarter of the annual social security ceiling, i.e. €11,592 for 2024.

Incentive supplement

If the profit-sharing premium calculated under the company agreement is less than the annual cap, the company may pay you an additional profit-sharing premium.

The amount of this supplement is free, but the sum of this supplement and the profit-sharing premium must not exceed the annual ceiling.

The amounts that may be paid to employees as compensation vary from one company to another. These variations are related to various quantitative and qualitative parameters. For example, turnover, operating income, delivery times, implementation of new procedures, completion of a project.

But there are 2 cumulative limits that must not be exceeded:

  • The total of the profit-sharing premiums paid to all the beneficiary employees may not exceed 20% of the total gross wages paid.
  • The amount received by an employee per year as profit-sharing may not exceed €34,776.

Benefits

Social contributions

All companies are exempt from social security contributions on the compensation paid to employees.

Social Package

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Company of less than 250 employees

The company of less than 250 employees is exempt from social package on the sums paid as part of the profit-sharing.

Company of 250 or more employees

A company with 250 or more employees must pay a social package of 20% of the sums paid in connection with the profit-sharing.

Contribution to vocational training and apprenticeship tax

The sums used to pay the profit-sharing premiums are exempt from contributions to vocational training and apprenticeship tax.

Tax benefits

Companies implementing the incentive benefit from the following tax advantages:

  • Deduction of taxable profit from amounts paid in connection with the profit-sharing
  • If the company is a Scop: titleContent, and if the sums are paid in the framework of a wage savings plan, the right to make a provision for investment. This provision must not exceed 50% of the sums paid by the company to supplement the profit-sharing, where it is below the legal limit.

The profit-sharing premium may be paid in advance or at the time when the company informs the employee of its amount.

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Advance payment (advance on profit)

If the profit-sharing agreement so provides, the company may make quarterly advances on the annual profit-sharing premium, after obtaining the employee's consent.

The employer must inform the employee of the possibility of receiving a profit-sharing advance and of the time available to him to give his consent.

If the award agreement does not provide for any time limit, the employee must give his reply within 15 days of the date of receipt of the letter informing him of the possibility of receiving an advance.

In the event that the employee does not agree to receive an advance on his profit-sharing bonus, the company must not pay him an advance.

If the employee agrees to receive an advance on his or her profit-sharing bonus, the company must issue a separate document from the pay slip, which states:

  • Amount of rights allocated as advance on the profit-sharing premium
  • Deductions made for the Generalized Social Contribution (CSG) and the Social Debt Repayment Contribution (CRDS)
  • Information on the obligation to remit to the employer the overpayment, in case the annual profit-sharing premium is less than the amount of the advances received, and the modalities of the repayment
  • Information on the impossibility to request the early release of the overpayment, when it has been paid into a wage savings plan
  • Unavailability periods for wage savings schemes and exceptional early release cases authorized by law
  • Information on the fact that the overpayment on a wage savings plan is considered as a voluntary payment that is not tax deductible
  • Procedure for default payment of company savings plan interest premium advances
  • Agreement of the employee to receive the advance.

If the total advances paid exceed the amount of the annual profit-sharing premium, the company is entitled to recover the overpayment by way of a payroll deduction.

Payment at the time the company informs the employee

The employee may choose to receive the premium or to invest it.

Immediate payment

If the employee wishes to obtain immediate payment of the premium (in whole or in part), he must request it within 15 days from the date on which he is informed of the amount awarded.

The sums shall be paid no later than the last day of 5e month after closing of the exercise. For example, if the fiscal year ends on December 31, 2023, the payment must be made by May 31, 2024.

After this period, interest on late payment shall be paid by the employer.

Placement

The bonus may be placed on a wage savings plan or on a time savings account:

Investment in a savings plan

If the employee does not request the immediate payment of the bonus, it will automatically be placed on a PEE: titleContent if it exists, or on a PEG: titleContent or a PEI: titleContent.

The employee may also choose to place all or part of the sums received on the Perco: titleContent if it exists.

The sums shall be placed no later than the last day of the 5the month after closing of the exercise. For example, as of May 31, 2024, if the fiscal year ends December 31, 2023.

After this period, interest on late payment shall be paid by the employer.

The sums are then available only at the end of the blocking period of the plan concerned (5 years for the PEE: titleContent, until retirement for the Perco: titleContent) except in the case of early release applicable to the plan.

Investing in a Time Savings Account

The employee may choose to place all or part of the sums received on a time savings account.

Amounts received as part of the profit-sharing are exempt from social contributions, except CSG and CRDS.

If the employee puts these amounts on a PEE: titleContent, one PEI: titleContent or a Perco: titleContent within 15 days of their payment, he shall be exempt from income tax, up to €21,996 in 2023 (€34,776 in 2024).