Participation

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

Participation is a mechanism for redistributing company profits to employees. Participation is obligatory in companies employing the minimum 50 employees. She's optional for other. We present the applicable rules.

Participation is a wage-saving scheme based on distributing part of the company's profits to employees.

The share of profit to be distributed to employees is called special reserve for participation.

The amount of the special-purpose participation reserve shall be calculated according to a formula laid down by law.

Participation must be compulsory in companies which have employed at least continuously 50 employees per month during the Last 5 years.

These companies must implement participation during the 1er accounting year opened after 5 years of employment of at least 50 employees.

Companies which do not fulfill these conditions may also build participation if they so wish. In this case, the company executives may also benefit from the scheme.

An experiment set up for 5 years since 1er december 2023 allows companies who want to set up voluntarily a participation scheme through a company agreement or a branch agreement to use a formula for calculating the special participation reserve derogatory to the legal formula.

Participation must be established by a agreement between the company and the employees' representatives and, in the cases provided for by law, by unilateral decision of the employer.

How to draw up the participation agreement?

The situation varies depending on whether the company is legally obliged or not to set up a participation scheme:

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Company obliged to introduce participation

The situation varies depending on whether or not there is an agreement between the employer and the employees:

Agreement between employer and employees

Participation is established by agreement between the company and the employees or their representatives.

The participation agreement may be concluded in one of the following ways:

  • Agreement or collective labor agreement concluded at professional or branch level
  • Agreement between the employer and representatives of representative trade unions
  • Agreement within the Social and Economic Committee (ESC) between the employer and the employee representatives
  • Draft agreement proposed by the employer and adopted by referendum by a majority of 2/3 of the employees.

The company may also use a standard model participation agreement which reproduces point by point the mandatory clauses to be included in a participation agreement. The choice of the calculation formula and the method of allocation are negotiated by the company with the employees' representatives.

Model for assistance in the negotiation of a participation agreement

No agreement between employer and employees

In the absence of agreement in the companies legally obliged to establish a participation regime, a mandatory regime is imposed on the company. This diet, says authorityshall be established on the initiative of the labor inspectorate. This scheme shall be put in place if no agreement is concluded within one year of the close of the beneficiary accounting year.

Other case

The situation varies depending on whether or not there is an agreement between the employer and the employees:

Agreement between employers and employees

Participation is established by agreement between the company and the employees or their representatives. The participation agreement may be concluded in one of the following ways:

  • Agreement or collective labor agreement concluded at professional or branch level
  • Agreement between the employer and representatives of representative trade unions
  • Agreement within the Social and Economic Committee (ESC) between the employer and the employee representatives
  • Draft agreement proposed by the employer and adopted by referendum by a majority of 2/3 of the employees.

The company may also use a standard model participation agreement which reproduces point by point the mandatory clauses to be included in a participation agreement. The choice of the calculation formula and the method of allocation are negotiated by the company with the employees' representatives.

Model for assistance in the negotiation of a participation agreement

Employer's decision

If negotiations fail, the company may decide to implement unilaterally a participation regime in accordance with the legal regulations.

What should the participation agreement contain?

The agreement must lay down the conditions under which the employee may benefit from the sum due to him in respect of the participation:

  • Date of conclusion, effective date and duration for which the agreement is concluded
  • Formula used as a basis for the calculation of the Special Participation Reserve (SPR) or, in the case of an agreement which does not use this formula, an equivalence clause with the legal formula
  • Duration of unavailability of beneficiaries' rights and cases of early release
  • Conditions and time limits within which beneficiaries may request, at the time of each allocation, the immediate availability of all or part of their contribution
  • Conditions and time limits within which beneficiaries may choose the allocation or allocations of the amounts due to them in respect of the participation (specifying that, without a choice expressed by them, half of these amounts shall be automatically allocated in a Perco when it has been introduced in the company)
  • Allocation of the reserve between beneficiaries and ceilings
  • Nature and method of managing beneficiaries' rights.

Mandatory Deposit

The company must deposit the participation agreement, the unilateral participation decision or the unilateral accession document on the Teleagreements platform:

TeleAccords, company Collective Agreement Filing Service

The company must also file documents to monitor the manner in which the participation was decided.

In the absence of the deposit of the agreement, the company cannot benefit from the tax and social security exemptions linked to the participation.

Control

Following the deposit of the agreement and the documents on the “TeleAccords” platform, the competent department of the Ministry of Labor issues the company a receipt and transmits the agreement and its annexes to the Urssaf.

The Urssaf has 3 months from the date of filing to verify whether the clauses of the deposited agreement are in conformity with the law and regulations.

If the Urssaf considers that there is a lack of documents necessary for the control, it may request them from the company.

In this case, the three-month period shall run from the date of receipt of the documents requested.

If, during the three-month period, the Urssaf requests the company to withdraw or amend clauses of the agreement that it considers to be in breach of the law and regulations, the company must do so in order to benefit from the tax and social exemptions linked to the participation.

FYI  

The Urssaf cannot ask the company to change the rules on how the agreements are terminated and revised.

If the Urssaf does not request any modification from the company within the three-month period, the company may benefit from the social and fiscal advantages of the agreement for the accounting years in progress or prior to the challenge.

Collective Information

The participation agreement is displayed unless another means of information is provided (e.g. delivery of the text of the agreement to each employee).

Each year, within 6 months of the close of the exercise, a report on the participation agreement shall be drawn up. It shall be subject to the Social and Economic Committee (ESC), if there is one. Otherwise, it is sent directly to each employee.

Individual information

The company which has set up one or more wage-saving schemes must give each employee a booklet setting out the schemes.

For each contribution payment, your company must give the employee a card, distinct from the salary slip.

This sheet shall specify in particular the amount of the rights allocated to the employee in connection with the participation. In the annex, the sheet contains a note recalling the calculation and distribution rules provided for in the participation 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 participation agreement or could benefit from it after leaving the company, the business must continue to inform him of his rights.

The sums paid in respect of the participation must not replace the remuneration of the employees.

Amount of money allocated to participation

Participation premium

The amount paid in respect of the participation shall be the result of the profits made by the company during the exercise has elapsed and can therefore vary from one year to the next.

After the end of the financial year, the company must calculate the share of profits to be distributed to employees, which is called special reserve for participation.

The company must use the statutory formula or another formula as favorable to employees as the statutory formula.

It shall take into account the following:

  • B: net profit
  • C: equity
  • S: salaries
  • V: company added value

The legal calculation formula is [½(B - 5% C)] x [S/V].

Whatever the formula used, the amount of the participation premium may not exceed a ceiling which is adjusted each year on the basis of social security benefits. For the year 2023, this ceiling is €34,776.

Additional participation

In the case of large profits, the Head of company may decide to pay employees a participation supplement for the last completed accounting year.

Distribution among employees

The sums paid out of the special participation reserve shall be distributed among all employees of the company in accordance with the allocation criteria laid down in the agreement.

Participation premium

The amount of the participation varies, as it results from the profits made by the company.

After closing the exercise, the company calculates the share of profits to be distributed to employees (called special reserve for participation). It must use a formula set out in the law. An alternative formula is possible provided that it is at least as favorable.

The distribution of the premium among employees may:

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

Please note

Where the allocation is proportional to the salary or time spent in the company accident at work, absences linked to maternity leave, paternity leave, child-care leave, adoption leave, bereavement leave, a doctor's visit, an occupational disease or quarantine shall not be counted.

The amount of the premium shall be capped.

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Premium paid for 2024

Maximum premium amount: €34,776

Premium paid for 2023

Maximum premium amount: €32,994

Additional participation

The company may decide to pay an additional contribution.

The amount of this additional contribution is free, but may not exceed €34,776 for the 2024 premium.

The company must pay the participation premium at the latest the last day of the 5the month after the end of the financial year (i.e. before 1er June of the following year for a financial year ending 31 December).

The company may also make advances on the amount of the participation premium before that date.

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Payment of the advance on participation

If the participation agreement so provides, the company may make quarterly advances to the employee on the annual participation premium, after obtaining the employee's agreement.

The employer must inform the employee of the possibility of receiving an advance on participation and of the time available to him to give his consent.

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

In the event that the employee does not agree to receive an advance on his participation premium, the company must not pay him an advance.

If the employee agrees to receive an advance on his participation premium, the company must issue a separate document from the pay slip, which includes the following elements;

  • Amount of rights allocated as an advance on the participation premium
  • Deductions made for the Generalized Social Contribution (CSG) and the Social Debt Repayment Contribution (CRDS)
  • Information on the employee's obligation to pay back to the employer the overpayment, in case the annual participation premium is lower than the amount of the advances received, and the modalities of the payment
  • 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 the default payment of participation premium advances on the collective pension savings plan (Perco) or on the collective company pension savings plan (collective company RIP)
  • Agreement of the employee to receive the advance.

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

Payment of the participation premium

At the time the company informs the employee of the amount of his participation premium, the employee can request to collect the money immediately or to invest it.

Immediate payment of the premium

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.

After this period, the company must pay interest for late payment.

Placement of the premium

If the participation agreement so provides, the employee may request that the participation premium be paid into a salary savings plan, (PEE: titleContent, PEI: titleContent, Perco: titleContent or collective company PER).

The amounts placed in a wage savings plan are unavailable for 5 years for the PEE: titleContent and the PEI: titleContent, and until retirement for the Perco: titleContent and the collective company ERP.

But there are early release case.

The employee decides not to receive the premium immediately, nor to place it

The situation varies depending on whether the participation agreement provides for the premium to be placed on a wage savings plan or not:

There's a participation agreement

If the employee does not request immediate payment or placement in a PEE: titleContent or a PEI: titleContent of the sums allocated to it, they are automatically allocated for half in a Perco: titleContent or in a collective company permit if one exists in the company.

The other half shall be placed in accordance with the conditions laid down in the participation agreement.

The money invested is unavailable, but there are early release case.

There is no participation agreement

If the employee does not request the immediate payment of the bonus, it is paid into a current account that the company must devote to investments.

In this case, the premium is blocked for 8 years.

The starting point for the 8-year period is 1er day of 6e next month the exercise. For example, the 1er June 2021 for a fiscal year ended December 31, 2020.

But there are early release case.

Sums received as part of the participation are exempt from social contributions, except CSG and CRDS.

If the employee puts the amounts received as part of the participation on a PEE: titleContent, one PEI: titleContent, one Perco: titleContent or a collective company RIP within 15 days of payment, he shall be entitled to an income tax exemption.

Benefits

Social contributions

All companies are exempt from social security contributions on contributions paid to employees in connection with the participation.

Social Package

The situation varies depending on the size of the company:

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Company of less than 50 employees

It shall be exempt from social package on the amounts paid in connection with the participation.

Company of 50 or more employees

She has to pay a social package of 20% of the amounts paid in connection with the participation.

Contribution to vocational training and apprenticeship tax

Amounts allocated to the special reserve for participation shall be exempt from contributions to vocational training and apprenticeship tax.

Tax benefits

Companies implementing participation benefit from the following tax advantages:

  • The sums paid in connection with the holding shall be deducted from the taxable profit
  • If the company is a Scop: titleContent, the sums allocated to the special reserve for participation may be the subject of a provision for investment.

FAQ