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1. What is profit-sharing?
The incentive bonus or “profit-sharing” is an employee savings plan. It is a Proportional bonus :
• to the results of the company according to financial or accounting indicators;
• to the company's performance or productivity goals such as increasing turnover or improving customer satisfaction.
The results can be appreciated at the company level, within an establishment or a work unit. In addition, the observation of results can be carried out over an annual or sub-annual period: by quarter or half for example.
The payment of the bonus therefore depends on trigger criteria defined. Indeed, the bonus is not paid if the objectives are not achieved.
In addition, the bonus can be distributed in such a way as:
• uniform;
• proportional to salary or attendance time.
It is also possible to combine several criteria.
The objective of this bonus is to encourage your employees to get involved in achieving the company's goals.
Good to know: Since December 1, 2023, a mandatory value-sharing system has been tested in companies with 11 to 49 employees with a net tax profit at least equal to 1% of revenue for three consecutive years. This mandatory value sharing may in particular correspond to an incentive agreement. This obligation will apply to financial years beginning after 31 December 2024.
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2. Who can set up the incentive bonus?
All businesses and associations can set up an incentive system.
To note: Since December 1, 2023, some social and solidarity economy companies with at least 11 employees have been experimenting with a value-sharing obligation that can take the form of profit-sharing.
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3. Who can benefit from the incentive bonus?
Setting up an incentive bonus is optional.
However, if you decide to implement it in your business, all employees should be concerned, including company managers.
To note : However, a seniority condition may be required. It is a maximum of three months.
The incentive agreement in companies with less than 250 employees can include non-employee managers such as:
• the company manager, natural person;
• the collaborating spouse or the associated spouse of the company manager, a natural person;
• the president, the managing director, the manager or a member of the management board of a company, legal person.
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4. How to set up profit-sharing?
In companies with less than 50 employees, the incentive bonus can be established by a unilateral decision when:
• the company is not covered by an approved branch agreement and does not have a trade union delegate or Social and Economic Committee (CSE) ;
• negotiations with employee representatives were unsuccessful.
Good to know: Companies with at least 50 employees with union representatives must conduct negotiations before 30 June 2024 to set up a value-sharing mechanism in the event of an exceptional benefit.
You must submit your profit-sharing project at least 15 days before filing it with the administrative authority, at the CSE.
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In all other cases, the incentive bonus must be set up by a company agreement.
The incentive plan can be concluded for a duration between one and five years.
The incentive agreement will be submitted on the website of the Ministry of Employment. Then, it may be subject to the control of social security contribution collection agencies. The organization may request that the provisions of the agreement be amended within three months.
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5. What is the content of the profit-sharing agreement?
Your company is free to define its own incentive agreement if it includes mandatory clauses. However, it can also use a:
• model profit-sharing agreement;
• incentive agreement for your professional branch.
The profit-sharing business agreement can be concluded by:
• collective employment agreement or agreement;
• agreement between the employer and representatives of representative trade union organizations;
• agreement within the CSE;
• draft agreement proposed by the employer and adopted by a majority of 2/3 of employees.
The content of the profit-sharing agreement must provide for:
• an introduction indicating the reasons for the agreement, the reasons for choosing the methods for calculating the profit-sharing and the distribution criteria;
• the information system for your employees and for verifying the execution of the agreement;
• the period during which the agreement is concluded;
• the institutions concerned by the agreement;
• the forms of profit-sharing selected;
• the methods for calculating profit-sharing and the distribution criteria;
• the rationale for the distribution criteria chosen;
• payment dates;
• the conditions under which the CSE (or a specialized commission) has the necessary information resources on the conditions of application of the terms of the contract;
• procedures for resolving disputes.
To note: The rules relating to the methods of calculation are defined in articles L3314-1 and following of the Labor Code.
As an employer, you will then have the obligation to provide your employees with:
• an employee savings account presenting the employee savings schemes in your company;
• a sheet for each payment of the bonus showing the amount of rights granted;
• a note recalling the calculation and distribution rules provided for in the agreement;
• a summary statement of all the amounts and assets saved or transferred, as well as the coverage of maintenance account-keeping costs when the employee leaves the company.
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6. How is the incentive bonus determined?
The incentive bonus depends on the results or performance of your business. The agreement must specify the calculation formula and distribution criteria among employees.
However, the annual amount of the bonus per employee is capped. It cannot exceed 75% of the annual social security ceiling (34,776 euros for 2024). In addition, the total of the bonuses paid must not exceed 20% of the total gross wages paid by the company.
To note: The incentive bonus for company managers and their non-employee spouses or Pacs partners cannot be greater than:
• the highest annual salary paid in the company during the previous year;
• a quarter of the annual social security ceiling for collaborating spouses and associated spouses (11,592 euros for 2024).
When the incentive bonus is below the limit, you have the option of paying a profit-sharing supplement.
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7. What are the advantages of setting up an incentive?
The advantages for a business
When your company decides to pay an incentive bonus, the amounts paid will be exempt from:
• social security contributions;
• social package for companies with less than 250 employees;
• contribution to vocational training and apprenticeship tax.
To note: Businesses with 250 employees or more will have to pay a 20% social package on the profit-sharing bonuses paid.
In addition, the amounts paid as part of the profit-sharing scheme will be deductible from taxable profit of your business.
In addition, you will have the opportunity to constitute a Provision for profit-sharing if the amounts are paid into an employee savings plan set up in the company.
The benefits for employees
The employee can choose between an immediate payment or an automatic investment of the amounts paid as profit-sharing.
Companies already covered by an employee savings plan can offer the investment of bonuses in a:
• business savings plan (PEE);
• group savings plan (PEG);
• inter-company savings plan (PEI);
• Group retirement savings plan (PERCH).
lookout : In this context, the amounts paid will only be available when the plan is unblocked.
In addition, employees can decide to invest all or part of the amounts in a time savings account.
In all cases, the incentive bonus will be subject to:
• social contributions (CSG and CRDS);
• to income tax unless allocated to a PEE, PEI or PERCO.
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