Value-sharing: which measures provided by the bill?

Bill transposing the national interprofessional  collective bargaining agreement on value-sharing within a company

This bill, which transposes the measures of the national interprofessional collective bargaining agreement signed on February 10, 2023, aims to improve employee savings plans and to develop employee shareholding plans. Having been adopted on first reading by the French National Assembly on June 29, the bill is now under the scrutiny of the French Senate.

To date, this bill includes the following measures:

5-year trial of two schemes to boost value-sharing in companies with fewer than 50 employees

1. Companies with fewer than 50 employees could set up a voluntary profit-sharing scheme, with the option of derogating less favorably from the legal formula for calculating the special profit-sharing reserve. Before June 30, 2024, all professional branches should open negotiations aimed at making a voluntary profit-sharing scheme available to companies with fewer than 50 employees;

2. As of January 1^er 2024, companies with 11 to 49 employees and a net taxable profit of at least 1% of turnover for 3 consecutive years will be required to implement one of the following schemes: a legal profit-sharing or incentive plan, a contribution by the employer to the company savings or retirement savings plan, or a value-sharing bonus ("PPV").

Obligation to negotiate in the event of exceptional profits: companies with 50 or more employees

When opening negotiations on a profit-sharing or incentive scheme, companies with at least 50 employees and a trade union delegate should also negotiate on the definition of an exceptional increase in the company's net taxable profit. They should also negotiate on value-sharing arrangements to apply in the event of exceptional profits.

These value-sharing arrangements could take the form of either a profit-sharing or incentive supplement, or the opening of negotiations to set up a value-sharing scheme (profit-sharing, contribution to an employee savings or pension plan, or PPV).

Companies already covered by a profit-sharing or incentive agreement should start negotiations on the exceptional profit increase before June 30, 2024.

Changes in the value-sharing bonus (PPV)

The PPV scheme provided for in the August 16, 2022 Purchasing Power Protection Act would be modified. While companies are currently limited to paying one PPV per calendar year, they will now be able to pay two PPVs per calendar year, up to the existing total exemption ceilings (3,000 euros or 6,000 euros depending on the case). These PPVs can be invested in an employee savings plan.

The income tax exemption for employees earning less than three times the annual minimum wage (SMIC) would be extended until December 31, 2026, but only for companies with fewer than 50 employees. The income tax exemption would apply to all employees, whatever the size of the company, if the PPV is allocated to an employee savings plan.

The company value-sharing plan: a new value-sharing scheme

This plan would be set up by agreement in the same way as a profit-sharing agreement, and would involve paying all employees with at least 1 year's seniority (unless a more favorable agreement has been reached), a bonus calculated on the basis of the increase in the company's value over a 3-year period.

In practice, the change in the value of the company would be assessed on the basis of a percentage corresponding to the ratio between the value of the company determined on a date fixed by the plan and the value of the company at the end of a three-year period starting on the day after the aforementioned date. A reference amount would also be allocated to each employee (which could vary depending on the employee's salary, classification level or working hours). The value-sharing bonus would thus be equal to the product of the reference amount and the percentage change in the company's value over 3 years, if this percentage is positive.

This bonus would not be payable if the rate of change in the company's value is less than or equal to zero. Nor would it be due if the employee reached the required length of service during the 3-year period, or left the company before the end of the 3-year period defined in the plan.

The amount of bonuses distributed to each employee could not exceed three-quarters of the PASS (the annual Social Security ceiling) for any one year. Bonuses paid in the 2026, 2027 and 2028 financial years would be exempt from social security contributions, but would remain subject to a contribution to the national old-age insurance fund (“CNAV”). The bonus would also be exempt from income tax, up to a limit of 5% of three-quarters of the PASS, if allocated to an employee savings or retirement plan.

New possibilities when managing an ongoing profit-sharing agreement

Profit-sharing and incentive agreements may now provide for the payment of advances on the sums accruing from these two schemes, at intervals of at least one quarter. If the employee's final entitlement is less than the amount of the advance granted, the sums overpaid will be reimbursed by the employee in the form of a salary deduction.

In addition, in the case of profit-sharing, the agreement could set a salary floor or ceiling, or both, for the calculation of profit-sharing based on salary. The calculation formula could also take into account performance criteria relating to the company's social and environmental responsibility.

More flexible limits for the award of free shares  ("AGAs")

The ceilings applicable to the allocation of free shares would be relaxed at three levels:

• the overall ceiling on the allocation of free shares would be raised:

  • from 10% to 15% of share capital for large and mid-sized companies;

  • from 15% to 20% of share capital for small and medium-sized companies;

  • from 30% to 40% of the share capital when free shares are granted to all employees ("democratic" grants).

• An overall ceiling of 30% of the share capital would be introduced for the allocation of free shares, subject to the granting of free shares to employees representing both more than 25% of total payroll and more than 50% of the workforce.

• The individual ceiling for the allocation of free shares would remain at 10% of the share capital, but only shares held for less than 7 years would be taken into account.

Authored by Faustine Lefèvre.