In France, profit-sharing is the new black. After years of statutory value-sharing bonuses (starting in 2018) and the introduction of compulsory profit-sharing schemes in companies with at least 50 employees (since 2020), the government encouraged trade unions to finalize a national and intersectoral collective bargaining agreement (CBA) on the subject of profit-sharing. This led to a CBA signed in February 2023. The new Profit-Sharing Act of November 19, 2023 transposes this CBA into law and adds some new provisions.
In particular, this law sets a deadline of January 1, 2025 for companies with at least 11 employees to implement a mandatory profit-sharing scheme if they are profitable, i.e., if they have a pre-tax net profit of at least 1% of turnover for three consecutive years. This obligation will last for five years as an experiment, although it is to be expected that this new obligation will remain.
A whopping 48,000 companies will have to comply with this new requirement.
How can companies comply? There are a number of options from which companies can choose:
- a voluntary profit-sharing scheme ("intéressement" or "participation");
- a contribution by the company to a company savings plan (PEE) or a pension plan (PER); or
- a value-sharing bonus (PPV).
Although this bill does not provide for specific sanctions if companies do not implement any of these schemes, market practice will undoubtedly change rapidly. Affected companies can work with employment counsel in implementing these new rules.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
