Participation

Verified 01 January 2024 - Legal and Administrative Information Directorate (Prime Minister)

Compulsory participation in beneficiary companies

Published on 1 January 2024

Since 1er December 2023, and for a period of 5 years, it is experienced a compulsory value-sharing arrangement in some beneficiary companies. These are companies that meet the following criteria:

  • 11-49 employees
  • Activity carried out in the legal form of a business
  • Net income for tax purposes at least equal to 1% revenue for 3 consecutive years

In these companies, the mandatory value sharing may correspond to the signature of a participation or profit sharing agreement,abundance a wage savings plan or the payment of the value-sharing premium.

The obligation to establish a mandatory value-sharing arrangement applies to open periods after 31 december 2024.

The details of the experiment are specified in the law of 29 november 2023 transposing the national interbranch agreement on value-sharing within the company.

Participation is a mechanism for redistributing company profits to employees. It is compulsory in companies with 50 or more employees. The beneficiary employee receives a premium, the amount of which is fixed by the participation agreement. The employee can request the immediate payment of the sums or their investment in savings. In this case, the money is unavailable for 5 years. The participation agreement sets out how the money is to be invested.

Participation is a wage savings plan that allows each employee to receive a share of the company's profits.

It is compulsory when the company has continuously employed at least 50 employees per month over the last 5 years.

The device should be in place by 1er accounting year opened after 5 years of employment of at least 50 employees.

Companies that do not meet these conditions can also set up participation if they wish.

In what companies is participation mandatory?

Participation is compulsory for a company that has employed at least 50 employees per month continuously over the last 5 years.

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 mechanism.

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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 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:

  • Collective agreement or 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 2/3 majority of 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

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:

  • Collective agreement or 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 2/3 majority of 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 agreement chosen by the company with or without negotiation with the employees or their representatives must be deposited on the website of the Ministry of Labor.

Collective company Agreement Filing Service

Checks

Since 1er in september 2021, participation agreements filed by companies are subject to two types of control: a formal control and a substantive control.

Shape control

The form check is carried out by the DDETS: titleContent competent for the seat of the company.

This check is used to verify whether the company has deposited the agreement in the required format, and whether it has complied with the rules for negotiating, denouncing and reviewing participation agreements.

The DDETS must take its decision within one month.

It may decide to issue the receipt or to request additional documents from the company.

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The receipt shall be issued

The DDETS must immediately forward the agreement to the social security collection agency on which the company depends.

The receipt is not issued

The situation varies depending on whether DDETS requires additional documents or not.

Additional documents are required

The DDETS must forward the agreement to the social security collection agency on which the company depends within one month.

No request for additional parts

The DDETS may transmit the agreement to the collection fund on which the company depends after the one-month period.

Substantive control

Substantive control is carried out by the social security collection agency on which the company which has lodged the agreement depends.

The purpose of this review is to verify whether the clauses of the agreement submitted comply with the law.

The recovery agency has 3 months to request the amendment of the provisions of the agreement which are contrary to the law.

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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.

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 you a card, separate from the salary slip.

This sheet specifies in particular the amount of rights allocated to you 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 can be delivered to you electronically.

When you exit the company, you receive a summary report 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 you are a beneficiary of the participation agreement or could benefit from it after you leave the company, the business must continue to inform you of your rights.

Contributions must not replace workers' remuneration.

What is the amount of money allocated to the 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.

How is the distribution between employees made?

The amounts paid out of the special-purpose participation reserve are distributed among all employees of the company according to one of the following allocation criteria:

  • Uniformly across all employees
  • Proportionately to wages
  • Proportionally to the time of presence in the company
  • By the combination of the 3 above criteria

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.

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.

Companies with a shop steward are required to negotiate before June 30, 2024, to adopt value-sharing mechanisms in the event of an exceptional benefit.

This sharing of value in the event of an exceptional profit may take the form, in particular, of the payment of an additional contribution.

When should the payment be made?

Deadlines for the payment of the contribution shall be fixed no later than the last day of 5e month after year-end (i.e. before 1er June of the following year for a financial year ending 31 December).

From 1 December 2023, participation agreements may provide for the possibility for companies to pay employees who so wish advances on their participation premiums.

Such advances may be paid at intervals which shall be at least quarterly.

If the total advances paid exceed the amount of the annual participation premium, the company will recover the overpayment through a payroll deduction.

The advantages of participation for the employee lie in the different possibilities of collecting the sum and in the tax level.

Availability of sums

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Immediate payment

If you wish to obtain immediate payment of the premium (in whole or in part), you must request it within 15 days from the date on which you are informed of the amount allocated to you.

The amounts are paid to you by the last day of the 5the month after closing of the exercise. For example, as of May 31, 2023, if the fiscal year ends December 31, 2022.

After this period, you will be paid interest for late payment.

Freezing of sums

General case

If you do not request the immediate payment of the premium, it is blocked for 5 years (8 years in the absence of a participation agreement). The starting point of the deadline (5 or 8 years) is 1er day of 6e next month the exercise. For example, the 1er June 2021 for a fiscal year ended December 31, 2020.

However, you can request the tax-exempt advance release of the amounts in certain cases. The most common are the following:

  • Marriage, Civil partnership
  • Birth or adoption of a 3e child
  • Divorce, separation, dissolution of a Civil partnership, with the custody of at least one child
  • Domestic Violence
  • Disability (employee, spouse or Civil partnership partner, children)
  • Death (employee, spouse or Civil partnership partner)
  • Termination of employment contract
  • Over-indebtedness

The request for early release must be made within 6 months of the event.

However, it may intervene at any time in the event of termination of the employment contract, death, disability, spousal violence and over-indebtedness.

Placement of blocked amounts
General case

The participation agreement may provide for the allocation of the sums to a wage savings plan (PEE: titleContent, PEI: titleContent or Perco: titleContent).

If you do not request an immediate payment or a placement in a PEE: titleContent or a PEI: titleContent of the sums allocated to you, they are automatically allocated for half in a Perco: titleContent if there is one in the company. The other half shall be placed in accordance with the conditions laid down in the Agreement.

FYI  

as of may 24, 2019, it is no longer possible to allocate funds to a blocked current account managed by the company. However, companies where a participation agreement provided for this possibility before 24 May 2019 are exempted.

At the end of the period of unavailability, you can choose to place all or part of the money received on a time savings account.

In the cooperative production business

The participation agreement may provide for the allocation of sums:

  • on a wage savings plan (PEE: titleContent, PEI: titleContent or Perco: titleContent).
  • or on a blocked current account managed by the company.

If you do not request an immediate payment or a placement in a PEE: titleContent or a PEI: titleContent of the sums allocated to you, they are automatically allocated for half in a Perco: titleContent if there is one in the company. The other half shall be placed in accordance with the conditions laid down in the Agreement.

At the end of the period of unavailability, you can choose to place all or part of the money received on a time savings account.

Tax benefits

Amounts allocated as part of the holding and which are frozen benefit from an exemption from income tax.

Payments made immediately in connection with the participation shall be subject to income tax, to the CSG (generalized social contribution) and the CRDS (contribution to the repayment of social debt).

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
  • The sums allocated to the special-purpose reserve may be the subject of a provision for investment up to 50 % of their value