Incentive bonus
How incentive bonuses work
This is an employee savings scheme in the form of a bonus linked to the company’s performance, set up by collective agreement.
All calculation and allocation procedures are set out in the agreement, but must comply with the following ceilings:
- The total amount of profit-sharing bonuses may not exceed 20% of the company’s total gross salaries.
- The maximum annual profit-sharing that a single employee can receive is €30,852 (in 2022).
In addition, the profit-sharing bonus must cover all company employees.
All companies, whatever their legal status, have the option of introducing a profit-sharing bonus.
Who can benefit from the Incentive Bonus?
The profit-sharing bonus is compulsory for all employees.
However, it can be calculated in different ways:
- Even distribution
- Proportional to salary
- Proportional to working time
- By combining these 3 criteria
Benefits for the company
All companies are exempt from social security contributions on profit-sharing payments made to employees.
Forfait social:
- Companies with fewer than 250 employees are exempt from social security contributions on profit-sharing payments.
- Companies with 250 or more employees must pay a flat-rate social security contribution of 20% on profit-sharing payments.
Taxation of profit-sharing bonuses
The social and tax benefits for the company depend mainly on the size of the company, and can include :
- Exemption from lump-sum social security contributions
- Deduction from taxable profit
- Exemption from taxes and social security contributions
- 50% investment provision
Tax and employee benefits
Incentive bonuses are subject to social security contributions (CSG, CRDS) and income tax, unless they are allocated to an employee savings plan (PEE, PEI or Perco) within 15 days of payment, up to a limit of €30,852 (2021).
In principle, money invested in an employee savings plan is unavailable for a defined period. The profit-sharing agreement specifies the investment terms and conditions. However, certain early release clauses allow accumulated sums to be released:
- Marriage or PACS,
- Birth or adoption of a 3rd child,
- Divorce, separation, dissolution of a civil union, with custody of at least one child,
- Disability (employee, spouse or civil union partner, children),
- Death (employee, spouse or civil union partner),
- Termination of employment contract (dismissal or resignation),
- Over-indebtedness,
- Starting up or taking over a business,
- Purchase of a principal residence or renovation.
A request must then be made to the managing body.
Employee profit-sharing
Unlike profit-sharing, incentive schemes are mandatory for companies with more than 50 employees.
How participaton works
Employee profit-sharing is compulsory for companies that have continuously exceeded 50 employees per month over the past 5 years.
⚠️ Companies with fewer than 50 employees can voluntarily set up a profit-sharing scheme to involve employees in the company’s results.
The profit-sharing scheme is then set up through an agreement between the company and the employees or their representatives. This agreement may take the form of :
- Collective bargaining agreement at branch level
- Agreement between employer and elected trade union representatives
- Agreement within the CSE (social and economic committee) between the employer and employee representatives
- Draft agreement proposed to employees by the employer and adopted by referendum with a 2/3 majority of employees.
👆 To help you draw up such an agreement, you can consult the service-public.fr website.
The agreement must then be registered on the Ministry of Employment website, which carries out a formal and a substantive check. Once these checks have been completed, the relevant DDETS (Departmental Directorate for Employment, Labor and Solidarity) issues a receipt.
Advantages for the company
All companies are exempt from social security contributions on profit-sharing payments made to employees.
Forfait social:
- Companies with fewer than 50 employees are exempt from social security contributions on profit-sharing payments.
- Companies with 50 or more employees must pay a flat-rate social security contribution of 20% on profit-sharing payments.
Profit-sharing calculation
Profit-sharing is calculated on the basis of the company’s profits for the previous year. It varies according to the company’s performance over the past year and is calculated as follows:
Participation = [½(B – 5% C)] x [S/V].
Considering :
- B: net income
- C: shareholders’ equity
- S: salaries
- V: company added value
Employees can then be allocated in different ways:
- uniform across all employees
- proportional to employee remuneration
- proportional to time spent with the company
- or a combination of the above 3 criteria
The maximum annual contribution an employee can receive is €30,852 (in 2021).
Tax and employee benefits
Profit-sharing bonuses received are subject to social security contributions (CSG, CRDS) and income tax, except in the case of allocation to an employee savings plan (PEE, PEI or Perco) up to a limit of €30,852 (2021).
In principle, sums invested in an employee savings plan are unavailable for 5 years. The profit-sharing agreement specifies the investment terms and conditions. However, certain early release clauses allow accumulated sums to be released:
- Marriage or PACS,
- Birth or adoption of a 3rd child,
- Divorce, separation, dissolution of a civil union, with custody of at least one child,
- Disability (employee, spouse or civil union partner, children),
- Death (employee, spouse or civil union partner),
- Termination of employment contract (dismissal or resignation),
- Over-indebtedness,
- Starting up or taking over a business,
- Purchase of a principal residence or renovation.
A request must then be made to the managing body.
👆 Do you want to involve your employees in your company’s success and don’t know how to go about it? Would you like to set up a PER in your company? Do you want to enhance the value of your company with a view to opening it up to capital? Altermès can help!
🔍 Find out how we helped an investment fund value the shares subscribed by exercising BSPCEs on behalf of a fast-growing company!
