By: HUB’s EB Global Benefits Team

France aims to expand profit-sharing programs to include companies with less than 50 employees according to an agreement between trade unions and employers. Mandatory profit sharing currently applies only to companies with 50 or more employees. But a bill, which was approved by the National Assembly this summer and will now go to the Senate for review, would broaden participation.

Under the agreement, companies with 11 to 49 employees would be required to introduce some form of profit-based reward program if the company has an after-tax profit of at least 1% of revenue for three consecutive years starting January 2025.

The program could be a mandatory profit-sharing program, a voluntary profit-sharing program, a value-sharing bonus, a voluntary contribution by the employer to a company savings plan, an intercompany savings plan or a retirement savings plan.

In addition, companies with 50 employees or more, with at least one or more trade union delegates would be required to negotiate the treatment of "exceptional profits" as part of an existing profit-sharing plan.

By the end of June 2024 companies would need to engage in mandatory collective bargaining to define what constitutes exceptional profits and how it will be shared.

The agreement also includes provisions for a new type of voluntary bonus, linked to increases in the value of the company, and an increase in the ceiling for granting "free shares" to employees. The government has said that it will propose the faithful and total transcription of the agreement into law.

Extension of profit-sharing to companies with 11 or more employees will significantly impact employers. They will need to consider the type of plan to offer, the cost of the plan, and how it will be funded. Employers should also consider the impact of the agreement on their employees. Profit-sharing can be a valuable tool for motivating and retaining employees, and it can also help to build a sense of ownership and participation in the workplace.

How this impacts you

  • Small employers could face lower net earnings (after employee profit sharing payouts) and increased administrative burden under the proposed profit – sharing law.
  • Companies may need to make changes to their compensation and benefits packages to accommodate the new profit-sharing requirements.
  • Employees would benefit from increased compensation for the various features of the proposed profit–sharing law.

Next steps

  • Track the process of the legislation, and if passed, assess its impact.
  • Investigate the viability and desirability of the various forms of distribution of profit – sharing payouts.
  • Develop a plan for implementing the proposed plan, including timeline, budget, and communication strategy.
  • If legislation is passed, consider options of partnering with a third-party provider to administer the plan or explore using a simplified profit – sharing plan.

If you have any questions, please contact your HUB Advisor. View more updates in our Global Benefits Directory.