The “Value Sharing” law, creates, on an experimental basis and for a period of 5 years:
- a requirement for companies with 11 to 49 employees to set up a value-sharing scheme in the event of an increase in profits.
This obligation is extended to companies in the social economy (associations, mutual societies, cooperatives) under certain conditions. - the possibility, also on an experimental basis, for companies with fewer than 50 employees to set up, on a voluntary basis, a profit-sharing scheme that derogates from the formula for calculating the special profit-sharing reserve (RSP) in a way that is less favorable to employees.
1. A mandatory value-sharing scheme for companies with 11 to 49 employees (Articles 5 and 6)
> Companies concerned
On an experimental basis and for a period of 5 years from November 29, 2023 (i.e. until November 29, 2028), companies with at least 11 employees not required to set up a profit-sharing scheme, i.e. companies with between 11 and 50 employees, which have achieved a net profit for tax purposes equal to at least 1% of sales for 3 consecutive financial years, will be required to set up a value-sharing scheme during the following financial year (Law, art. 5).
This obligation does not apply to:
- companies to which one of the above-mentioned schemes already applies in respect of the financial year in question;
- sole proprietorships;
- the “sociétés anonymes à participation ouvrière” (Sapo) which pay a dividend to their employees in respect of the previous financial year, and whose interest rate on the sum paid to holders of capital shares is equal to 0% (Law, art. 5, II and III).
> Four possible schemes
Companies meeting these conditions must:
- either set up a profit-sharing scheme (by adherence to an approved industry-wide agreement or application of a voluntary profit-sharing scheme) or an incentive scheme (by adherence to an approved industry-wide agreement or unilateral agreement or decision under the conditions set out in the French Labor Code);
- set up a profit-sharing scheme that is less favourable than the statutory scheme (see below);
- contribute to an employee savings plan (PEE, PE interentreprises – PEI, Perco, Perco interentreprises – Percoi, Pereco or a Pereco interentreprises – Perecoi) in accordance with the law;
- or pay a value-sharing bonus (PPV) (Law art. 5, I).
> Coming into force of the obligation
This obligation to set up one of the above value-sharing schemes will come into force for financial years beginning on or after January 1, 2025.
The 3 previous financial years will be taken into account when assessing compliance with the condition relating to the achievement of net taxable income (Law, art. 5, IV).
Accordingly, the net taxable income of the 2022, 2023 and 2024 financial years will be taken into account to assess the implementation of a value-sharing scheme for the 2025 financial year.
2. Derogatory effective profit-sharing (Article 4)
> Companies concerned
The Value Sharing Act of November 29, 2023 introduced a new, exceptional profit-sharing scheme for companies with fewer than 50 employees.
On an experimental basis and for a period of 5 years from November 30, 2023, companies that are not required to set up a profit-sharing scheme (i.e. companies with fewer than 50 employees) may implement a profit-sharing scheme that derogates from the rule of equivalence of benefits granted to employees.
In other words, the special reserve calculation formula may be less favorable than the legal formula.
> Possible schemes
A special profit-sharing scheme may be set up:
- either by application of a profit-sharing agreement concluded at branch level; the law stipulates that each professional branch must enter into negotiations with a view to setting up this overriding profit-sharing scheme before June 30, 2024;
- or by application of a profit-sharing agreement concluded at company level.
In this case, if negotiations fail, the employer may not unilaterally set up the overriding profit-sharing scheme if the formula for calculating the overriding special reserve is less favorable than the legal formula. A unilateral decision can only be taken after consultation with the Works Council if the formula for calculating the special reserve is at least as favorable as the legal formula.
Companies with fewer than 50 employees that were already applying a voluntary profit-sharing scheme on November 30, 2023, may opt for the less favorable derogatory scheme by concluding a new profit-sharing agreement in accordance with the conditions set out above.
> Coming into force
This is an experimental scheme applicable for a period of 5 years from the promulgation of the law (i.e. from November 29, 2023).
All the team of French Business Advice is at your disposal to clarify you on these schemes, so do not hesitate to contact us!
