Covid-19 | Deadline and conditions of payment of the exceptional buying power bonus

By application of article 7 of the French Social Security Finance Act for 2020 no. 2019-1446 of 24 December 2019, employers can decide, either by company agreement or unilateral decision taken after consultation of the Works Council (Comité Social et Economique, or CSE), to award their employees an exceptional buying power bonus that is exempt from tax and from social security contributions under certain conditions.

Ordinance no. 2020-385 of 1 April 2020 (Ordinance on exceptional buying power bonus), published in the Official Journal of 2 April 2020 and effective immediately after its publication, softens and extends the scheme.

POSTPONEMENT OF THE BONUS PAYMENT DEADLINE

Initially, in order to benefit from social and tax exemptions, the Social Security Finance Act for 2020 provided that employers had to pay the bonus by 30 June 2020 at the latest.

The Ordinance on exceptional buying power bonus extends the deadline for payment of the bonus from 30 June to 31 August 2020. Thus, any exceptional buying power bonus paid until 31 August 2020 that meets the legal conditions will benefit from the related social and tax exemptions.

OPTIONAL NATURE OF THE PROFIT-SHARING AGREEMENT

The Social Security Finance Act provided that payment of the bonus was subject to the existence of an optional profit-sharing agreement in force within the company.

The Ordinance on exceptional buying power bonus abolishes this condition by allowing companies without optional profit-sharing agreement to benefit from the scheme.

However, the maximum amount exempted per employee depends on whether the company is covered by an optional profit-sharing agreement:

• companies not covered by an optional profit-sharing agreement may pay an exceptional buying power bonus up to a maximum of EUR 1,000 per employee; and
• companies covered by an optional profit-sharing agreement may pay an exempt bonus up to EUR 2,000 per employee.

POSTPONEMENT OF THE DEADLINE FOR CONCLUDING AN OPTIONAL PROFIT-SHARING AGREEMENT FOR 2020

Positive law on optional profit-sharing agreements provides that such agreements must be concluded:

• before the first day of the second half of the calculation period following the date on which it takes effect – i.e. for an optional profit-sharing scheme taking effect on 1 January 2020, no later than 30 June 2020; and
• for a period of three years.

The Social Security Finance Act for 2020 already provided that optional profit-sharing agreements concluded between 1 January 2020 and 30 June 2020 could exceptionally be concluded for a period of less than three years, but not less than one year.

The Ordinance on exceptional buying power bonus goes further by postponing the deadline for concluding an optional profit-sharing agreement from 30 June 2020 to 31 August 2020, when the financial year is based on the calendar year (as is the case for the majority of companies).

For these companies, an agreement entered into between 1 July and 31 August will thus not cause them to lose the benefit of the exemptions, even though it will have been concluded during the second half of the financial year.

EXTENSION OF BENEFICIARIES

Initially, the bonus could only be paid to employees and temporary workers present within the company on the date of payment of the bonus.

The Ordinance on exceptional buying power bonus extends the beneficiaries by adding that the bonus shall also benefit employees and temporary workers present within the company on the date the collective company or group agreement is filed or on the date of the employer’s unilateral decision to pay the bonus.

ADDITION OF A NEW MODULATION CRITERION FOR ADJUSTING THE AMOUNT OF THE BONUS

In principle, the amount of the bonus paid to beneficiaries depends on:

• their remuneration;
• their classification level;
• their actual seniority during the past year or the working time provided for in their employment contract.

The Ordinance on exceptional buying power bonus introduces a new criterion for modulating the bonus, and which takes into account the employees’ working conditions during the Covid-19 crisis.

This modulation is part of a strategy to encourage employees having to go to their workplace during the public health emergency period. Thus, employees required to physically go to their workplace will receive a higher profit-sharing bonus than employees working remotely.

♦ ♦ ♦

Gide’s Employment practice group is available to answer any questions you may have in this respect. You may also get in touch with your usual contact at the firm.

This legal update is not intended to be and should not be construed as providing legal advice. The addressee is solely liable for any use of the information contained herein and the Law Firm shall not be held responsible for any damages, direct, indirect or otherwise, arising from the use of the information by the addressee.

>> Click here to read the legal updates of Gide’s multidisciplinary taskforce set up to answer all your legal issues relating to Covid-19.