France: Macron bonus renewed, accompanied by new inflation-fighting measures

Employer Action Code: Act

In response to rising consumer price inflation — reaching 6.1% year-on-year as of July — the French Parliament passed measures to help protect individuals’ purchasing power, including several relating to employee benefits and compensation.

Key details

• Social security retirement and disability pensions in payment as well as family allowances were increased by 4%, effective July 1, 2022. The monthly minimum wage (salaire minimum interprofessionnel de croissance – SMIC) was increased by 2.01% on August 1 to 1,678.95 euros (€11.07 per hour), the third increase in 2022 following a 2.65% increase in May and a 0.9% increase in January. Indexation of the SMIC is triggered whenever consumer prices increase by 2%, based the rate of inflation for households in the bottom 20% by income as well as any gains in purchasing power for workers with earnings equal to national average gross hourly wage.
• The voluntary exceptional purchasing power bonus that employers may pay employees — previously known as the Macron bonus and now renamed as the value sharing bonus (prime de partage de la valeur – PPV) — was made permanent with some changes. The tax-exempt Macron bonus, introduced in 2019 and annually renewed through March 2022, was available to employees earning under three times the SMIC in amounts up to €1,000 per year (doubled if a profit-sharing agreement was in place or if there were under 50 employees). Under the new measures:
• From July 1, 2022, through 2023, employees earning below three times the SMIC may be paid an annual PPV of up to €3,000 (doubled if profit sharing is in place or there are under 50 employees), not subject to income tax or social security contributions.
• From 2024, all employees may be paid a PPV, up to the same limits, subject to income tax but not social security contributions.
• The PPV may be paid in up to four quarterly installments, to prevent it from replacing salary increases. Similar to the Macron bonus, companies that choose to pay a PPV must do so for all employees, though the amounts may vary by employee based on objective criteria (e.g., salary, job classification, working time).
• From 2023, the implementation of profit-sharing agreements will be made easier. Companies with under 50 employees will be able to do so unilaterally (outside of a collective agreement), and an online application procedure will be available with profit-sharing templates.
• From October 2022, employer social security contributions will be reduced by a flat rate based on employee overtime performed in companies with 20 to 249 employees (the amount to be defined by separate decree). In addition, the income tax exemption on overtime for 2022 will be increased from €5,000 to €7,500.
• Through 2022, employees may withdraw up to €10,000 free of income tax or social security contributions from tax-favored employee savings plans (such as PER, PEE and PERCO plans) for the purchase of goods or services.
• Staff who accrue paid time off in the form of RTT* days between January 1, 2022, and the end of 2025 would be able to sell accrued RTT days up to €7,500 per year. This entitlement would include professional and managerial staff covered by hourly or daily flat-rate working time regimes (convention de forfait).

*Based on RTT (Réduction du temps de travail) agreements under which employees accrue paid time off (RTT days) based on hours worked exceeding the 35-hour workweek.

Employer implications

The bill received final approval and became law on August 16. The enhanced tax-favored bonus option — both the temporary basis through 2023 and the permanent version available to all employees from 2024 — presents planning opportunities for employers to reward and assist employees, though may result in higher labor costs. The option for employees to sell RTT days could be attractive to employers that want to reduce the amount of RTT days accrued by staff in return for increased employee working time.