What is ‘intéressement et participation’ in France? If you work for a medium to large French company you will be hearing your colleagues talking about ‘intéressement et participation’, normally during the 2nd quarter of the year.
Good news! this is more money for you! Let’s understand a bite more…
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What is 'Intéressement et participation' in France?
It is a conditional company profit sharing mechanism. It is partially regulated by the state in order to make employees part of the success of their companies and encourage them to invest within.
This sharing plan is mandatory for companies with more than 50 employees. The “intéressement and participation” profit sharing could have an important impact on employee’s remuneration annual package.
Depending on your company sharing plan conditions and performance, it could represent around 1 month of equivalent salary.
You can learn more details on the government site.
Differences between 'Intéressement' and 'participation' in France ?
“Intérèssement” is optional whereas “participation” is compulsory for companies employing at least 50 employees. Although both schemes encourage employee savings, there are notable differences in regard to application and calculation.
All employees are eligible to “intérèssement” and “participation” as of three months of seniority within the company.
Both saving schemes are linked to the company’s performance, but their scope differs:
1. “Intérèssement” is linked to the achievement of the company’s objectives;
2. “Participation” is linked to the company’s annual profit.
The implementation of “participation” is mandatory for all companies employing more than 50 employees. The agreement modalities are the same as the ones for “intérèssement”. As a general rule, the participation agreement is subject to an official communication within the organization to insure collective information.
A copy of the text could be distributed to each employee. In addition, 6 months after the end of each financial year, a report concerning “participation” has to be submitted.
“Intéressement” and “participation” offer tax and social advantages to employees and companies.
What should I do with my 'Intéressement et participation' in France?
In regards to the employee, the applied tax regime depends on his/her decision to either block the sums (for a minimum of five years) on a specified account (ex: PEE- Plan d’Epargne Enterprise, or PER Plan d’epargne retraite) or to receive an immediate payout.
If you decide to invest it within your company’s PEE, you will benefit from income tax exemption (social contribution tax still applies). This option could be ideal to benefit from the tax exemption and potential capitalization of your investment.
Nevertheless, it is important to bear in mind that the money will be blocked during 5 years. However, it is possible to unblock your savings earlier, but only if one of these events occurs:
- Marriage, Civil partnership
- Birth (or adoption) of your 3rd child,
- Divorce, separation, dissolution of a Civil partnership, with the custody of at least one child
- Domestic Violence
- Disability (employee, spouse or Civil partnership partner, children)
- Death (employee, spouse or Civil partnership partner)
- Termination of the employment contract (dismissal, resignation, retirement before the expiry of the 5-year period), termination of the activity by the individual contractor, termination of the company’s employment,
- Creation or takeover of a company (by the employee, his or her spouse or Civil partnership partner, his or her children)
- Acquisition of a principal residence (or expansion or rehabilitation following a natural disaster)
In the case you prefer to get the payout, then you will be entitled to pay full income taxes and social security charges (as a thumb up rule, you can estimate a net amount around 65%). This option could make sense if you need the cash for any specific personal project.
It may be helpful to contact your local union (CSE – Commité Social et Economique) to understand the company rules and all options offered to you.
Our own experience
We have benefited from this company sharing plan in France. It is normally a good surprise for us as we were not expecting this extra cash. However, even though it was a pleasant news, we did not have a clue what was and what to do with it.
During our 1st year in France, we received a letter at home announcing the n-1 year company results and the sharing plan payout amount.
We opted to withdraw the money as we did not understand the possibility to invest it. So we took the simplest option in the menu which was to get the money in our pockets.
It was a big surprise few weeks later when we received the payslip. There was a huge difference from the expected amount as announced in the letter vs. the net amount received. This was due to the taxes, as explained above.
We decided to do nothing during our 2nd year. Then it was invested by default in our PEE ‘low risk’ fund. Good news, we paid less taxes and the gap from gross to net was lesser. In the other hand, this low risk fund was not the best investment for us (too conservative).
Finally, it was only after the 3rd year in France that we understood all details. Not only, we decided to invest the sharing plan payout but we chose the right fund within our company’s PEE.
If you are yet living in France, and thinking about taking a job offer here, you should probably ask more details about the company sharing plan. What are the conditions? Last 3 years average payout ratio? etc.
Normally HR and recruiters do not like to communicate much about it as it depends on the year company results. However, this is something you need to ask in advance as it could have a positive impact in your decision.
In case you are already living in France, and just learning about this, we recommend that you approach you company union (CSE – Comité Social et Économique) to get more details. Another option, will be to ask your colleagues during a coffee break.
Remember you have the option to withdraw or invest your sharing plan payout. We hope you have found some criteria in this blog to make the best decision as per your own needs.
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Please remember that we are neither financial nor tax advisors. We are just sharing our best understanding based in our own experience. This blog is for educational purposes only. Do not make investment decisions solely based on what you read in this blog. What works for us, may not work for you. Do your own research and look for professional service if required. Read our full disclaimer in the ‘about’ page.