Value-Sharing Obligations With Employees Applicable To French Companies

The Articles 5 and 6 of Law No. 2023-1107 dated 29 November 2023 transposing the Article 7 of the National Interprofessional Agreement (ANI) dated 23 February 2023 on the value-sharing with the employees, introduce a new value-sharing mechanism (on an experimental basis for a period of five years from 1 January 2025) to involve employees in the performance of their company.

This new regulation is part of an overall approach to integrating social, environmental and governance (ESG) issues into the companies.

This commitment is further underscored by the growing focus of private equity investors on social dimensions, including diversity, safety and well-being at work, employee profit-sharing and value-sharing, among others. In May 2023, a hundred private equity and private debt firms signed the 'Value Sharing Charter of Commitment', initiated by France-Invest to promote value-sharing within the context of their investments. The objective is twofold: firstly, to increase the percentage of employees covered by an annual value-sharing scheme; and secondly, to promote the long-term value-sharing through employee shareholding (incentive scheme) and the sharing of capital gains.

1. A new value-sharing obligation applicable to companies with between 11 and 49 employees The value-sharing obligation now applies to French and foreign companies (with permanent establishments in France and filing tax and social security returns in France) that:
   1. employ at least 11 people,
   2. are not subject to the legal obligation to implement a profit-sharing scheme (i.e. companies with more than 50 employees during five consecutive financial years) and are not subject to a profit-sharing or incentive agreement, and
   3. have a net taxable profit of at least 1% of turnover for three consecutive financial years.

   As of 1 January 2025, companies that meet all the above criteria will be required to implement at least one of the following value-sharing mechanisms:

   • profit-sharing plan
   • contribution to employee's savings plan
   • value-sharing bonus

   Companies that implement such value-sharing mechanisms are entitled, under certain conditions, to preferential tax and social treatment.

2. Obligation to negotiate in the event of an exceptional increase of net profit

The Article 8 of Act no. 2023-1107 of 29 November, transposing Article 9 of the national inter-professional agreement signed on 10 February 2023 on the value-sharing with the employees, require companies with at least 50 employees and one trade union delegate and which are subject to the obligation to implement value-sharing mechanisms to hold compulsory negotiations on the consequences of an exceptional profit in terms of value-sharing of the company with the employees.

These negotiations should address (i) the definition of an exceptional increase in net profit and (ii) the concrete measures to be implemented (e.g. profit-sharing or incentive supplementor a commitment to negotiate a new value-sharing scheme).

Companies that have adopted a profit-sharing or incentive agreement prior to 29 November 2023 were required to initiate these negotiations before 30 June 2024. For companies with no effective profit-sharing agreement, these negotiations shall be conducted concurrently with the negotiation of a profit-sharing agreement.

Read the original article on GowlingWLG.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.