presentation sofia 2 april 2007

8/2/2019 Presentation Sofia 2 April 2007

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Legislative backgroundIn France


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GAIN SHARING

The first rule was edicted in 1959

Companies were allowed to enter in an

agreement with the employee representatives

stating that some bonus could be granted to

employees depending on the achievement of

pre-defined goals.Those bonuses, paid in cash, were tax free and exempted

from social charges (both companys and employeespart)

for the Companies, but it was considered as a pure salary

for the Beneficiary, and, as such, without any tax relief for

the employees.


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There have been a very few agreementssigned until 1967.

It is the reason why the French Government

decided at that time to edict a new statutory

order:Any Company with more than 100 employees

(this limit was reduced to 50 in 1986)

should enter in an agreement stating that a

part of the profits would be paid to the

employees, following some precise rules

Profit Sharing


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Profit sharing

The main rules (1):

- the calculation formula:

RSP= (B- 5%K)x(S/AV)

- the allocation: the total amount should be sharedbetween all the employees either on an uniformbasis, or as a proportion of the salary, or dependingon the time spent by the employee within thecompany, or on a mix of these elements.

- the limits: a)the total amount cannot be more thanthe result of the formula with S as four times asocial ceiling.

b)the individual amount cannot be morethan of the same ceiling for individuals.


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Profit Sharing

The main rules (2):

- the bonus granted to the employee is frozen during 5 years.

- there is an exemption of taxes and social charges both for the employers

and the employees. The profits coming from the investment of the bonus

are as well free of taxes.

- since the beginning these bonusses could be only invested in two ways: in

shares of the company, or as a loan granted to the company. At that time

the employee became either a shareholder or a creditor of his company.

Which means that there was a new tight link between the company and

its employees, between shareholders and workers.


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Company Saving Plans

In 1986, a new law was voted which createdthe Company Saving Plans (PEE in French):

Such a plan may be opened , following thewillingness of the Company (it is notcompulsory), but for 5 years as a

minimum, and joining in such a plan is ona voluntary basis for the employees.

It is a tool which encourages the employees

to save money, because the law states a lot

of incentives in favour of the employers as

well as for their employees.


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Main rules (1):

- the employees may pour yearly in their PEE up to25% of their gross salary

- they may chose to put also their bonusses coming

from the gain sharing or/and profit sharingschemes.

- the employer may help its employees by an extracontribution, linked to the payments made by theemployees: this contribution may be up to 3 times

the employee contribution, with an absolute yearlyceiling of 8% of the social ceiling referred to in aprevious slide ( previously this limit was an absolutefigure of 2.300).


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Main rules (2):

- the contribution of the employee coming either fromthe profit sharing scheme or the gainsharingscheme is (even in the later) exempted of taxes andsocial charges. It is the counter part of the period of

unavailability.- Concerning the voluntary payments to the plan,

these exemptions are limited to the income from theinvestment.

- The contribution made by the employer is free of tax

and of social charges, for the employer as well asfor the beneficiary.


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Main rules (3):

In these plans the money may be invested inseveral ways. The plan must offer variousmutual funds which are managed byindependant assets managers.The choice is obligatory given to theemployees between diversified funds (with

shares of other companies, cash, bonds),share funds (with up to 2/3 of shares of thecompany ), or pure cash funds. The employees maychose one or two or three of them, to invest theirmoney.The company may encourage their investment in a

given fund, by a discriminatory allocation of the companycontribution, particularly if it wishes to promote the investment inthe companys shares.


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Intercompany Savings Plan

The law voted in February 2001 ( Fabius

law) launched a new kind of plan, which

could be mutualised between several

companies on the basis of a common field of

activities, or a common geographical area.

The purpose of that new law was to allow

SMEs to become part of Financial

Participation Schemes, which was not

possible because of the reluctancy of service

providers to deal with too small individual amounts of

money.


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Company Retirement Saving Plans

A law voted in 2003 allows a company to

launch a saving plan in which the savings

made by each employee are not frozen for 5

years, from the date of their payment, but

until the retirement date of the beneficiary.

These plans are known as PERCO (collective

retirement saving plans), and the applicable

rules are almost the same as for PEE.

Except that it is not possible that any mutual fund

within the plan invests more than 5% of its assets in

the company shares. Conversely, the companys

contribution may reach 16% of the yearly socialsecurity ceiling (twice the maximum contribution in a

PEE).


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Employee Shareholdingand Free Shares

Since 1973 it has been possible for a

company to issue new shares for itsemployees, or to sell existing shares tothem with a discounted price (the discountbeing limited to 20% of the share price).A new rule exists since early 2005 which

allows the companies to grant free shares totheir employees, but with a vesting period of2 years, and a minimum holding period of 2further years. The most recent law (30thDecember 2006) states that if the vesting period lasts

4 years, there is no obligation for any holding period.This may facilitate the adaptation of such plans fortheir foreign subsidiaries.


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Conditions for earlier availability

1. Marriage of the employee

2. A third child (born or adopted)

3. Divorce of the employee, if he keeps the responsibility of one childat least

4. Disability of the employee, the other member of the couple, orchildren

5. Death of the employee or the other member of the couple

6. Stoppage of the working contract (expiration of the contractredundancy dismission retirement)

7. Creation or buy out of a company by the employee, the othermember of the couple, or children

8. Purchase or extension of the main home and natural disaster noncovered by insurances

9. Excessive debt of the employee


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Exceptions for earlier availabilityPERCO

1. Death of the employee, or the other member of thecouple

2. Expiration of the unemployment rights of thebeneficiary

3. Disability of the beneficiary, the other member ofthe couple, or children

4. Excessive debt of the participant

5. Purchase of the main home or reparations after anatural disaster (acknowledged as such by theAuthorities)


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Main Features of the New Laws

- It is possible for the top manager of a

company with less than 100 employees to be

a beneficiary of both gain sharing and profit

sharing schemes. He may also become a part

of a PEE (Company saving plan).- As soon as the employee shareholding in a

public company reaches the level of 3% of its

share capital, the Board of this company must

include at least one representative of theseemployee shareholders as a Director.

presentation sofia 2 april 2007

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