News : The economic recovery bill, also known as the Macron bill, is currently completing its passage through parliament. It will be put to a formal vote in the Senate on May 12, 2015, following a request from the government for an expedited procedure. With a view to « unlocking growth in France, » one of the points under debate is, quite rightly, profit sharing and, more specifically, the growth of employee savings plans, which currently cover 11 million employees.
We have already explained the challenges and different facets of employee savings (see this article), which is a key tool both for the internal functioning of companies and for economic dynamism.
The Macron law, presented to the Council of Ministers on December 11, 2014, has three pillars: the liberalization of restricted activities, the stimulation of investment and innovation, and finally the development of employment and social dialogue. With this in mind, it aims in particular to make employee savings more attractive. However, like all the reforms that preceded it, it does not revolutionize the employee savings system. After passing through the National Assembly in February, the Macron law was the subject of a Special Commission, then it was studied from early April to early May by the Senate. A joint committee (senators and deputies) must agree on a single text before the law can be enacted. If no agreement is reached, it will go back to the National Assembly for a second reading. The latter has the final say, which led to rumors of a « change of heart » throughout the bill’s review due to the interplay of majorities. The government has a majority in the National Assembly but lost its majority in the Senate in 2015.
We have already discussed employee savings as a tool for economic recovery, which is at the heart of current issues but subject to multiple legislative reforms (see this article). So, at the end of this constitutional process, what are the new provisions that have just been adopted during the public reading?
Initially, following the recommendations of Copiesas, the main focus regarding employee savings was on simplifying its mechanisms, developing it for SMEs, directing savings towards SMEs and mid-cap companies, reducing the social security contribution rate, and providing tax incentives for PERCO (collective retirement savings plans). Last March, the Special Committee made a number of changes to the text initially adopted by the National Assembly. The Committee proposed:
– a reduction in the social security contribution from 16% to 12% for PERCOs on profit-sharing, employer contributions, and incentive schemes. As PERCOs are thesecond largestemployee savingsscheme, the reduction in the social security contribution is a boost for long-term savings.
– The possibility of paying 10 days of leave into the PERCO, as well as the introduction of managed PERCO accounts from January1, 2016, allowing employees to take fewer risks as they approach retirement.
– Exemption from the social security contribution for companies with fewer than 50 employees for three years, provided that this is the first time a profit-sharing or incentive agreement has been implemented. After that, a flat rate of 8% will apply for three years (compared to 20% today).
– The social security contribution must be reduced to 16%[1] for plans aimed at financing SMEs and mid-cap companies.
– The obligation to establish intra-industry negotiations before the end of December 2017 for profit-sharing agreements.
– The mandatory implementation of profit-sharing in companies, but with a three-year delay if a pre-existing agreement is in place.
– The abolition of the obligation to provide an employee savings account (livret E) proposed by the government for the purpose of providing information when joining the company.
– Finally, for the sake of harmonization, profit-sharing and incentive payments must now be paid on « the first day of the sixth month following the financial year for which the rights arose » (i.e., June1 ).
The Senate reversed some of the special committee’s decisions but approved several of those listed above on Friday, April 17. One example is the removal of the rules on representativeness of the supervisory board of mutual funds for employee savings plans (Plan Epargne Entreprise (PEE) and PERCO). While it was proposed that employees be represented at a rate of 66%, the latter has returned to its initial level of 50%. In addition, when profit-sharing payments are made, if the employee has not expressed a choice regarding the use of the bonus, the amount is invested and blocked in a PEE starting in 2016.
Thus, the underlying thrust of the Macron law towards strengthening long-term employee savings over retirement savings is reaffirmed in the final text. The search for growth is clearly the main watchword, along with the desire to harmonize the rules. Employee savings should not replace wages, and the use of this tool should be facilitated. On Tuesday, May 12, the Senate voted on the bill, which validates all the changes we have just outlined. There is one last step to complete the process: approval by the joint parliamentary committee on June 3.
Notes:
[1]The total cost of the reduction in the social security contribution is estimated at between €60 and €80 million for the State.
