Participation: flexible calculation rules to encourage its implementation

Participation is a scheme for distributing a portion of a company’s profits to its employees in the form of bonuses. However, its implementation is mandatory only for companies with at least 50 employees.

Voluntary participation in companies with fewer than 50 employees is limited. Indeed, according to DARES, only 4.2% of the employees of these companies had access to participation in 2021.

Therefore, to encourage the use of this value-sharing scheme, the government has decided to set up an experiment allowing companies with fewer than 50 employees to deviate, until November 29, 2028, from the rules provided for by the Labor Code for calculating participation.

A less favorable calculation formula

Before paying the bonuses to employees, employers must calculate the total amount of profit to be distributed, known as the “special participation reserve” (RSP(1)). This reserve must be calculated according to the standard formula provided for by the Labor Code, i.e., half of the tax profit minus 5% of shareholders’ equity, multiplied by the ratio of wages to value added: [1/2 (Net profit -5% equity)] x [Wages/Value added of the company].

Note: Participation agreements may deviate from this formula. In that case, the amount of the RSP must be at least equivalent to that resulting from the standard formula of the Labor Code.

Noting that the formula for calculating the RSP provided for in the Labor Code is complex and unsuitable for small businesses, the government now allows companies with fewer than 50 employees to choose a calculation formula that is less favorable to employees (for example, a percentage of the net tax profit or the pre-tax accounting result). In other words, the amount of RSP thus obtained may be lower than that which would have been obtained with the standard formula.

Companies with fewer than 50 employees applying voluntary participation on December 1st, 2023, can only deviate from the standard formula for calculating the RSP by concluding a new agreement. They are, therefore, prohibited from changing it by a simple unilateral decision.

Please note: Trade union sectors must, by June 30, 2024, at the latest, open negotiations for providing for a participation scheme, including the chosen formula for calculating the RSP that is less favorable to employees than the formula provided for by the Labor Code.

(1) Réserve Spéciale de Participation (RSP)