Profit-sharing offers the company the opportunity to optimize its wage costs and provides many tax and social benefits. In order to learn more about the benefits of setting up an incentive plan, it is important to be familiar with the principles of profit-sharing, its advantage, know the calculation and the methods of paying the incentive bonus and the specificities of the profit-sharing agreement.

Principles of profit-sharing

The incentive bonus consists of paying an exceptional bonus to employees based on the results and performance of the company. The incentive award is optional, regardless of the size of the company, is free to grant an incentive bonus to its employees. However, it is collective, and all employees must benefit that profit-sharing once the agreement is in place.

Benefits of the incentive bonus

The profit-sharing scheme is totally exempt from employers ‘contributions and social contributions. This bonus is subject only to the CSG and CRDS which allows to distribute more for the employees and reduce the cost for the employer. From a tax point of view, and under certain conditions, profit-sharing can generate a tax credit and is deductible from the company’s taxable profit. Employee profit-sharing is therefore a real motivational tool for employees, which will strengthen the economic dynamics of the company.

Calculation and payment of profit sharing

The incentive will be calculated according to the results and performance of the company. There is no fixed method to calculate the incentive, and can vary from company to company and work units. The incentive is also capped: in a global way, all the premiums distributed must not exceed 20% of total gross salary. Individually, the amount is capped at half the annual social security ceiling.

The profit-sharing agreement: implementation and specifications

The profit-sharing agreement is reached within the scope of a common-law agreement or to specific terms defined by the various parties involved within the agreement (trade union, works council, company manager). The duration of the profit-sharing agreement is of three years. If none of the parties involved in the agreement requests amendments within three months before the deadline, the agreement may be renewed for the same period. The profit-sharing agreement contains various clauses: mandatory clause drawn from the labor code and optimal clauses which depend on the particular wishes of the various parties concerned by the agreement.

Profit-sharing is still a good opportunity for companies wishing to reward the work of their employees while benefiting from significant advantages.