Prsentation PowerPoint

1
Legislative background In France
2
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.

3
Profit Sharing

• There have been a very few agreements
• signed 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

4
Profit sharing

• The main rules (1)
• - the calculation formula
• RSP ½ (B- 5K)x(S/AV)
• - the allocation the total amount should be
  shared between all the employees either on an
  uniform basis, or as a proportion of the salary,
  or depending on the time spent by the employee
  within the company, or on a mix of these
  elements.
• - the limits a)the total amount cannot be more
  than the result of the formula with S as four
  times a social ceiling.
• b)the individual amount
  cannot be more than ¾ of the same ceiling for
  individuals.

5
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.

6
Company Saving Plans

• In 1986, a new law was voted which created the
  Company Saving Plans (PEE in French)
• Such a plan may be opened , following the
  willingness of the Company (it is not
  compulsory), but for 5 years as a
• minimum, and joining in such a plan is on
• a 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.

7
Company Saving Plans

• Main rules (1)
• - the employees may pour yearly in their PEE up
  to 25 of their gross salary
• - they may chose to put also their bonusses
  coming from the gain sharing or/and profit
  sharing schemes.
  
  
• - the employer may help its employees by an extra
  contribution, linked to the payments made by the
  employees this contribution may be up to 3 times
  the employee contribution, with an absolute
  yearly ceiling of 8 of the social ceiling
  referred to in a previous slide ( previously this
  limit was an absolute figure of 2.300 ).

8
Company Saving Plans

• Main rules (2)
• the contribution of the employee coming either
  from the profit sharing scheme or the gainsharing
  scheme is (even in the later) exempted of taxes
  and social 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
  the investment.
• The contribution made by the employer is free of
  tax and of social charges, for the employer as
  well as for the beneficiary.

9
Company Saving Plans

• Main rules (3)
• In these plans the money may be invested in
• several ways. The plan must offer various
• mutual funds which are managed by
• independant assets managers.
• The choice is obligatory given to the
• employees between diversified funds (with
• shares of other companies, cash, bonds),
• share funds (with up to 2/3 of shares of the
• company ), or pure cash funds. The employees may
• chose one or two or three of them, to invest
  their
• money.
• The company may encourage their investment in a
• given fund, by a discriminatory allocation of the
  company
• contribution, particularly if it wishes to
  promote the investment in
• the companys shares.

10
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.

11
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 social
• security ceiling (twice the maximum contribution
  in a
• PEE).

12
Employee Shareholding
and Free Shares

• Since 1973 it has been possible for a
• company to issue new shares for its
• employees, or to sell existing shares to
• them with a discounted price (the discount
• being limited to 20 of the share price).
• A new rule exists since early 2005 which
• allows the companies to grant free shares to
• their employees, but with a vesting period of
• 2 years, and a minimum holding period of 2
• further years. The most recent law (30th
• December 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
  for
• their foreign subsidiaries.

13
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 child at least
• 4. Disability of the employee, the other member
  of the couple, or children
• Death of the employee or the other member of the
  couple
• Stoppage of the working contract (expiration of
  the contract redundancy dismission
  retirement)
• Creation or buy out of a company by the employee,
  the other member of the couple, or children
• Purchase or extension of the main home and
  natural disaster non covered by insurances
• Excessive debt of the employee

14
Exceptions for earlier availability PERCO

• 1. Death of the employee, or the other member of
  the couple
• 2. Expiration of the unemployment rights of the
  beneficiary
• 3. Disability of the beneficiary, the other
  member of the couple, or children
• 4. Excessive debt of the participant
• 5. Purchase of the main home or reparations after
  a natural disaster (acknowledged as such by the
  Authorities)

15
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 these
• employee shareholders as a Director.