Profit sharing refers to compensation systems in which employees receive a percentage of the company’s profits in addition to their normal salary, bonuses and benefits. In order to help its employees to save, this contribution can be paid into employee savings plans. Let’s take a closer look at how profit sharing works
Profit sharing is a form of compensation in which a company shares a portion of its pre-tax profits with employees. This type of compensation can work in different ways, depending on the structure of the company and the decisions made by employees and employers. Generally, these plans are designed to be incentive-based. When employees share the profits, they have a vested interest in increasing the profits in order to have access to more money.
In a profit-sharing agreement, a bonus is paid to each employee, who has the choice of receiving it directly or saving it in a Company Savings Plan (PEE) or Collective Retirement Savings Plan (PER). In this case, the premium is exempt from tax, in return for a blocking of 5 years for the PEE or until retirement for the PER Collectif. However, people who immediately receive the profit-sharing bonus payment will have to pay taxes on it.
A participation agreement can be put in place in all companies, but it is compulsory for those with more than 50 employees.
The establishment of a participation bonus is carried out in order to share the wealth created with the employees. It is a motivation and loyalty tool. In addition, participation benefits from attractive tax and social benefits. The participation envelope released by the company is exempt from social charges (excluding any social package) and deductible from taxable profit.
Depending on the size of the company, participation can be set up via an agreement concluded either with the trade union representatives, or within the Social and Economic Committee or even by ratification of the
2/3 of the staff. In some cases, the unilateral decision of the employer is also possible.
Do not hesitate to contact experts in employee savings who can assist you in setting up your system.