The exceptional purchasing power bonus was renewed for the year 2020 under the Social Security Financing Act voted on 24 December 2019.
Updated information, as of the date of publication of this article.
This law made the payment of an exceptional purchasing power bonus exempt from social security contributions and income tax conditional on the existence of a company profit-sharing agreement that could be concluded by way of derogation for a minimum period of one year before 30 June 2020.
The Covid-19 epidemic has prompted the government to change the conditions for the allocation and payment of this exceptional purchasing power bonus, the payment of which remains reserved for employees who have received less than three times the annual value of the minimum wage in the twelve months preceding its payment (i.e. €55,404 gross based on the minimum wage for 2020).
This is the subject of Ordinance No. 2020-385 of 1st April 2020.
The main changes to the Act brought about by this Ordinance are as follows:
- As with the first exceptional purchasing power premium introduced for the year 2019, it is no longer necessary to have a profit-sharing agreement to pay the premium and benefit from exemptions from social security contributions and income tax.
- The amount of the bonus allocated in this case cannot exceed €1,000 and is fixed either by company agreement or by a unilateral decision of the employer.
- The amount of the exceptional purchasing power premium can, as before, be adjusted according to remuneration, classification level, length of actual presence during the past year or the working time provided for in the employment contract, but can now also be adjusted according to “working conditions linked to the Covid-19 epidemic“.
- The Ordinance of 1st April 2020 also introduces the possibility of increasing the amount of the exceptional purchasing power premium to €2000, while allowing it to benefit from the same tax and social security exemptions. However, this possibility is reserved for companies with a profit-sharing agreement and the Ordinance also maintains the possibility of entering into derogatory profit-sharing agreements lasting between one and three years. The deadline for setting up such agreements is extended, as it is now set at 31 August 2020 instead of 30 June 2020 as provided for by the Law. The Ordinance also provides for a derogation allowing tax and social security exemptions when the profit-sharing agreement was entered into after the first day of the second half of the period used to calculate the profit-sharing.
- The scheme therefore remains a strong incentive to set up a profit-sharing agreement for a period which may be limited to one year and to allow the payment of an exceptional bonus exempt from charges and taxes up to €2000 per employee.
- Obviously, as with all collective compensation schemes, the exceptional purchasing power bonus – whether or not it is paid with an existing profit-sharing agreement – cannot replace any element of compensation that would be mandatory under a legal rule, a contractual provision or a customary practice.
- Finally, it should be noted that the Ordinance also extends the deadline for paying the exceptional purchasing power bonus: the deadline of 30 June 2020 is extended to 30 August 2020.
Bignon Lebray is at your side, do not hesitate to contact us for any further information you may need.
