The main social measures introduced by the Finance Act for 2024 […]

The main social measures introduced by the Finance Act for 2024 and the Social Security Financing Act for 2024.

The Finance Act for 2024 of December 29, 2023 includes several social measures:

 

  • On value sharing

Value-sharing bonuses paid by a company with fewer than 50 employees between 1st January 2024 and December 31, 2026 to employees who, during the 12 months preceding payment of the bonus, received remuneration of less than three smic euros a year remain exempt not only from social security contributions, but also from income tax, CSG/CRDS and payroll tax.

From January 1, 2024, PPV distributed by other companies will be fully subject to CSG/CRDS.

As far as income tax is concerned, the PPV paid between January 1, 2024 and December 31, 2026 to an employee whose remuneration is less than 3 SMIC and whose company has 50 or more employees is subject to income tax from the first euro.

However, for tax purposes, the bonus allocated to a savings plan will be exempt from income tax up to a limit of €3,000 or €6,000.

As with profit-sharing schemes, employees can allocate all or part of their employer’s bonus to a company savings plan (PEE) and/or a company retirement savings plan (PER).

However, an implementing decree is needed to allow PPV to be paid into these plans. For the time being, therefore, the measure is not applicable pending publication of the decree.

 

  • Tipping at HCR

The tip exemption measure introduced on January 1st, 2022, which was due to expire on December 31, 2023, has been extended by one year to December 31, 2024.

Gratuities paid voluntarily by customers (either directly or indirectly through the employer) to employees in hotels, cafés and restaurants, in cash or by electronic or bank payment, are exempt from social security contributions and income tax.

This measure, which was introduced after the health crisis, will be evaluated in October 2024, with a view to its possible continuation.

 

  • On commuting expenses

As a reminder, employers are obliged to cover 50% of the cost of public transport season tickets for their employees travelling to and from work.

An incentive to cover the optional portion, i.e. over 50%, was introduced in 2022 and 2023, with the exemption of tax and social charges. The scheme will be extended to 2024.

The Finance Act for 2024 also maintains the benefit of the transport bonus (personal vehicle fuel costs) for all employees, and extends the authorization to combine the transport bonus with the compulsory payment of transport tickets.

As a reminder, employers can grant a transport bonus, with partial exemption from social security contributions and taxes for employees only (C. trav. art. L 3261-3):

  • whose habitual residence or place of work is located in a commune not served by a regular public transport service or a private service set up by the employer, or is not included in the perimeter of a compulsory mobility plan;
  • or whose working hours do not allow them to use public transport.

The temporary elimination of these two alternative conditions for 2022 and 2023 has been extended to 2024. However, both conditions will once again apply from January 1, 2025.

As for combining the transport bonus with the compulsory employer-paid public transport season ticket, this is in principle prohibited under the last paragraph of Article L 3261-3 of the French Labor Code.

However, the temporary authorization of such accumulation, which was introduced for the years 2022 and 2023, is maintained for the year 2024.

 

The Social Security Financing Act for 2024 of December 26, 2024 makes changes on the following points:

  • On the security of the new social security regime for severance pay :

As a reminder, severance pay is subject to different tax and social security treatment depending on whether or not the employee is entitled to a retirement pension.

 

Social security :

The FSS 2024 law unifies the social security regime applicable to individual termination indemnities paid in respect of employment contracts terminating after August 31, 2023.

It is no longer necessary to distinguish between employees who are entitled to a basic statutory pension and those who are not.

Accordingly, severance pay under individual collective bargaining agreements is not subject to social security contributions up to a limit of 2 annual Social Security ceilings (Pass), or the higher of :

  • the specific amount of compensation provided for or, in the absence of such an amount, the amount of legal or contractual severance pay;
  • half of the total amount of compensation paid ;
  • double the gross remuneration received in the year preceding the termination of the employment contract.

Individual severance pay is also exempt from CSG and CRDS, up to the lesser of the two following amounts:

  • the specific amount of compensation provided for or, in the absence of such an amount, the amount of legal or contractual severance pay;
  • the amount excluded from social security contributions, which is a maximum of 2 times the annual social security ceiling (Pass).

It should also be remembered that if the amount of the individual contractual termination indemnity exceeds 10 times the Pass (or 5 times the Pass if combined with termination indemnities for a corporate office), it is fully subject to social security contributions.

Finally, we remind you that, as part of the pension reform, the contributions paid by the employer on indemnities paid on the occasion of a conventional termination and retirement have been unified since September 1, 2023. The rate of this single contribution is set at 30% of the allowance paid.

This single contribution replaces :

  • a flat-rate social security contribution of 20% of the severance pay (previously applicable only to employees not entitled to a retirement pension)
  • and the employer’s contribution of 50% of the compensation paid for the employee’s retirement.

 

Concerning the tax system :

Indemnities paid on termination of an employee’s employment contract by mutual agreement, where the employee is not entitled to a retirement pension, are exempt from income tax up to the higher of the following two amounts:

  • the amount of redundancy pay provided for by the collective bargaining agreement, the professional or interprofessional agreement or, failing that, by law;

 

  • twice the gross annual remuneration received by the employee during the calendar year preceding the termination of his/her employment contract, or 50% of the amount of the indemnity if this threshold is higher, these alternative amounts being themselves subject to a ceiling equal to six times the annual Social Security ceiling (Pass) in force at the date of payment of the indemnities.

 

For employees entitled to a retirement pension, compensation is taxable from the first euro.

 

  • Work stoppage due to medical interruption of pregnancy

The three-day waiting period, normally applicable in the event of sick leave, for women obliged to stop work in order to undergo a medical interruption of pregnancy will be abolished from a date to be set by decree, but no later than July 1st, 2024.

 

  • On the limitation of work stoppages prescribed by teleconsultation :

The prescription or renewal of a work stoppage via teleconsultation may no longer be for more than three days, nor have the effect of extending to more than three days the duration of a work stoppage already in progress.

The LFSS provides for two exceptions to the rule, applicable from January 1st, 2024:

  • when work stoppage is prescribed or renewed by the insured’s attending physician or midwife;
  • if the patient duly justifies his or her inability to consult a doctor in order to obtain a prescription in his or her presence to extend the period of sick leave.

 

  • Self-employed workers

The rules for calculating social contributions for the self-employed have been modified to simplify them and improve social protection for those concerned. These rules will apply to income earned on or after January 1, 2025.

As a reminder, self-employed workers pay contributions on two separate bases, depending on the nature of the deductions: a net basis for contributions, and a gross basis including CSG-CRDS contributions.

The LFSS for 2024 provides for social contributions to be calculated on a single, simplified basis.

 

In conclusion, it should be noted that the Constitutional Council, in its decision of December 21, 2023 (Cons. const. 21-12-2023 no°2023-860 DC : JO 27) censured the measure introducing automatic suspension of sick pay in the event of unjustified stoppage of work, as established by a second medical examination carried out by the employer.

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