Exceptional “Yellow Vest” Bonus : The law is published !
Published on : 14/12/2018The law bearing economic and social emergency measures was enacted on December 24th.
True to the initial project which had been announced on December 14th, article 1 of the law implements an “exceptional spending-power bonus”.
Parliamentary debates allowed for a certain evolution of the text. As a result, the bonus applies to all employees who have an employment contract on December 31, 2018 (and not only those present at that date), can be modulated according to more criteria than those initially debated, and can be implemented by a group-wide agreement (that will then be imposed on all the subsidiaries).
When it meets the conditions set out below, the bonus is exempt from social charges (contributions and CSG/CRDS) as well as income tax, up to 1,000 EUR, and on the condition that the beneficiary’s 2018 salary was below three times the legal minimum wage (SMIC).
To be exempt, the bonus must meet the following requirements:
- paid between December 11, 2018 and March 31, 2019;
- be paid to employees "bound by an employment contract" as of December 31, 2018 (or, on the date of payment, if the bonus was paid before). This wording, resulting from the parliamentary debates, was adopted to include the employees whose employment contract would be suspended, in particular the employees on maternity, paternity or training leave;
- as it is additional remuneration, the principle of non-substitution applies. It must therefore be added to the end-of-year bonuses that would already be mandatory under legal, contractual or customary rules. Nor can it be used as a substitute for increases or any other bonus provided for in a wage agreement, the employment contract or the practices in force in the company;
- set up in principle by company or group-wide collective agreement (which must be concluded before the end of March 2019It may be set up by a unilateral decision, that must be taken before 31 January 2019. In the latter case, the employer must inform the staff representatives (CE / CSE, DP or DUP) no later than 31 March 2019. Although the text does not require negotiation (at least until 31 January 2019), companies should pay attention if they are in the course of mandatory annual negotiations. As long as negotiation is in progress, the employer can not take unilateral decisions concerning the community of employees in the matters dealt with on that occasion, such as actual wages (article L2242-4 of the French Labour Code). ;
- the collective agreement or unilateral decision must set out the amount of the bonus and the conditions for eligibility, in particular by setting out the beneficiaries ( all employees or only those under a certain income ceiling.)
The bonus is a lump sum, but out of fairness, it can be modulated based « on criteria such as » remuneration, job classification, length of presence in the company in 2018 (on this point, the text specifies that the periods of contract suspension for maternity, paternity, adoption, child sickness, or parental education leave are considered effective presence), or the duration of the working time provided for in the employment contract.
The parliamentary debates suggest that only the collective agreement option allows for the modulation of the bonus amount based on other criteria than those provided for by the law, it being specified that modulation based on length of service in the company does not appear possible. The text of the law does not distinguish between the unilateral decision and collective agreement, so the wording “on criteria such as” seems to leave the door open to a considerable liberty in terms of modulation of the amount of the bonus, regardless of the method of implementation chosen.
The Minister of Labour, Ms. Muriel Pénicaud, confirmed that as the bonus is not subject to income tax, “it will not enter into the individual’s reference fiscal income.”
This bonus and its implementation conditions are already raising questions: is it possible to use modulation conditions different from those provided for the by the law, including in the event of a unilateral decision, as the text seems to suggest? How are the thresholds for the benefit or exoneration to be calculated in case of contract suspensions without the maintaining of wages? The modulation of the bonus based on remuneration must it be inversely proportional? How should employees hired in the course of 2018 be treated? Etc.
The government-issued explanatory notes (“circulaires”), announced by the Minister of Labor, will undoubtedly provide answers to some of the questions still remaining.
Joël Grangé and Camille Ventejou are available to provide assistance and guidance on this subject.
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