Collective gains from benefits in France

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• France has three compulsory pension schemes and one voluntary pension for employers to offer staff.

• Profit-sharing schemes are mandatory for employers with over 50 staff.

• Subsidised lunch is available for all French employees.

France has three compulsory pension plans and profit-sharing is mandatory for larger employers, says Jennifer Paterson

France’s national motto – liberte, egalite, fraternite (liberty, equality, fraternity) – is reflected in its collective approach to employee benefits.

Whether offering a pension scheme, a share plan or a subsidised lunch, employers have to offer benefits for all their staff to reap the tax benefits. Alison Main-Lavergne, international benefits manager at Wells Fargo, says: “There is solidarity in a collective approach to benefits. If an employer allows staff to opt out, then a benefit would become taxable, a benefit-in-kind.”

France has three compulsory state pension systems. The social security scheme is compulsory for all and pays out at 50% of average earnings over the best 25 years of a person’s career, up to a maximum of 50% of the social security ceiling, which is set at €35,372 a year in 2012. Contributions are 20% on average, two-thirds from the employer and one-third from the employee.

Staff also fall into one of two other schemes, known as Arrco and Agirc. Arrco is for all staff and Agirc is aimed at management-level employees. Both resemble a defined contribution (DC) pension plan.

Some employers also offer a further DC plan under Article 83 of the tax code. These schemes are insured policies, with the accumulated funds used to buy an annuity at retirement. Contributions are typically a percentage of salary, shared between employer and employee. Sylvain Rousseau, director of healthcare, retirement and benefits at Towers Watson, says: “Sometimes it is 1% from an employee and 5% from the employer, and sometimes 2% from the employee and 1% from the employer.”

Tim Reay, head of global benefits at Aon Hewitt in Paris and secretary of the International Employee Benefits Association, says: “Typically, staff would have a contribution rate of 2-4%, split between employer and employee. They do not need to pay much more because they are already paying into the compulsory systems.”

Additional voluntary contributions

Since 2010, there has been an option for workers to pay additional voluntary contributions into these plans, although there is a maximum rate, including the regular employer and staff contributions, of 8%.

There is also a collective retirement savings plan known as Perco. Here, the maximum matched contribution from employers is 16% of the social security ceiling per year and per employee, which is €5,800 for 2012. At least three funds must be offered and, at retirement, the funds are available as an annuity or a lump sum.

Profit-sharing savings plans are common in France. It is a mandatory benefit for organisations with more than 50 staff, and has tax advantages if the employer and employee pay directly into the scheme. One of these is a company savings scheme known as Pee, a five-year savings plan with associated tax advantages. Employees can contribute up to €2,900 a year with a maximum 300% match from the employer. Main-Lavergne adds: “These schemes are tax deductible for the employer, and the employee is getting a match without it being considered income.”

All employers provide death and disability benefits, which are tax-efficient only if provided to all employees. Healthcare benefits are typically offered through an insurer and are used to top up what is offered by the state.

All staff also receive a tax-free subsidised lunch. Larger employers will have a subsidised canteen, while staff at smaller employers receive €5 a day to buy lunch.

The legal minimum for holidays is five weeks a year, but most employers provide six weeks. In 2000, the mandatory working week for private sector organisations with more than 20 staff was lowered to 35 hours.

Read more on international benefits schemes