France: New measures to encourage employee savings schemes
The government is to introduce new measures aimed at persuading more employers to offer employee savings schemes and encouraging more French employees to participate in them.
Employee savings schemes are becoming increasingly popular in French firms, according to the latest figures issued by the statistics office of the French ministry of labour (Dares). As at the end of 2003, more than 8 million employees had access to some kind of scheme, an increase of 192,000 on the previous year. This total represents 53.2% of dependent employment in the commercial sector (excluding agriculture).
There are essentially three main types of savings schemes on offer:
- deferred profit-share schemes (participation);
- immediate profit-share schemes (interessement); and
- company savings schemes.
For an overview of these schemes, see box 1.
Incidence of schemes by company size
Overall, the workforce of large companies is most likely to have access to an employee savings scheme. Employees in firms with a workforce of 1,000 or more represent almost half of all employees who have access to such schemes, even though they represent only around a quarter of all employees.
Conversely, employees in companies with fewer than 50 staff represent only 8.7% of employees who have access to such schemes, even though they represent 42% of all employees. Thus, employee savings schemes are most widespread in large companies. This is partly due to the fact that there is an obligation for companies of 50 or more employees to put into place deferred profit-share schemes (see box 1). The study notes that 94% of employees in companies with 1,000 staff or more have access to a deferred profit-share scheme. By contrast, only 7% of employees in companies of fewer than 10 employees have access to a deferred profit-share scheme.
In general, access to employee savings schemes is increasing in companies of all sizes, but especially in the smallest firms, according to the Dares study. For example, the number of employees with access to one or more savings schemes in companies of fewer than 10 employees rose by 18% between 2002 and 2003, although the overall incidence in companies of this size remains relatively low. The study attributes this increase to the number of small companies taking part in inter-company savings schemes (plans interentreprises, PEI), whereby companies can set up joint schemes to share the administrative burden and costs.
Incidence by sector
In sectoral terms, the industries with the highest numbers of large companies tend to have the most widespread incidence of employee savings schemes, for example, the automobile industry and the intermediate goods industry. Employee savings schemes are also prevalent in banking, insurance and certain company service sectors, such as consulting and IT services.
In the tertiary sector, employee savings schemes are not limited to large companies, but are used to offer additional benefits to people who are already earning an above-average salary.
Types of scheme on offer
Around 3.3 million employees have access to all three types of employee savings scheme - immediate and deferred profit sharing and company savings schemes - and all three of these schemes are offered by almost 10,000 companies.
Around 5.8 million employees working for a company with fewer than 50 employees do not have access to any form of employee savings scheme. Deferred schemes are not obligatory in these companies, and therefore less than 10% of employees working for these companies are offered this type of scheme.
The obligatory nature of deferred schemes in companies with 50 or more employees means that these types of scheme are most common overall - 41.7% of employees have access to a deferred scheme, compared with 33% for an immediate scheme and 32.6% for a company scheme. Nevertheless, the study estimates that 2.6 million employees do not have access to a deferred scheme, even though their company is legally obliged to offer one.
If small companies have a scheme in place, it is most likely to be a deferred scheme - the larger the company, the more likely it is for the deferred scheme to operate alongside an immediate scheme or a company scheme.
The study also notes, however, that only 62% of large companies of 1,000 or more employees have an immediate scheme and 67% have a company scheme.
Average payouts
Of the 8.2 million employees covered by an employee savings scheme in 2003, 6.3 million (77%) received a payment - an increase of 250,000 compared with 2002. Employee savings schemes distributed a total of €11.6 billion in 2003, which is an increase of 8.7% on 2002. The majority of this sum was distributed by deferred schemes - €5.3 billion, compared with €5 billion by immediate schemes. A total of €1.3 billion was distributed by company schemes in 2003.
The average payout received by individuals also increased in 2003, to €1,830, which is a rise of €80 compared with 2002. In total, payouts from employee savings schemes averaged 6.5% of the total wage bill in 2003.
Employees will not be able to access the €5.3 billion distributed by deferred profit-share schemes during 2003 for five years. Most of this (€3.2 billion) has been invested in joint company investment schemes (fonds commun de placement d'entreprises, FCPE), either directly or by means of a savings plan. A further €1.5 billion has been placed in blocked current accounts, managed by the company that distributed the payment.
The use of company savings schemes is growing considerably, the study notes. Almost 5% of companies are offering a total of 4.9 million employees access to such schemes, which is equivalent to around one-third of all employees in the commercial non-agricultural sector. Of those, 3.6 million were using such schemes in 2003, an increase of 7.2% on the previous year.
Overall, a total of €56 billion is being held in employee savings plans, which is an increase of 18% on 2002 figures. Deposits into schemes in 2003 totalled €7.5 billion, compared with €6.4 billion in 2002. Deferred schemes hold the most money overall, and are particularly popular in companies where pay is comparatively low. Nevertheless, employer contributions to voluntary schemes, including immediate profit-sharing schemes, have increased significantly in recent years, and now represent 16% of total deposits, or almost €1.3 billion. The average employer contribution is €0.30 for each €1 deposited in voluntary and immediate profit-share schemes.
New incentive measures
However, although a great number of employees can now benefit from employee savings schemes, it is reported that many employees and companies are still not taking advantage of these schemes. Accordingly, two members of parliament - Francois Cornut-Gentille and Jacques Godfrain - have been asked by the prime minister to launch a campaign to encourage companies and employees to find out about the employee savings schemes on offer. These two MPs issued a report on 29 September in which they propose measures designed to help employees to gain access to these schemes and to encourage employers to administer them.
Measures to help employees
All employees, regardless of the size of the company in which they work, will receive a savings booklet, informing them of the types of employee savings schemes on offer to them.
Employees can already gain early access to the money saved in their deferred accounts before the five-year deadline under certain circumstances, such as if they leave the company or want to buy their own home. Under the new measures, employees will also be able to have early access to money saved in the scheme when one of their children reaches the age of 18. In addition, collective bargaining at company or regional level may determine other situations in which early access to savings is permitted.
Measures to help employers
To make the schemes more transparent, a national centre will be created, centralising all the government information and administrative services related to deferred savings schemes. In addition, a range of financial and fiscal measures will be put into place to encourage companies to set up employee savings schemes.
To encourage better corporate governance, the 40 largest companies quoted on the Paris stock exchange will be obliged to ensure that 5% of their capital is held by employee shareholders. This means that employees will have a right to attend general shareholder meetings and be represented on the company's board of directors (conseil d'administration).
Further, the publication of decrees implementing provisions of the law of 17 January 2002 relating to the representation of employee shareholders on boards of directors will be fast-tracked. This law, which is a general piece of legislation aimed at modernising social policy in France (EIRR 325 p.6), contains provisions obliging companies to provide for worker representation on their boards of directors if employees hold at least 3% of the company's capital, although the number of worker representatives must not exceed one-third of the total board representatives. The implementing decrees have not yet been published.
It is hoped that this package of measures will do much to stimulate the growth of employee savings schemes in France.
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Deferred profit-share (participation) This type of scheme is compulsory in companies with at least 50 employees. It allows a company's entire workforce to share in its profits, using a distribution method set by collective agreement. Employees cannot access their payouts immediately, however: they are invested for five years, although employees are allowed early access under a range of individual circumstances, such as the purchase of a home or departure from the company. In addition, under new legislation passed on 9 August 2004, employees may have unconditional early access to a sum of up to €10,000. This measure was put into place to stimulate consumer demand and investment. Neither the company nor the employees pay any tax or social security charges on the money invested in these schemes. The investments are made either into blocked current accounts administered by the company or into joint investment funds, which can also be linked to company savings plans (see below). Immediate profit-share (interessement) Under this type of scheme, which is voluntary, companies may set up a profit-share scheme for their employees as long as it has the correct employee representation structures in place. Companies are free to decide how much they distribute under these schemes - the payouts are calculated using a formula linked to the company's results and performance. Employees can access their payouts immediately, although they can also decide to invest them in a company savings plan, in which case the investment will benefit from special tax arrangements. The employer may also make a financial contribution to top up the savings plan. This is a type of collective savings scheme allowing employees to build up savings. The scheme is administered by the company, which can, if it wishes, make its own financial contribution to top up the scheme. As with the deferred profit-share scheme, employees do not have access to the money saved until five years have elapsed, although they may have early access under certain conditions, as with the deferred scheme. In addition, under legislation passed on 19
February 2001 (EIRR 326 p.21), inter-company savings schemes may be set up,
allowing smaller companies to share administration costs. These schemes can
be set up by several companies together, or at regional or sectoral level. |
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Legislation passed on 26 July 2005 (France: New employment measures), aimed at increasing economic confidence and modernising the economy, contains two measures to increase purchasing power and encourage consumer demand. Under the law, companies may pay an extraordinary immediate profit-share bonus to their employees before 31 December 2005. This bonus may be up to 15% of the immediate profit-share payments paid during the 2004 financial year, or up to €200 per employee (whichever is more favourable). The bonus will be free of tax and social charges. Distribution of the bonus may be the same for all employees, or it may be service-related, pay-related or a mixture of these two criteria. Companies that do not have an immediate profit-share agreement in place may pay out this bonus if they show that they are embarking upon negotiations for an agreement. This measure is particularly aimed at small and medium-sized enterprises. In addition, the law allows employees early access to sums that they have paid into deferred profit-share accounts over the financial year to 31 December 2005. Access must be made before the end of this year and a simple demand from the employee will normally be sufficient, unless there is specific provision for authorisation by collective agreement. |
