Under a French statute effective as of 28 July 2011, a company with a French subsidiary must pay a dividend “bonus” to its French employees if the following circumstances apply:
- The French subsidiary has at least 50 employees
- The French subsidiary pays dividends to its shareholders
- The amount of these dividends per share is up from the average amount of dividends per share paid during the previous two years.
When the Bonus Is Paid
The bonus is payable for the first time in 2011, i.e., if the French subsidiary pays dividends in 2011 for the year 2010. The dividends per share paid in 2011 must be compared with the average dividends per share paid in 2008 and 2009. The bonus must then be paid before the end of 2011, and before the end of every subsequent year during which dividends are paid.
How the Bonus Is Paid
The company must negotiate the amount of the bonus either with the trade unions or with the works council. This agreement must be executed within three months of the payment of the dividends. If no agreement is executed, the company decides how much is paid.
All French employees must be paid a bonus. Every employee may be paid the same amount, or the amount can be based on salary or the length of service during the year.
The bonus is exempt from social charges, up to EUR 1,200 per year and per employee.
Ramifications for Companies
This is yet another obligation for international companies employing at least 50 employees in France.
This new obligation must be considered by:
- The Finance and Tax department prior to any decision regarding the opportunity for the French subsidiary to pay dividends to its shareholders
- The HR department when designing global and/or local compensation, taking into account the impact of this new bonus on the compulsory profit-sharing in France.