What Are The Different Types of Bonuses Available to Employees in France?
In France, bonuses are not mandatory by law, but they can be included in employment contracts, collective agreements, or introduced as part of company policy. All bonuses are subject to income tax and social security contributions.
Understanding the different types of bonuses in France and how they are regulated is essential for employers to ensure compliance and manage employee expectations.
The Role of Collective Bargaining Agreements (CBAs)
Bonuses in France are often stipulated through collective bargaining agreements (“CBA”). These agreements may outline bonus payments for various reasons, such as reaching a specific seniority level, obtaining a professional degree, or achieving certain performance metrics. While not mandated by law, where a bonus is explicitly mentioned in the CBA that applies to the company, it becomes binding on the employer. It is important to note that CBAs can be extended by Ministerial Decree to apply to an entire sector or geographic area, thus becoming binding on employers even if they did not directly negotiate or join the CBA.
When Bonuses Become Mandatory
Bonuses may also become a customary practice within a company. If a business regularly awards bonuses to its employees over time, these bonuses are considered binding, even if not formally written into an employment contract. For a bonus to be deemed a customary practice, it must be:
Fixed: Awarded based on a predetermined calculation.
Regular: Given consistently each year.
Constant: Applicable to a specific category of employees.
Once these conditions are met, employers can only discontinue the bonus after following a specific procedure, which includes notifying the works council and informing the affected employees in advance.
Discretionary vs. Contractual Bonuses
Discretionary Bonuses: These are awarded at the employer's discretion, without any obligation. The French Court of Cassation has ruled that discretionary bonuses must be justified on objective grounds. Employers must ensure that employees in similar roles are treated equally when awarding bonuses. However, where discretionary bonuses become regular, they may be seen as part of the employer’s compensation model and could become enforceable.
Contractual Bonuses: If a bonus is specified in the employment contract, it becomes a contractual obligation. Any changes to this bonus require the employee's consent. Contractual bonuses, including variable pay, must be based on clear and objective criteria, ensuring that the employee is informed of these criteria in advance.
Special Types of Bonuses in France
Welcome Bonuses: These bonuses are sometimes offered to new employees as an incentive. However, if the employee resigns before a specified period, they may be required to return the entire bonus or a prorated portion.
Thirteenth-Month Bonus: While not universally required, a thirteenth-month bonus or thirteenth-month pay, often paid in December, is a common practice in France. This bonus equals one month's salary and is mandatory if included in an employment contract, collective agreement, or unilateral employer commitment.
Holiday Bonus: These bonuses are awarded to help cover vacation-related expenses. While not mandated by law, Holiday Bonuses may be provided for by CBA, company policy or under the contract of employment. They are often calculated based on the employee’s salary, or any other metric set out in the employment agreement.
Implications for Employers
Employers must ensure that if bonuses are implemented within company policy, they are structured in a way that aligns with legal requirements and collective bargaining agreements.