Employee savings – Overview

RV participation-ES

The purpose of workplace savings is to give employees a stake in their employer’s performance, while enabling them to build up savings on advantageous terms. The system is based on incentives, profit-sharing and employee savings schemes.  Workplace savings arrangements are eligible for relief on taxes and social security contributions – a benefit for both employees and employers.
What is an employee investment fund?

Employee investment funds (FCPEs) are collective investment schemes for workplace savings.
They were created when the 1967 legislation on employee profit-sharing and employee savings plans was implemented. Access to FCPEs is reserved for the employees of one or more specific companies with a profit-sharing agreement or a savings plan. Employees can have their incentive payments and profit-sharing payments paid into these funds, and also make voluntary payments. The employer often provides matching payments.

The AFG publishes half-yearly statements of the assets under management in employee investment funds FCPE.
For information concerning employee saving funds and employee pension schemes statistics please use the following links:

Workplace savings systems

In France, workplace savings are based on three main systems available to employers and employees:

Incentives

Incentives reward employees for improvements in the business performance of their employer, when earnings or performance targets are reached.
This optional system can be applied by any employer on the basis of an agreement with its employees or their representatives. The agreement must stipulate the terms and parameters for calculating the amounts to be distributed to the employees and the criteria for distribution.
The employees may decide to have these amounts paid into their savings scheme, if the employer offers one, which means that the funds are locked up for a minimum of five years. In this case, the incentive payment is exempt from income tax.

Profit-sharing

Profit-sharing is designed to give employees a stake in the medium-term growth of their employer through a distribution of earnings.

Employee savings schemes

Employee savings schemes are an excellent way for employees to build up savings or capital, as well as a means of managing workplace savings. The schemes are more “social” and carry a relatively low cost for employers. They contribute to improving the financial situation of participating employees. The schemes are also one of the best tools for introducing, managing and developing employee share ownership.

Employee savings plans (PEEs) and  company sponsored direct contribution pension schemes (PERCOs) , which are optional and available to all companies, are collective savings schemes that enable employees to build up a portfolio of securities, with support from their employers in some cases. Employees obtain tax breaks in exchange for locking up the money paid into the schemes, which can be offered unilaterally or through a collective bargaining agreement.

Savings are built up through:

  • Voluntary payments up to an annual limit of 25% of the employee’s gross compensation,
  • Profit-sharing payments,
  • Incentive payments, when offered,
  • Matching payments, from the employer for the employees’ voluntary payments.

The money paid into the plans is locked-up for a minimum of five years, with the same early withdrawal conditions as for profit-sharing payments. During the lock-up period, the savings may be invested in an employees’ investment fund (FCPE) or, in the case of an employee savings plan, in an employee-owned open-end investment company (SICAVAS).

Regulatory reforms introduced in 2001 created new products:

  • SICAVAS, which are designed to promote workplace savings in the foreign subsidiaries of French companies,
  • Employee umbrella funds
  • Employee feeder funds.

These workplace savings schemes must be set up at the initiative of a management company and a depositary institution.

Regulatory framework

The regulatory framework for workplace savings is primarily based on:

  • The French Labour Code,
  • AMF’s regulation “Instruction DOC-2011-21“:Authorisation procedures, preparation of a KIID and a prospectus, and reporting for employee investment undertakings.
    Instruction DOC-2011-21
     (English version) outlines the rules that apply to employee investment undertakings (FCPE or SICAVAS) regarding the authorisation process, the drawing up of a key investor information document (KIID) and prospectus, and periodic disclosure. Information is provided about the formation of an employee investment undertaking, any changes during the life of an employee investment undertaking (changes subject to pre-approval or changes subject to ex-post notification) and the means by which information is provided to subscribers and the AMF. This document has not been updated for the laws and regulations that transpose MIF 2 and legally separate investment firms from asset management companies. The update will take place in the near future.
  • Workplace savings handbook (French version):
    The full range of mechanisms employee investment undertakings is described in the Workplace savings handbook. It was published in 2014 by the Minsitry of Labour, and it recalls the fundamental principles governing Incentives, Profit-sharing and Employee savings schemes.