France: Payment of an exceptional bonus exempt of social contributions and taxes

The law on social and economic urgency of 24 December 2018 implements an “exceptional spending-power bonus”. The bonus applies to all employees who have an employment contract on December 31, 2018, can be modulated according to several criteria, and can be implemented by a group-wide agreement.

When it meets the conditions set out below, the bonus is exempt from social charges (contributions and CSG/CRDS) as well as income tax, up to 1,000 EUR, and on the condition that the beneficiary’s 2018 remuneration was below three times the legal minimum wage (SMIC).

The law refers to the “remuneration in 2018” without specifying whether this is base salary or counts other elements of remuneration. However, the law does refer to articles of the French social security code which define elements of remuneration that are subject to contributions, and this covers the base and variable salary.
This bonus must be implemented either through an employer’s unilateral decision set out before January 31,2019 or through a collective agreement, and must, in any case, be paid out before March 31, 2019.