One-time tax-free bonus : good things always come in threes

After being announced by the Government in March 2021, the third Macron tax-free bonus finally came into force under the 1st amended Finance Act n°2021-953, dated July 19, 2021. Its implementation has been later clarified by an administrative instruction dated August 19, 2021.

Its aim: boosting the purchasing power of the employees at a low cost for the companies, as this bonus, which is not compulsory, will benefit from tax and social contributions exemptions.

Here are summarized the main conditions to comply with in order to benefit from this favourable measure.

Entities in scope

All private employers are included, as well as state controlled entities with commercial and administrative activities as long as they employ workers under private laws.

Potential beneficiaries are employees and officers. However the employer can choose to grant the bonus, either to all or only those earning less than a certain salary.

Be careful, among all potential beneficiaries, not all will be eligible to the specific tax and social contributions measure! Only those complying with the 2 following conditions will be eligible :

• Existence of an employment relationship at a given date: it can be, either when the bonus is paid or, when the collective agreement implementing it is registered or, when the unilateral employment decision creating it is signed.

All beneficiaries who meet this condition must get the exceptional bonus (except if a salary cap has been set).

Temporary staff (hired from an interim agency) must also get the bonus; the payment conditions are specific and imply both the interim agency and the company.

• Salary below a certain level: only employees earning less than 3 times the annual guaranteed minimum wage (corresponding to the working time set in the employment contract) are eligible.

Conditions on the tax-free bonus

The tax-free bonus amount is freely chosen by the employer. However, only the part below a certain ceiling can benefit from the tax and social contributions exemptions.

As a rule, this ceiling amounts to 1.000 euros per employee. By way of derogation, it can rise up to 2.000 euros per employee under certain circumstances, which are the followings:

• Companies employing less than 50 employees; or
• Associations or foundations pursuing a mission of general interest; or
• Companies with profit-sharing agreement implemented or signed (and coming into force before March 31, 2022) at the date of the bonus payment; or
• Companies covered by a collective agreement (negotiated or set up at a branch or a company level) which aims at increasing the status of the so-called « second-line workers » (workers having particularly contributed to economic and social life during the sanitary crisis). If not concluded, the negotiation of the agreement must at least have started.

The above mentioned administrative instruction provides more precise guidelines on how to determine which employers can benefit from these derogations.

The bonus amount can be modulated, but only based on the following criteria:

• Salary;
• Classification level;
• Actual presence length during the past year  (some absence must be considered as physical presence, like for example maternity leave);
• Working time set in the employment contract.

The payment must occur between June 1, 2021 and March 31, 2022.

The bonus shall not replace any existing salary component (like for example another bonus or a salary rise).

Conditions on the implementation process

The employer decision must be formalised trough, either:

• A written unilateral decision– in such case, the works council must be informed before the payment, or
• A company or a group collective agreement, concluded in the same conditions as a profit-sharing agreement.

In any case, the followings must be stated:

• The bonus amount ;
• The scope of the beneficiaries (a salary cap can be set and the given date when the employment relationship existence is controlled must be mentioned) ;
• If any, the modulation criteria used ;
• The date of payment.

Tax and payroll exemptions

When all above mentioned conditions are met, the exceptional purchasing power bonus is free from income tax and all social contributions, up to either 1.000 euros or 2.000 euros.

Terms of payment

The payment appears on the pay slip on a dedicated line which clearly identifies its nature. It can be split into several payments if all above conditions are met.