A formula the law writes for you

SAS Lemoine makes 420 000 € of net profit and employs sixty people. Its director assumed he could set the profit-sharing pot freely. The law computes it for him: 112 500 €, that is 1 875 € per employee. Before you read on: where does that figure come from, and what does the director still decide?

Fifty employees, and five years

Profit-sharing becomes compulsory in companies that have employed without interruption at least fifty people a month over the last five years. The two conditions are cumulative: the threshold and its duration.

That five-year rule is protective and often overlooked. Crossing fifty employees in one year triggers nothing: the obligation only arises after five consecutive financial years above the threshold, which leaves time to prepare the agreement.

Below the threshold, profit-sharing remains possible voluntarily. It then opens the same social and tax advantages, and becomes an argument for attracting staff in companies that cannot match the salaries of larger ones.

The formula, term by term

Article L. 3324-1 of the labour code lays down a single formula. It starts from net profit made in France, as used for tax, from which 5 % of equity is deducted as a return on capital.

The result is then multiplied by the ratio of salaries to the company's value added, and divided by two. That final division expresses a split: half the excess profit goes to employees, the other half to the company.

Each of the four terms can be read in the accounts, which makes the pot verifiable by staff representatives. The formula leaves no room for judgement: it produces a figure, not a range.

The 5 % equity deduction has a counter-intuitive consequence. A heavily capitalised company mechanically pays less profit-sharing than an indebted one at equal profit, since capital is served first.

What the agreement still chooses

The formula sets the pot; the agreement sets its distribution. Three criteria are allowed: an equal share for all, a share proportional to salary, a share proportional to time present, or a combination of these criteria.

The choice is not socially neutral. An equal distribution redistributes towards lower salaries; a distribution proportional to salary reproduces the existing pay hierarchy. It is the only genuinely political decision in the agreement.

Two ceilings bound the exercise. The annual individual ceiling stands at 36 045 €, and the salary used for a proportional distribution is itself capped at three times the annual social security ceiling.

A length-of-service condition may be imposed, up to three months. Beyond that, every employee present must be served: profit-sharing cannot be reserved to open-ended contracts or to long-serving staff.

Where the money goes if the employee says nothing

Every agreement must let the employee direct their profit-share into an employee savings plan: a company plan, an inter-company plan, or a retirement savings plan. The choice is made within fifteen days of notification.

Absence of a choice blocks nothing: failing an answer, half the sums are directed by default into a retirement savings arrangement. An employee who does not reply therefore makes a choice, without knowing it.

This is the point an employer has every interest in explaining clearly. An employee who discovers their savings locked until retirement sees it as an imposition, when the default allocation followed from their own silence.

A last point separates profit-sharing from a bonus in the employee’s eyes. Sums placed in an employee savings plan are locked for five years, save for listed early-release cases: buying a home, marriage, the birth of a third child, ending the employment contract.

That lock is what buys the tax exemption. A profit-share taken in cash is taxable; the same sum placed in the plan is not, which is the whole economic logic of the scheme.

Explaining that trade-off is worth more than any communication effort. An employee who understands what the five years buy chooses knowingly, instead of experiencing the lock as an administrative imposition.