Changes as of 1 January 2018

The 2018 Social Security Finance Bill (projet de Loi de Financement de la Sécurité Sociale) was presented to the Council of Ministers in October. Here is an overview of some of the key measures.

Social security ceiling

The annual social security ceiling for 2018 is set to be increased to €39,732 (from €39,228 in 2017).

The monthly social security ceiling would therefore be raised to €3,311 in 2018 (from €3,269 in 2017).

Hourly minimum wage

From 1 January 2018, the hourly minimum wage is set to be increased from €9.76 to €9.88.

AGIRC-ARRCO supplementary pension plans

Calculating contributions and ceilings

An AGIRC-ARRCO circular issued on 27 October 2017 provides the clarification that we had been expecting since the publication of the decree of 21 November 2016 scrapping deferred salary payments and the decree of 9 May 2017 making significant changes to the regulations on calculating and declaring headcount.

In summary, the circular provides details on the methods for calculating supplementary pension contributions from 1 January 2018 so that they are consistent with the methods for calculating social security contributions, as required under the monthly electronic payroll return (déclaration sociale nominative – DSN) system.

The circular reiterates and explains the following:

  • the end of deferred salary payments, providing an example that is identical to the example given in French social security update no. 93 with respect to the ceiling applicable to social security contributions in 2017;
  • the rules on the period to which amounts paid after an employment contract has been terminated or pursuant to a court decision relate (in this respect, the circular is very clear because it abolishes one-off payments, even in the event of a court decision and regardless of the period to which the additional remuneration relates);
  • the social security ceiling for an employee who arrives or leaves during a given month, which will now be prorated based on the actual number of calendar days in said month rather than being divided by thirty;
  • the social security ceiling for an employee whose employment contract is suspended, which was hitherto only prorated if said employee was absent for the entire payroll period between two payment dates, which will now be prorated.

GMP contribution

The board of directors of AGIRC has decided to increase the amount of the minimum points guarantee (garantie minimale de points – GMP) (circular AGIRC 2017-10 DT of 16 October 2017) for 2018.

This contribution, which guarantees a minimum of 120 supplementary pension plan points per year for all managerial employees and those with equivalent status whose salary is lower than the social security ceiling or falls between this ceiling and a cut-off salary, will be increased to an annual amount of €872.52 from 1 January 2018 (compared with €844.56 in 2017), i.e., a monthly contribution of €72.61, divided between the employer (€45.11) and the employee (€27.60).

GMP base

In light of the assumption that the annual social security ceiling will be set at €39,732 for 2018, the GMP calculation base for salary bracket B should increase to an annual minimum amount of €4,254.84 (for full-time employees present the entire year), provided that the AGIRC supplementary pension contribution rate does not also increase.

The cut-off salary below which the GMP contribution is applied will be €39,732 + €4,245.84 falling within salary bracket B, i.e., €43,977.84 per year.

 

Increase in the CSG

The rate of the CSG supplementary social security contribution tax will rise by 1.7 points. This increase will concern employment income (salaried and non-salaried), replacement income, property income, investment income and gambling losses/winnings.

The contribution paid on employment income and replacement income will therefore increase from 7.5% to 9.2%, but the deductible portion of the CSG will rise from 5.1% to 6.8%. The non‑deductible portion of the CSG will remain unchanged at 2.4%, as will the rate of the CRDS social security contribution tax which currently stands at 0.5%.

The increase in the CSG will not affect unemployment benefits, social security daily allowances or pensions qualifying for the reduced CSG rate which remains unchanged at 6.2% in the former two cases and at 3.8% in the latter.

Abolition of employee contributions to health and unemployment insurance

Under the 2018 Social Security Finance Bill, the employee contribution to unemployment insurance – which currently stands at 2.40% – will be abolished in two stages, pursuant to a decision of the French government. From 1 January 2018, it will be decreased by 1.45% to 0.95%, before being abolished from 1 October 2018.

In addition, the employee contribution to health insurance – which currently stands at 0.75% – will be abolished from 1 January 2018. We are expecting a regulatory provision to this effect.

These measures are a result of the French government’s desire to boost employees’ purchasing power by cutting social security contributions by some 3.15%.

Competitiveness and employment tax credit (CICE)

Under the 2018 Social Security Finance Bill, the competitiveness and employment tax credit (crédit d’impôt pour la compétitivité et l’emploi – CICE) – which is scheduled be abolished in 2019 – will be transformed into a reduction in employer contributions. From 1 January 2019, employer contributions on salaries representing less than 2.5 times the minimum wage will be decreased by 6%. The CICE will be maintained in 2018, but at a reduced rate of 6% (versus 7% currently).

Fillon reduction

With respect to salaries representing less than 1.6 times the minimum wage, the French government is planning to gradually reduce employer contributions to (i) health insurance, (ii) the family allowance fund, (iii) the national housing fund (fonds national d’aide au logement – FNAL), (iv) the supplementary pension scheme (AGIRC-ARRCO) and (v) unemployment insurance, thereby extending the scope of the previous general reduction in social security contributions, more commonly known as the Fillon reduction.

This measure is set to enter into force on 1 January 2019. Consequently, in 2019 companies would benefit from these reductions, in addition to the reduction in the CICE calculated with respect to 2018.

Tax treatment of income from employee savings plans

From 1 January 2018, any income earned in an employee savings plan (company savings plan [plan d’épargne entreprise – PEE], intercompany savings plan [plan d’épargne interentreprises – PEI], collective pension plan [plan d’épargne pour la retraite collectif – PERCO], etc.) will be taxed at the rate in force when the income is earned rather than at the rate in force when it is recognised. However, for any income earned or recognised before 1 January 2018, the “historical rates” mechanism will continue to apply.

Start date of an occupational disease

Members of the French parliament wanted to amend the date considered to constitute the start date of an occupational disease.

Currently, an occupational disease is considered as such from the date on which the victim is informed by way of a medical certificate of the potential link between their disease and their work. Under the legislation proposed by members of the French parliament, an occupational illness would start on the most recent of the following two dates:

  • the date on which the disease is first medically diagnosed (i.e., the date of the first examination by a doctor during which the disease is identified);
  • the date two years prior to the declaration of the occupational disease.

In other words, even if the disease was diagnosed many years ago, the date from which compensation would be due may not extend back more than two years prior to the date on which the occupational illness was declared. The amendment would apply to occupational diseases notified from 1 July 2018.

Tax treatment of free shares

The 2018 Social Security Finance Bill further amends the tax treatment of free share grants. Under an amendment tabled by members of the French parliament, the rate of the employer contribution with respect to free shares would be reduced from 30% to 20%. It was only recently increased to 30% by the 2017 Finance Act (Loi de Finances), after having already been decreased to 20% by the 2015 Macron Law. The new reduced rate of 20% would apply to free shares granted after the publication of the 2018 Social Security Finance Act (Loi de Financement de la Sécurité Sociale).

Simplification of payslips

As already mentioned in French social security update no. 88 for the second quarter of 2016, the legislation governing the simplification of payslips has been published.

It entered into force on 1 January 2017 for employers with 300 employees or more and will enter into force on 1 January 2018 for employers with fewer than 300 employees.

Therefore, all employers must now prepare simplified payslips.

Contactez-nous

Philippe Hurez

Associé Expert-comptable

Tel : 33 1 56 57 60 13

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