Payroll in France : changes for 2025

1. Calculating benefits in kind for a car 

For cars made available to the employee until 31/01/2025 included a change was made regarding the calculation benefits in kind.

• For purchased cars, the flat-rate benefit in kind is 15% of the purchase price (or 10% if the car is more than 5 years old).
• For leased cars, the benefit in kind is 50% of the total cost (rental, maintenance and insurance of the car).
• If the employer bears the fuel costs, the benefit in kind is increased to 20% (or 15% for cars older than 5 years) for purchased cars and 67% for leased cars (rental, maintenance, insurance and fuel costs included).
• For cars made available to the employee until 31/01/2025 included, the calculation does not change and the benefit in kind is still 9% of the purchase price for purchased cars (or 6% for cars older than 5 years), for leased cars it is 30%.
• If the employer bears the fuel costs, the flat rate of 12% on purchased cars (or 9% for cars older than 5 years) and 40% on leased cars will continue to apply if the car was made available until 31/01/2025 included.

Since 1 January 2020, temporary measures applied to electric cars. Thus, charging costs at the expense of the employer were not to be taken into account and a 50% discount was granted on the calculation of the benefit in kind with a maximum of €2,000.30 (2025) on an annual basis. 

From 1 February 2025 to 31 December 2027, charging costs are still not to be taken into account and a 70% discount is provided with a maximum of €4,582 on an annual basis. An additional condition here is that the electric car has an environmental score of at least 60 points. For cars whose environmental score is lower, this discount does not apply. The temporary measures concerning charging stations were also extended until 31 December 2027. Their use, at the workplace or at the employee's home, does not create a benefit in kind..

2. Calculation daily allowance in case of illness 

Employees who have worked a sufficient number of hours or paid sufficient contributions are entitled to a daily allowance from the Social Security Scheme (IJSS) in case of illness. This daily allowance is 50% of the normal daily wage. The daily wage is calculated based on the last 3 monthly wages received by the employee prior to the work stoppage.

Currently, the limit for the income taken into account for calculating the IJSS is set at 1.8 times the monthly minimum wage (SMIC), currently EUR 1,801.80 per month. Consequently, the salary taken into account for the calculation of per diems can reach a maximum of EUR 3,243.24.

What changes ?

From 1 April 2025, this limit will be reduced to 1.4 times the monthly minimum wage (SMIC), or €2,522.52. This means that the basis for calculating the IJSS also decreases, resulting in the maximum amount payable for the IJSS dropping from €53.31 to €41.47 per day.

What is the impact on employees and employers ?

• Employees who do not receive supplementary salary retention from the employer will receive lower benefits in case of illness.
• Employers who, regarding the collective agreement, have to supplement some or all of their employees' salary in case of illness will face higher employer costs as a result.
• An increase in disability insurance premiums ("prévoyance") may follow. 

3. Reduction in employers' social contributions

The rebate scheme on employer social security contributions was introduced in the 1990s and has since been reformed several times. At present, the rebate consists of the following 3 components:

1. The general reduction of employer contributions, applicable to salaries not exceeding the amount of 1.6 times the SMIC
2. The reduced rate for the employer contribution “allocations familiales”, for the employees with a gross salary up to 3.5 times the SMIC on date of 31/12/2023
3. The reduced rate for the employer contribution “assurance maladie” for the employees with a gross salary up to 2.5 times the SMIC on date of 31/12/2023

As a result, the reduction in employer contributions is especially significant for workers compensated at the minimum wage (SMIC): for these workers, virtually no employer contributions are due. Subsequently, the reduction rapidly decreases to 1.6 times the minimum wage, eventually moving to partial and proportional reductions on salaries up to 3.5 times the minimum wage.

A first phase in the reform of this system will be launched from 2025, complemented by a second phase in 2026. Read more about it here.

Reform

The current reform aims to merge the existing systems into a single unified system and ensure that the employer's contribution rebate decreases gradually, rather than in stages. Specifically, the rebate will start slightly lower for the lowest wages, and will continue to be fully degressive until wages equal to 3.5 times the SMIC. Unfortunately, it was also planned that the PPV (Prime de Partage de la Valeur, a value sharing scheme) will be included in the basis for calculating the reduction in employer contributions. As a result, less rebate will therefore be obtained if a PPV is granted. However, the premium itself will remain fully exempt from employer contributions.

The reform will be implemented in two phases: the first phase will take place in 2025, the next phase in 2026.

If you have any questions regarding this, please email us at info@rfn.fr. We will be happy to help you further.