France Takes Steps to Fight Inflation's Effects on Workers

​With inflation reaching 5.6 percent in France as of September, the French government has taken steps to alleviate the effects of rising costs on employees and employers in the country. Most of these measures are voluntary but aim to increase the amount of money available to employees in a manageable way.

"The way so far the government has implemented measures is to encourage employers to increase the wages of the employees or at least put in place some measures to ensure that employees would be able to face the inflation on day-to-day products," said Florence Bacquet, an attorney with Flichy Grangé in Paris. "Some economists would argue that increasing wages is a grant for further inflation, but the measures so far are quite limited, probably in consideration for this risk."

The Value-Sharing Bonus

One way that the government has provided for a possibility to temporarily increase wages is a tax-exempt bonus that initially went into effect in reaction to the "yellow vest" protests in December 2018. This bonus is referred to now as the value-sharing bonus.

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"This was meant to be a temporary measure when it first came into force, but it was renewed several times, and the government decided to renew it on a permanent basis now, considering the inflation situation," said Sophie Lippmann, an attorney with Fromont Briens | Littler in Paris. "It is completely voluntary, so employers can decide to grant it or not, the categories of employees who will benefit from it, and the amount of it."

Whether the value-sharing bonus will make a large impact remains to be seen.

"It's capped at 6,000 euros [approximately $5,933] per employee, so it is going to make a big difference if you have a low salary, for sure. It's a one-time premium, so it will be consumed quite fast, and if inflation continues to rise, as it is at the moment in the Eurozone, I'm not so sure it's going to be enough," Bacquet said. "The premium is purely elective. It must be either negotiated in the company with the unions or put in place unilaterally by the employer after consultation of the works council."

Implementing Profit-Sharing Schemes

Another action the government has taken makes it easier to implement voluntary profit-sharing schemes. Companies with at least 50 employees have had an obligation to implement a profit-sharing scheme, but now provisions have been adopted to facilitate the implementation of similar profit-sharing in smaller companies. "The process is now simplified for these companies in order to incentivize them to provide for such a scheme and to redistribute the profit among employees," Lippmann said.

Further initiatives related to profit-sharing include temporarily freeing up the amount it generates. Generally, in France, if an employee benefits from profit-sharing, the money is not available to the worker for five years, with some exceptions. There is an exception in place until Dec. 31, 2022, to allow employees to use the profit-sharing amount accrued up to Jan. 1, 2022, right away, without waiting five years, Lippmann said.

In addition, there are smaller measures that have been put in place that allow for an increase in the amount of meal vouchers provided to employees, as well as an employer contribution to transportation costs.

An Uncertain Future

With strikes in France happening regularly and inflation continuing, it's unclear if there will be any further measures taken by the government to combat the effects of inflation for employees and employers.

"The government could incentivize the professional bodies at the branch level to try and negotiate higher wages," Lippmann said. "But the government won't compel the trade unions and employers to increase these wages. The legal statutory minimum wage is already
indexed on inflation."

A complicating factor is that these measures are not mandatory, so it is likely that some companies will choose to not apply them. "Those are voluntary measures, so they will be applied mostly by large companies, whereas the vast majority of companies in France are small companies with less than 50 employees." Lippmann said.

Looking forward, much of the situation will depend on how inflation develops and how the war in Ukraine continues to affect energy prices. With annual wage negotiations coming up, there is some flexibility, but a solution that works for both employees and employers won't necessarily be easy to reach.

"The next annual negotiation on wages is going to come up early next year, and that is going to be quite tense," Bacquet said.

Katie Nadworny is a freelance writer in Istanbul.