Social contributions and penalties: changes introduced by the Social Security Financing Law for 2018

The Social Security Financing Law (“Loi de financement de la sécurité sociale” or LFSS) for 2018 was published in the Official Journal on December 31, 2017. The strategy pursued is once again that of balancing the social security deficit, but, in accordance with the presidential platform and program, the government has implemented several measures designed to increase the purchasing power of the workforce and encourage business activity.

Social security contributions (Art. 8)

Employee Contributions

  • Health Insurance: as of January 1, 2018, elimination of the employee contribution to health, maternity, disability and life insurance at a rate of 0.75% and applied to the total remuneration of employees enrolled under the general and agricultural social security regimes.
  • Unemployment Insurance: reduction of the employee contribution to unemployment insurance applied to remuneration within the limits of four times the Annual Social Security Ceiling (“Plafond annuel de la sécurité sociale” or PASS) to the rate of 0.95% (formerly, 2.4%) from January 1 to September 30, 2018. Exemption will reportedly be total as of October 1, 2018.
  • Generalized Social Contribution (“Contribution sociale généralisée” or CSG): 1.7% increase in rates applicable to wage-based revenue, pension and disability plans as of January 1, 2018. The increase in CSG is deductible from taxable income. The rate of the CSG is therefore brought to 9.2% on salaries and to 8.3% on pension plans. The rate for the Contribution to the Reimbursement of Social Debt (“Contribution au remboursement de la dette sociale” or CRDS) is maintained at 0.5%. This increase does not apply to daily social security benefits or to unemployment benefits (CSG rate maintained at 6.2%). A reduced rate of 3.8% applies to certain low-income workers (approximately € 14 500/year).
  • Gain global net : 0.5% for the period ranging from January 1, 2018 to September 30, 2018, then brought to 1.45% as of October 1, 2018.
  • The Constitutional Council has rejected the grievance on grounds of unequal treatment before the law and the public expenses brought by certain members of parliament who deemed any difference in treatment to be unjustified, whether be-tween active workers and retirees, or active workers and those drawing unemployment benefits.

Employer Contributions

  • So as to facilitate hiring by approaching “zero general contributions” for minimum-wage employees, the legislative branch has:

o replaced the Tax Credit for Competitiveness and Employment (“Crédit d’impôt pour la competitivité et l’emploi” or CICE) by a 6-point reduction in employer contributions to health insurance on salaries under 2.5 times the minimum wage. The contribution rate for such salaries will therefore be of 7%, and of 13% for higher salaries.

o broadened the scope of the contributions concerned by the general reduction (the so-called “Fillon” reduction) to include contributions to unemployment insurance and statutory complementary pension plans. The remuneration taken into con-sideration in calculating the reduction will no longer be that deducted from the total Specific Fixed Deduction (“Déduction forfaitaire spécifique” or DFS) (specifics to be determined by executive order).  

o these measures will apply to contributions owed for current periods as of January 1, 2019.

  • The rate of the employer contribution owed for the free issue of shares has been reduced from 30% to 20% for those authorized by an extraordinary general meeting as of January 1, 2018.

Additional resources in the fight against social fraud (Art. 78)

The right of communication available to supervisory bodies allows them to request certain information from third parties con-cerning persons, identified or not, professional confidentiality notwithstanding. Hitherto, the penalty for refusing to comply with such a request was a fine. The LFSS decriminalizes this penalty, which thereby becomes an administrative penalty amounting to € 1 500 per contributor, insured person or beneficiary concerned and capped at € 10 000 if the request concerns identified persons. If the request concerns non-identified persons, the administrative penalty is set at € 5 000.

In brief: social security and tax regime governing compensation for collective termination by mutual agreement specified by the Finance Law

The Finance Law for 2018 brings the tax regime governing such compensation into line with that governing compensation paid in the framework of a Job Protection Plan (“Plan pour la sauvegarde de l’emploi” or PSE). Such compensation is thus entirely exempt from both taxes and social contributions within the limit of twice the PASS.

Justine Venel

Justine Venel is a lawyer and a Doctor of Law. She taught Social Security Law for several years at the University of Paris 1 – Panthéon Sorbonne. Within the framework […]