On 22 May 2019, the French government passed new legislation knows as the “Pacte law” for business growth and transformation. The new law aims to unlock the growth of small and medium-sized enterprises and to encourage pension savings and investments in the domestic economy. While some provisions of the Pacte law entered into effect on 1 October 2019, others will be effective on 1 January 2020.


The Pacte law was adopted by the French parliament on 11 April 2019, and published in the Official Journal on 23 May 2019. The law is the flagship economic reform of the government of Emmanuel Macron, led by Bruno Le Maire. The government expects the Pacte law to increase France’s gross domestic product by 0.4% by 2025 and 1% over time.   

Key details

The most important changes affecting employment practices and employee benefits are the following:

Workforce thresholds

The Pacte law harmonizes workforce thresholds for all labor legal obligations derived from labor, social security and tax codes. The harmonized thresholds are 11, 50 and 250 employees.

On 1 January 2020, there will be a harmonization of workforce thresholds’ calculations for companies that are already above a workforce threshold triggering the application of some tax or legal requirements. The workforce calculation that will be considered for these companies will be the average number of employees in the previous calendar year. Some exceptions apply to this harmonization of calculation.

Companies below a workforce threshold triggering the application of some tax or legal requirements will have a different calculation. Beginning 1 January 2020, any workforce increase that reaches 11, 50 or 250 employees must be observed for five consecutive calendar years before triggering some specific legal obligations. This new calculation rule applies only to specific legal requirements such as vacation and transportation vouchers, vocational training, overtime, carpooling, etc.

A decrease of the workforce below a threshold for only one calendar year will suffice to render the legal obligation inapplicable.

As stated by the French Finance Ministry, the new workforce thresholds rules and calculations won’t have any impact on the thresholds of work councils and any committee representing employees.

The establishment of rules and regulations

On 1 January 2020, companies with 20 employees will no longer be required to establish internal rules and regulations. The establishment of rules and regulations will apply to companies with an average of 50 employees or more during the previous calendar year. The new article allowing a flexible period of five years for threshold crossing does not apply to this legal obligation. A decrease of the workforce below 50 employees for a calendar year makes the internal rules requirement inapplicable.

Pension savings

On 1 October 2019, the Pacte law merged existing supplemental Defined Contribution (DC) pension plans (PERCO, PERE, PERP and MADELIN) into one single pension savings plan known as the Plan d’Epargne pour la Retraite (PER). This merger is expected to increase the equity available for business growth and to boost pension savings. 

The new PER has the same basic features as the previous plans. Employees can voluntarily contribute up to 10% of taxable salary (deductible from income tax), and funds may be withdrawn before retirement for the following reasons:

  • The purchase of a primary residence.
  • Disability of the participant or a family member.
  • Death of the participant’s spouse or legal partner.
  • Bankruptcy, over-indebtedness and the expiry of unemployment benefits.

At retirement, employees may receive a lump sum for only voluntary savings and an annuity payment for the remaining. In addition, employees can now transfer their accrued savings from old DC plans to PERs and from an individual PER to a group PER.


Mandatory profit-sharing

On 1 January 2020, employers will be mandated to set up a profit-sharing plan on the first fiscal year after a period of five consecutive calendar years during which the workforce threshold of 50 employees has been reached or exceeded.

In addition, the maximum wage cap used to calculate proportional profit-sharing decreased from four times to three times the annual social security ceiling.

Optional profit-sharing

On 1 January 2020, the cap on the amount that can be distributed to employees as optional profit-sharing will increase from 50% (EUR 20,262) to 75% (EUR 30,393) of the social security ceiling.

Next steps

Employers should review their rules and policies and ensure compliance with the Pacte law within the timeline.

Additional resources

The Pacte Law for the Business Growth and Transformation Action Plan – Law No. 2019-486 of May 22, 2019