The recent reforms to social security contributions in France, set out in the 2024 Social Security Financing Act, introduce significant adjustments to reduced contribution rates. The Act has introduced caps affecting the reduction of rates for certain employer contributions. These changes, intended to respond to the current economic context, have consequences for employers and employees, leading us to ask what impact this Act will have on businesses.

New measures relating to employer contributions

Currently, employers benefit from reduced rates for two employer contributions: health insurance and family allowances.

• For health insurance, the contribution rate is 13% for earnings above 2.5 times the SMIC, but it is reduced to 7% for remuneration at or below 2.5 times the SMIC.
• For family allowances, the contribution rate is 5.25% for earnings above 3.5 times the SMIC, but it is 3.45% for remuneration at or below 3.5 times the SMIC.

From now on, these thresholds will be set by decree, meaning they will no longer be expressed as multiples of the SMIC, but as amounts in euros:

Therefore, to benefit from the reduced rate, earnings must not exceed an amount defined by decree:

• For health insurance, it cannot be lower than 2.5 times the SMIC, i.e., €4,368 applicable as of December 31, 2023, and 2 times the SMIC for the current year.
• For family allowances, it cannot be lower than 3.5 times the SMIC, i.e., €6,115.20 applicable as of December 31, 2023, and 2 times the SMIC for the current year.

These adjustments aim to better control the cost of payroll tax relief on wages. However, the Act now provides for de-indexing from the SMIC the remuneration caps associated with these reduced rates, thereby introducing a new dynamic.

This increase in contributions is in addition to the increase in the SMIC and the increases in reference ceilings (the IJSS sickness cap, for example). This therefore requires greater control in payroll production, social declarations and URSSAF contributions.

Freezing of Employer Reduction Thresholds

In parallel, the 2024 Finance Act froze the thresholds for the employer reduction of the health contribution (2.5 times the SMIC) and Family Allowances (3.5 times the SMIC) at the level of the SMIC in force on December 31, 2023.
This measure, initially planned for two years, until December 31, 2025, aims to stabilise public finances in an economic context marked by sustained inflation.

Freezing of employer reduction thresholds: what impact on businesses

The freezing of the thresholds for the employer contribution reduction, provided for by the 2024 Finance Act until December 31, 2025, may have several concrete impacts on businesses in France.
As wages will increase and this limit is being frozen, the bases for the higher rates should be larger in 2024.

• Increase in social contribution costs for businesses: businesses usually benefit from employer reductions on social security contributions for employees whose remuneration is below certain thresholds (2.5 times the SMIC for the health contribution and 3.5 times the SMIC for family allowances). By freezing these thresholds at the level of the SMIC in force on December 31, 2023, businesses could see their social contribution costs increase for employees paid above these thresholds.
• Reduction in employees’ net income: employees whose remuneration is above the frozen thresholds could see their social contributions increase, which could reduce net income.
• Stability of Public Finances: from the government’s perspective, freezing the thresholds aims to stabilise public finances by limiting reductions in revenue from social contributions. The objective is to maintain budgetary balance in a complex economic context.

How will the 2024 Financing Act impact businesses?

• Increase in Social Costs. Businesses will see their social costs increase for employees whose remuneration exceeds the frozen thresholds (2.5 times the SMIC for the health contribution and 3.5 times the SMIC for family allowances), as they will no longer benefit from employer reductions.
• Impact on Profitability. The increase in social costs can affect business profitability, particularly for those employing a significant number of employees paid above the set thresholds.
• Review of Compensation Policies. Businesses will likely need to review their compensation policies to minimise the financial impact of freezing the employer reduction thresholds. This could include adjustments to the structure of salaries and benefits.
• Fewer Hiring Incentives. Freezing the thresholds could reduce businesses’ incentive to hire employees whose remuneration is close to the thresholds, potentially impacting recruitment policies.
• Monitoring Legislative Developments. Businesses will need to remain vigilant regarding future legislative developments. Adjustments may be required depending on subsequent government decisions affecting social contributions.

Optimising social charges: a solution for businesses?

In the face of the new LFSS 2024 regulations, optimising social charges is emerging as a crucial strategy for businesses, particularly following the threshold adjustments and the freezing of employer reductions. Faced with these challenges, businesses can explore ways to streamline their social costs by carefully analysing their salary structures, employment contracts and benefits. Indeed, this will require a thorough review of payroll processes, social declarations and URSSAF contributions. The goal? To maintain balanced financial management while remaining compliant with the new regulations. Finally, proactively seeking optimisations can help businesses mitigate the economic consequences of these legislative changes while preserving their competitiveness in the market.

Implementing over-contribution audits

Over-contribution audits involve carefully examining the various components of the company’s social charges in order to identify any errors, overpayments or inefficiencies. In a period of legislative changes and rising contributions, an in-depth audit can help identify optimisation opportunities. The objective of an over-contribution audit is to ensure that the company is paying its social charges correctly and to highlight areas for improvement. This may include reviewing employment contracts, verifying calculation bases, compliance with new regulations, and other aspects related to social charges.

By correctly adjusting these elements, the company can not only partially offset the increase in contributions, but also improve its operational and financial efficiency. The over-contribution audit can be carried out by specialised consultants, thus ensuring a rigorous approach that complies with the regulations in force. In summary, an over-contribution audit represents a proactive and relevant strategy to mitigate the financial impacts of rising contributions, while contributing to more efficient management of the company’s social charges.

Althéa, a firm to support you

We have observed the many impacts of this new regulation on businesses. That is why we believe it is necessary for businesses to be supported by a consulting firm, mainly for optimising social and employer charges.

This makes sense, as Althéa offers a service focused on optimising social and employer charges. We make our technical expertise and ongoing legal monitoring available to help you control your social charges and maximise your savings.

Althéa is a management consulting firm, bringing together more than 250 consultants with triple expertise: consulting methodology, IT solutions & business.

In 2023, we achieved €28 million in revenue. We support our clients in their transformation projects across HR, Finance, Procurement, and Supply Chain, from defining the transformation roadmap to the operational deployment of projects.