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Businesses reopen and working time increases

More attractive overtime rules during the health crisis


As businesses begin to reopen, organisation of employees’ working time is being examined more closely than ever.

The exceptional measures taken by public authorities notably include the possibility, until 31 December 2020, for companies in “business sectors particularly necessary for the security of the nation and the continuity of economic and social life1 to deviate from maximum working hours.

In order to revive economic activity in the coming months, legislation has also been passed to provide employers with incentives enabling them to increase production as well as their use of available employees to compensate for the absence of those off sick or forced to look after their children at home.

Here is an update on this measure, encouraging a short-term increase in employees’ working time.

Since 1 January 2019, salary and bonuses paid for overtime have been exempt from income tax up to an annual limit of €5,000 per employee2.

In response to the health emergency declared on 23 March 2020, recently extended until 10 July 2020, this income tax exemption ceiling has been temporarily increased to €7,5003.

However, the increase in the exemption ceiling to €7,500 only relates to overtime worked between 16 March 2020 and the last day of the health emergency.

Let’s take the example of a taxpayer who works overtime in 2020 representing a taxable net income of €6,500, of which €1,000 is for hours worked during the health emergency. Since the ceiling of €5,000 is exceeded, in principle, €1,500 should be taxable. However, if that €1,500 excess includes €1,000 attributable to overtime worked during lockdown (and total overtime pay for 2020 does not exceed €7,500), then only €500 is ultimately taxable. Only €6,000 is therefore exempt from income tax.

In terms of employment legislation, employees and employers in small businesses continue to benefit from the reduced contributions provided for by previous laws.

In practice, for employees, the Social Security Finance Act for 2019[4] granted a reduction in payroll pension contributions. This reduction in social security contributions applies to all employees subject to hourly calculation of their working time, for overtime calculated weekly, for hours worked beyond a fixed annual amount of 1,607 hours, or additional hours.

The reduction in payroll contributions was capped at 11.31%, approximately corresponding to the basic and supplementary old-age pension contribution rates payable by employees.

It should be noted that in companies with fewer than 20 employees, employers benefit from a flat-rate reduction in employer contributions of €1.50/hour. The deduction is applied to sums payable by the employer to the various collection bodies for each relevant employee and in respect of all remuneration paid for that overtime and may not exceed that amount.

These reductions in contributions, designed to incentivise both employers and employees in small businesses, remain unchanged, while the attractiveness of the scheme is increased from a tax perspective during the period of the health crisis.

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