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Transfer untaken holidays into a Perco pension plan or a time savings account: so you do not lose out!

Home Retirement savings Transfer untaken holidays into a Perco pension plan or a time savings account: so you do not lose out!
October 8, 2021admin0
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May is usually full of bank holidays but is also the last chance in France for busy employees to use up last year’s holiday entitlement and other days-off so dearly acquired. However, there is an arrangement that can take the sting out of the 31 May deadline. Transfer part on one’s leave entitlement into a time savings account (CET) or even directly into a collective pension savings plan (Perco). How?

10 days of leave not taken – converted into retirement savings

The CET (time savings account) was introduced in 1994 to facilitate the management of working time. Since then, by virtue of various reforms, it has become an instrument for converting time into money. Paid holiday leave not taken can be transferred into the CET and then converted later into retirement savings under a Perco or Article 83 pension plan.

Employees who do not have a CET can also save some of their untaken leave by transferring it directly into their Perco. The recent Macron Act has simplified things by standardising the rules. From now on, whatever the scheme used, employees can convert up to ten of their untaken days-off as from the fourth week of paid leave.

Using the employer contribution to reduce employee benefit liabilities at little expense

When an employee decides to transfer their untaken leave into a pension plan, the employer has the possibility of adding a voluntary employer contribution. Such a decision is a way of rewarding those employees who sacrificed a part of their holiday time to help the organisation get through a busy period. It also means paid leave does not stagnate too long in CETs thereby increasing the company’s employee benefit liabilities. This is because, if the employee resigns, is made redundant or retires they receive compensation for the paid leave stored in their CET. This is then treated as salary, subject to social insurance contributions. By converting untaken holiday leave into money via retirement savings plans, the employer reduces their employee benefit liabilities.

An advantageous social insurance niche

Holiday entitlement paid into a Perco is exempt from employee and employer social insurance contributions (sickness, old-age and family allowance) and also escapes the infamous 20% flat contribution. Such payments are however subject to the so-called CSG/CRDS additional social insurance contributions. They are also subject to contributions to the unemployment benefit fund and to retirement and employee benefit funds. In the end of the day, the savings on social insurance charges for the employer can exceed 25% of gross salary.

A rare favour since the conversion of paid holidays into retirement savings leads to a reduction in total social security contributions on salary which does need to be paid but which would otherwise have attracted full contributions

Damien Vieillard-Baron

Retirement savings

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