France's 2026 Payroll Relief Overhaul: What Employers Need to Know About the New RGDU

French payroll has just undergone its most significant structural change since the Fillon reduction was introduced in 2003. From 1 January 2026, the three overlapping employer relief mechanisms — the Fillon degressive reduction, the reduced sickness contribution band and the reduced family allowance band — were merged into a single scheme. If you employ staff in France, your January 2026 payroll already uses a new formula, new parameters and a wider eligibility range.

This article explains the mechanics, the numbers that matter, and the operational pitfalls we see most often in employer files.

From 1 January 2026, the two salary-band reliefs (reduced sickness rate up to 2.5× SMIC; reduced family allowance rate up to 3.5× SMIC) were abolished and replaced by a single degressive employer relief (RGDU) running up to 3× the SMIC. The maximum coefficient is 0.3981 for employers with fewer than 50 staff (0.4021 for 50 or more). Relief is zero once gross annual pay reaches three times the annual SMIC.

Until 31 December 2025, French employers benefited from three separate mechanisms to reduce employer social contributions on lower wages:

1. The Fillon degressive reduction — applicable up to 1.6× the SMIC.
2. A reduced sickness contribution rate (7% instead of 13%) — applicable between 1× and 2.5× SMIC.
3. A reduced family allowance rate (3.45% instead of 5.25%) — applicable between 1× and 3.5× SMIC.

Law n° 2025-199 of 28 February 2025 (Social Security Financing Act — LFSS 2025, Article 18), implemented by Decree n° 2025-887 of 4 September 2025, abolished all three and replaced them with the RGDU. The simplification is genuine, but the recalibration affects any employer with staff earning between 1.6× and 3.5× the SMIC.

Yes, for all mainstream private-sector employers. Both reduced rates disappeared from the general social security regime on 1 January 2026.

A narrow exception applies: employers operating under specific territorial or sectoral exemptions (Lodeom for overseas territories, TO-DE for seasonal agricultural work, AADPA, ZRD, ZFRR) retain those mechanisms within their specific scheme. For the vast majority of mainland SMEs, they no longer exist.

The threshold shift is the most consequential change. The old Fillon reduction cut off at 1.6× the annual SMIC. The RGDU runs to 3× the annual SMIC, at which point it reduces to zero.

With the SMIC in force from 1 January 2026 (€1,823.03/month), the exit threshold sits at roughly €65,629 gross per year (approximately €5,469 gross per month for a full-time employee). That threshold will move when the SMIC is revised.

Practical note: for employers whose teams include junior engineers, technicians or sales staff earning between €2,000 and €4,000 gross monthly, the RGDU unlocks relief where only the family allowance band partially applied before. A precise calculation is worth running before drawing conclusions.

The official formula from Decree n° 2025-887 is:

Coefficient = Tmin + (Tdelta × [0.5 × (3 × annual SMIC / annual gross pay − 1)]^P)

Parameters:

Maximum coefficients (at SMIC level)#

The monetary relief equals: Gross pay × Coefficient

Illustrative example#

An employee earns €2,200 gross per month in a 12-person company. Using the SMIC in force in January 2026 (€1,823.03/month, or roughly €21,876 annually), the annual gross reference pay is €26,400. The ratio 3 × SMIC / pay is approximately 2.49; the bracketed term gives 0.5 × (2.49 − 1) = 0.745; raised to the power 1.75 this gives roughly 0.574; the approximate coefficient is 0.0200 + 0.3781 × 0.574 ≈ 0.237, suggesting a monthly relief of around €521.

This is for illustration only. Exact coefficients must be obtained via the official URSSAF simulator. Actual figures depend on hours worked, pay composition and other parameters.

This is where errors cluster most in practice.

The SMIC used is the rate in force for the relevant pay period — not a fixed annual figure frozen at the start of the year. The formula references an "annual SMIC" that is derived from the applicable hourly rate and the employee's actual or contractual working hours over the period.

In 2026, two SMIC rates apply:

• 1 January to 31 May 2026: €12.02/hour — €1,823.03/month (35-hour full time).
• From 1 June 2026: €12.31/hour — €1,867.02/month (35-hour full time).

The June uprating shifts the reference SMIC used in every payslip issued from that date forward. For employees whose pay sits close to the 3× SMIC threshold, the change can move them marginally in or out of eligibility.

The underestimated risk: payroll software configured with a static annual SMIC figure can produce incorrect coefficients from June 2026 onward. Verify that your payroll tool updates the reference SMIC automatically at each revision.

The table below gives a schematic before/after comparison:

Before and after 2026 by pay band#

The only band where employers face a net loss is 3× to 3.5× SMIC — approximately €5,469 to €6,381 gross per month. If any of your employees fall in that range, model the annual cost increase before mid-year payroll is finalised.

The RGDU applies to all private-sector employers affiliated to the general French social security regime, except those under specific incompatible exemption schemes. Covered entities include:

1. Commercial companies (SARL, SAS, SA, SNC, etc.)
2. Sole traders employing staff
3. Non-profit associations (loi 1901) with employees
4. Employer groupings

Self-employed individuals, corporate officers without an employment contract, and professionals without payroll are not in scope.

Two approaches are permitted, as with the former Fillon reduction:

Monthly calculation: the coefficient is recalculated each month on that month's SMIC and pay. Straightforward for stable salaries, but can create distortions when bonuses or overtime vary pay month to month.

Annual regularisation: monthly instalments are provisional; a final calculation is run at year-end on total annual pay and the weighted annual SMIC. More accurate for variable pay, and reduces the risk of a payroll audit adjustment.

For employees on stable monthly salaries, monthly calculation is sufficient. Where bonuses or variable overtime are regular, annual regularisation reduces compliance risk and improves accuracy — particularly in a year where the SMIC changes mid-year.

1. Confirm that your payroll software or provider has loaded the correct RGDU 2026 parameters: Tmin 0.0200, P 1.75, the appropriate Tdelta, and the 3× SMIC ceiling.
2. Verify that the reference SMIC updates automatically to €12.31/hour (€1,867.02/month) from June 2026 — not held at the January figure.
3. Identify any employees earning between 3× and 3.5× SMIC annually: they lose the family allowance band relief with no RGDU offset. Quantify the cost impact.
4. Check your headcount against the 50-employee threshold to confirm which Tdelta (0.3781 or 0.3821) applies.
5. Ensure payslips for January through May 2026 no longer carry "bandeau maladie" or "bandeau AF" line items — those reliefs are gone.
6. Plan your year-end regularisation if running monthly calculations: the mid-year SMIC uprating will create a balance to settle on the final payslip of the year.

Updated 2026-05-31. This article is for information and does not replace tailored advice. For your situation, contact a chartered accountant.