Mandatory executive provident scheme: the 1.50% contribution and its pitfalls

Quick answer. Since 1947, every company employing managers must cover them with collective provident insurance. The obligation requires a contribution entirely at the employer's expense, set at 1.50% of salary below the monthly Social Security ceiling (PMSS 2026 = €4,005). The law mandates that the majority of this contribution (minimum 0.76 percentage points) be dedicated to death risk coverage. If an employer fails to provide coverage and an executive dies, the employer must pay beneficiaries an indemnity equal to 3 times the annual Social Security ceiling (i.e. 3 × €48,060 = €144,180 in 2026).

The mandatory provident scheme for managers did not originate yesterday. It stems from Article 7 of the National Collective Convention for Managers (Convention collective nationale des cadres) of March 14, 1947 — a foundational text in French managerial labour law. When AGIRC and ARRCO (complementary pension schemes) merged on January 1, 2019, this collective convention formally ceased to exist as a standalone instrument. However, the National Interprofessional Agreement (ANI) of November 17, 2017 on managers' provident insurance kept this obligation alive: it establishes a standalone scheme that broadly carries over the logic of Article 7 of 1947. This legal continuity is crucial: no employer can circumvent this obligation by claiming the convention expired.

The rationale for this obligation? Protecting executives and their beneficiaries against risks of serious illness, disability, and death. In 1947, it was groundbreaking. Today, in 2026, it is routine law, yet catastrophic if breached.

Definition and calculation basis#

The mandatory contribution is calculated on "Tranche A" — the portion of gross salary between €0 and the monthly Social Security ceiling (PMSS). In 2026, the PMSS stands at €4,005/month, equal to an annual ceiling (PASS) of €48,060.

Concrete examples:

• Executive 1: gross salary €3,000/month → provident basis = €3,000 → contribution due = €3,000 × 1.50% = €45
• Executive 2: gross salary €5,000/month → provident basis = €4,005 (capped) → contribution due = €4,005 × 1.50% = €60.08
• Executive 3: gross salary €10,000/month → provident basis = €4,005 (capped) → contribution due = €4,005 × 1.50% = €60.08

Exclusive employer obligation#

Unlike Social Security contributions, which are shared between employer and employee, the 1.50% provident contribution is entirely borne by the employer. It cannot be passed on to the executive's net salary or deducted from pay.

The term "manager" is not monolithic. The 2017 ANI defines two categories:

1. Managers in the strict sense (Article 2.1): engineers, administrative, commercial, and technical managers holding manager status under their sector's classification or collective agreement.

2. Assimilated managers (Article 2.2): certain non-managers who, by virtue of their functions (leadership, responsibility, autonomy), are deemed managers via sectoral or group agreement. For example, a team lead in a small firm may be classified as assimilated manager, even without an official "manager" title.

This distinction is critical: an employer cannot circumvent the obligation by refusing a "manager" title to an employee exercising managerial functions.

The law does not require the employer to concentrate the 1.50% solely on death coverage. However, it mandates priority allocation to that risk. Per an August 26, 1994 letter from Agirc (upheld in case law), the phrase "by priority" means more than half of the 1.50% (i.e., a minimum of 0.76 percentage points) must address death risk coverage.

The remaining 0.74 percentage points may finance other guarantees: disability indemnity, medical expenses, hospitalization, annuities for critical illness. Modern contracts call this "supplementary provident protection."

This is where the real danger emerges. If an employer fails to subscribe to a provident scheme or misses contributions, and an executive dies, the financial consequences are catastrophic.

Penalty amount#

If an uninsured executive dies, the employer must pay beneficiaries an indemnity equal to 3 times the annual Social Security ceiling (PASS).

In 2026, the PASS is set at €48,060. The indemnity owed = 3 × €48,060 = €144,180.

This is enormous for an SME. It compounds with:

• Costs of replacing the deceased executive (recruitment, temporary staffing, training)
• Litigation risks with heirs (claims for additional damages)
• Administrative penalties for unlawful employment (if labour inspectors discover the missing coverage)

The inescapable nature of this obligation#

This payment to heirs is not a discretionary fine. It is a mandatory civil law obligation. Beneficiaries can claim it in court, or a simple demand letter triggers the process. No short statute of limitations applies: claims can be filed years after death.

Micro-enterprises and sole traders#

A micro-enterprise (turnover < €85,000 in sales) can be an employer. If it hires even one manager as a permanent employee, the obligation applies. However, the cost may be prohibitive (€45–60/month per manager). Some micro-entrepreneurs bypass this by hiring non-managers or outsourcing through payroll platforms. This is a trap: a manager is a manager, even in a micro-firm.

Managers on part-time or internship#

• A part-time manager (25 hrs/week) remains a manager. The contribution applies pro rata.
• A manager-level intern: under an internship contract, they are not an employee in labour law; the obligation theoretically does not apply. But under a permanent contract with a "manager" title, the obligation applies from day one.

Remote or expatriate managers#

• Remote work: no impact. Once the contract says "manager," the provident obligation applies.
• Expats: if the employee is a salaried employee of a French subsidiary, the obligation applies (even if based in Switzerland or Canada).

Enterprises with no managers#

If an SME employs only non-managers (workers, clerks, technicians), there is no 1.50% provident obligation.

Pitfall 1: Confusing provident insurance with group health insurance. Many employers think subscribing to group health insurance satisfies the provident obligation. False. Group health covers medical expenses. Provident covers work incapacity, disability, death.

Pitfall 2: Neglecting annual contract reviews. A provident contract signed in 2015 may allocate insufficient death coverage (say, 0.60% instead of 0.76%). The employer thinks "it's settled" and never audits it.

Pitfall 3: Forgetting to list all managers. Some employers subscribe to a provident contract but omit declaring several managers.

Pitfall 4: Declaring incomplete salaries. A firm pays €50k/year to an executive, but declares only €35k to the provident insurer (while classifying the remaining €15k as "non-insurable variable").

Pitfall 5: Believing a termination letter affords protection. An employer engages an uninsured manager, then terminates. Months afterward, the manager dies. The employer assumes they bear no responsibility. Wrong. The provident obligation runs for the entire period of employment.

Recently, an 8-person startup contacted us to validate its payroll setup. It had just hired two managers (sales engineer, technical director) and wanted compliance assurance. Auditing the structure, we discovered zero provident coverage. The founder said: "We're a startup; managers assume the risk; they know there's no social protection." This is extremely dangerous thinking. Legally, missing provident insurance is a breach, period. We immediately advised subscribing to a contract and retroactively collecting 6 months of arrears (roughly €2,000). The insurer agreed to regularize without major penalty.

This case illustrates a reality: many founders, especially in startups or SMEs, are unaware of this obligation. They discover it too late — during a labour inspection or, worst case, when an executive dies. It is an invisible obligation until a claim arises. Our conviction, grounded in fifteen years of HR and payroll auditing: provident insurance for managers is not a cost; it is protection. The monthly cost (€45–60 per manager) is negligible against the risk (€144,180 in 2026).

Hayot Expertise advice. Before hiring your first manager, or within a month if you have already done so, verify two things: (1) Do you hold a provident contract with death coverage of at least 0.76% of Tranche A? (2) Are all your managers, including assimilated ones, declared to the insurer with their true salary? If the answer is "no" to either, contact your broker or insurance adviser to execute an amendment or new contract. It takes one day, costs €500–€1,000 (setup fees), and prevents a €144,180+ claim upon death. It's the most cost-effective insurance in the world.