Time-savings account (CET): setup and cash-out in France

Quick answer. A time-savings account (compte epargne temps, CET) is set up through a company or industry-wide agreement (articles L3151-1 et seq. of the French Labour Code). It lets an employee save rest days or sums, then use them as leave, cash them out, or transfer them to a retirement savings plan. A cash-out follows the same social and tax regime as salary, except when allocated to a PER or PERCO within the exemption limits.

A business owner often calls us at the worst moment: a key manager leaves, having accumulated dozens of unused RTT days, and the company discovers it must pay them out in one go, payroll taxes included. With no formalised CET, this liability was never framed nor properly provisioned.

The time-savings account is more than a retention tool. It turns an unmanaged carry-over of days into a controlled commitment, with funding rules, caps and a payroll treatment known in advance. Poorly framed, it becomes a social and cash-flow time bomb.

We support employers on the payroll and social management of your company, and the CET regularly comes up as an underestimated topic: easy to open, harder to close. This article sets out the real mechanics, from the legal framework to the payroll entry.

A time-savings account lets an employee accumulate rights to paid leave or to receive pay in exchange for unused leave or rest periods. It is governed by articles L3151-1 to L3153-2 of the French Labour Code.

The CET rests on three simple principles.

• It is optional: no law requires a company to set one up.
• It is created by collective agreement: company, establishment, or failing that, industry-wide.
• It is funded at the employee's initiative, within the limits set by the agreement.

The agreement is the cornerstone. It defines the funding sources, the cap on rights, the terms of use, the management of rights, and the guarantees in the event of employer insolvency. A CET without a solid agreement is an almost guaranteed source of disputes.

Setting it up cannot be improvised. Here is the sequence we recommend to employers.

1. Check the collective bargaining agreement. Some industries already provide a CET or framing rules. Start from that base before negotiating a company agreement.
2. Negotiate the agreement. With union representatives, or by referendum in companies without representatives depending on headcount thresholds. The agreement sets everything: funding, cap, use, guarantees.
3. Define the funding sources. RTT days, rest days, overtime, bonuses, sometimes a fraction of paid leave beyond the fifth week.
4. Set a cap on rights. This is the point companies most often forget, and the one that best protects them against uncontrolled accumulation.
5. Organise management and information. Individual counter, annual employee statement, integration with the payroll and time-management software.
6. Provide for guarantees. Beyond the AGS guarantee, the agreement must cover surplus rights.

A reliable tracking tool prevents counter errors. Many of our clients manage rights through Lucca leave-management software connected to payroll, which secures funding and the count.

Funding depends on the agreement but is subject to legal limits. The table below summarises the most common sources and their limits.

The most important distinction concerns paid leave. The fifth week may fund a CET, but it can only be used to finance a leave: it cannot be converted into money. The first four weeks cannot be placed on a CET at all, because the right to rest must actually be exercised.

Cashing out the CET means converting saved rights into a pay supplement. Employees value this option, but its payroll treatment often surprises them.

Sums paid as a CET cash-out follow the same regime as salary when received: they are subject to social contributions and income tax. There is no general favourable regime for a cash-out paid directly to the employee.

In practice, a cash-out indemnity enters the contribution base like an ordinary payroll item. It is also subject to withholding tax. The employee therefore receives a net amount noticeably lower than the gross saved, exactly as for an ordinary salary.

This is why a cash-out is not always the best choice for the employee. For a director treated as an employee, the trade-off between cash-out, leave and transfer also fits into a broader thinking on the trade-off of director's remuneration.

Transferring CET rights to retirement savings is the most tax-efficient option, and also the least used in the files we take over.

Rights recorded on a CET and allocated by the employee to a collective retirement savings plan (PERCO), a collective company PER (PERECO) or a mandatory company retirement plan benefit from a favourable regime: they are exempt from income tax up to 10 days per year, provided they do not correspond to an employer top-up in time or money. Where the company has no CET, the employee may transfer unused rest days to these plans up to 5 days per year.

On the social side, these sums benefit from contribution exemptions under the conditions and limits set for employee savings, and the monetisation of rest days allocated to a PERCO or PERECO that is exempt from contributions is not subject to the solidarity levy. To understand the overall structure, our analysis of the company savings plan and its top-up usefully complements this point.

What happens to saved rights if the company goes bankrupt? It is a legitimate concern, and the answer is more nuanced than commonly believed.

Rights accrued on a CET are guaranteed by the AGS (the French wage-guarantee scheme) within the limits of article D3253-5 of the Labour Code. This guarantee is not unlimited. Article L3253-17 of the Labour Code sets the AGS guarantee ceiling by reference to the monthly ceiling used to calculate unemployment-insurance contributions, not the annual ceiling.

The maximum amount of this guarantee, set by article D3253-5, depends on the length of the employment contract at the date the insolvency proceedings are opened.

There is therefore no AGS guarantee floor equal to "twice the annual PASS". The "twice the ceiling" rule appears in article L3253-2: it refers to the monthly social security ceiling and concerns the salary privilege, not the calibration of the AGS guarantee for the CET.

Where, after monetary conversion, the employee's rights exceed the guaranteed ceiling, the agreement must provide insurance or a financial guarantee for the surplus. Failing such a mechanism, rights exceeding the monthly ceiling are liquidated and paid to the employee as an indemnity. This is precisely the point that older agreements, drafted without this reflex, rarely secure.

A CET creates a latent social liability that the accounts must reflect. Accrued and unused rights form a commitment of the company at year-end.

Best practice is to book a provision for accrued CET rights, including employer payroll taxes. This provision is reassessed at each year-end based on individual balances and the valuation of saved days. Ignoring this liability distorts the balance sheet and can surprise during a sale or an audit.

Analytical tracking of CET counters, cross-referenced with the payroll base, gives a faithful view of the commitment. It is a concrete use of cost accounting serving social-data management.

The underestimated risk of the CET is not tax: it is uncapped accumulation. In the files we take over, the problem almost always stems from an agreement with no clear cap, letting counters swell for years until a departure or a company difficulty.

Recently, an SME called us after two day-rate managers left, having saved very large balances. The agreement provided neither an annual funding cap nor an accounting provision. The cash outflow, payroll taxes included, weighed heavily on an already tight financial year. The scheme, designed to retain staff, had turned against the company for lack of framing.

Our reading: a useful CET is a capped, provisioned CET oriented towards a retirement-savings transfer rather than systematic cash-out. The cap protects cash flow, the provision gives a true balance sheet, and the transfer to a PER or PERCO offers the employee a tax advantage that a plain cash-out does not.

What the authorities and a buyer look at first: the existence of the agreement, the reality of the counters, and the balance-sheet provision. An unprovisioned CET is a classic red flag in acquisition due diligence. We therefore recommend reviewing the agreement, setting a cap if none exists, and provisioning from the next year-end.

Hayot Expertise tip. Before opening or extending a CET, have the potential commitment costed over three years, cap included. Simulating the latent social liability and the payroll cost of each option (cash-out, leave, transfer) informs the negotiation of the agreement. As a chartered accountant and statutory auditor registered with the Order, we carry out this analysis within the social mission and the production of the accounts.

Several situations deserve specific attention.

• Fifth week of paid leave: it may fund the CET but stays excluded from any immediate cash-out; it only finances a leave.
• Day-rate employee: unused rest days often heavily fund the CET; the funding cap is decisive here.
• Employee departure: on termination, rights are either liquidated as an indemnity or transferred per the terms of the agreement.
• Director treated as an employee: he may have a CET under his employment contract if he holds one, but the pay-versus-savings trade-off must be considered as a whole.
• No industry-wide agreement: setup then necessarily goes through a negotiated company agreement.