👌Understanding the Monthly Payment Law in Insurance

📌 Quick Summary

The monthly payment law in insurance is an important topic affecting many insured individuals. This law was implemented to allow insured persons to pay their premiums regularly and in installments throughout the year. In this blog article, we will explain in detail what the monthly payment law in insurance is and how it works.

What is the monthly payment law in insurance?

The monthly payment law in insurance is a legal provision that allows insured individuals to pay their premium monthly, rather than having to pay a lump sum at the start of the year. This law was put in place in France in 1972 to facilitate the management of insured persons’ budgets and to avoid premium non-payment.

The monthly payment of the insurance premium works as follows: the total annual premium is divided into 12 equal monthly payments, which are automatically deducted each month from the insured’s bank account. Thus, the insured no longer needs to worry about paying a single premium each year but can spread the cost of their insurance over the entire year.

The amount of the monthly premium is calculated based on the amount of the annual premium and the number of months in the year. It is important to note that the monthly payment should not incur additional fees for the insured, unless explicitly stated in the contract.

In the event of cancellation of the insurance contract during the year, the insured may be required to pay premiums due up to the date of cancellation. Conversely, if the monthly premium is not paid, the insurer may terminate the contract after a certain delay, usually 10 days after issuing a payment notice.

How does the monthly insurance premium payment work?

The monthly payment of insurance premiums allows the cost to be spread over the entire year, with regular monthly installments instead of a single premium at the beginning of the year. The monthly premium is calculated based on the annual amount divided by 12.

The calculation of the monthly premium can be influenced by various factors, such as the type of insurance purchased, the insured’s age and profile, the guarantees chosen, the geographical area, etc. The monthly premium can therefore vary depending on these criteria.

The payment of the monthly premiums is generally made by automatic bank transfer from the insured’s bank account. The insurer asks the insured to sign an automatic direct debit authority that authorizes the insurer to deduct the premium amount each month from the insured’s bank account.

It is important to note that the monthly payment of the insurance premium should not incur additional fees unless explicitly stated in the contract. Therefore, the insured should carefully read the general conditions of their insurance contract to know about any fees related to monthly payments.

In case of non-payment of the monthly premium, the insurer may terminate the contract after a certain delay, typically 10 days after issuing a payment notice. It is thus important to ensure that the insured’s bank account is sufficiently funded to avoid non-payments.

The advantages and disadvantages of the monthly premium payment system

The monthly premium payment system offers several benefits for the insured:

1. Better budget management: Monthly payment allows the insured to better manage their budget by spreading the payment of their premium over the year rather than paying a large sum all at once.
2. Facilitated payment: Automatic deduction of monthly installments means the insured does not have to worry about paying their premium each month.
3. Adapting to changing needs: Monthly payment makes it easier for the insured to adjust their insurance needs and to change contracts more easily.
4. Adding additional guarantees: The insured can also add supplementary guarantees to their contract throughout the year.

However, the monthly premium payment system may also have certain drawbacks for the insured:

1. Additional fees: Some insurance companies may charge extra fees for the monthly payment option. The insured should carefully read the contract’s general conditions.
2. Higher total cost: Monthly payments may lead to a higher overall cost, especially due to the additional fees mentioned above.
3. Quicker contract termination: In case of non-payment, the insurer can end the contract faster than if it were an annual premium.

It is also important to ensure that all dues have been paid and check for any potential termination fees.

🔍 What is the monthly payment law in insurance?

The monthly payment law, established in 1978, is a key legal provision to ensure the financial stability of employees during a work stoppage caused by illness or accident. It requires employers in the private sector to maintain part of their employees’ salary in addition to the daily allowances paid by Social Security.

📜 A protective legal framework

This law is embedded in the Labor Code and applies automatically to all employees, with some exceptions. Indeed, seasonal workers, intermittent workers, and temporary agency workers are not covered by this provision, because their activity is punctual or irregular.

The main goal of this law is to limit income loss for employees on temporary incapacity. Without this protection, a sick leave could result in a drastic decrease in salary, making it difficult to pay fixed expenses such as rent, loans, or everyday costs.

🔄 A tripartite system

Compensation for work stoppages relies on a tripartite system, involving three main actors:

1. Social Security: It pays daily allowances (IJSS) representing 50% of the gross salary, after a three-day waiting period. These allowances are capped and may therefore be insufficient to maintain a decent living standard.

2. Employer: Under the monthly payment law, they are obliged to partially supplement the employee’s salary, based on their seniority and the applicable collective provisions. This supplement can reach up to 90% of the gross salary during the first period, then 66.66% during a second period.

3. Additional contingency insurance (if subscribed by the employer or required by collective agreement): It can take over once the legal salary maintenance period by the employer has ended. Some policies even guarantee 100% of the salary, reducing the financial impact of a prolonged work stoppage.

📅 Variable compensation duration

The duration of salary maintenance by the employer directly depends on the employee’s seniority. The longer they have worked for the company, the more their right to compensation is extended.

Example:

• An employee with 2 years of seniority can receive 30 days of 90% compensation, then 30 days at 66.66%.

• An employee with 15 years of seniority can benefit from 50 days at 90%, followed by 50 days at 66.66%.

⚠️ Obligations and limitations

Although this law effectively protects employees, it also involves some constraints for companies:

• Cost for the employer: Maintaining salary represents a financial burden for the company, especially in cases of multiple sick leaves.

• Cap on compensation: The allowance paid by Social Security is calculated based on a capped salary, which can be insufficient for some employees.

• Waiting period: The employee is only compensated starting from the 4th day of leave (except in cases of work accident or professional illness).

🔎 Why is this law essential?

Without this law, employees on sick leave would only receive 50% of their salary, often insufficient to cover their fixed costs. Thanks to the salary maintenance provided by the employer and complemented by insurance coverage, they can enjoy broader coverage and avoid financial difficulties.

This law is thus a pillar of social protection in companies, ensuring employees financial security while imposing significant social responsibility on employers.

✅ Employers’ obligations

The employer is responsible for paying a salary supplement to employees on leave, to ensure income continuation. This system is regulated by the monthly payment law, but some collective agreements may add additional guarantees for employees.

The salary supplement paid by the employer comes on top of the daily allowances paid by Social Security and allows covering part or all of the employee’s salary during leave.

📜 Conditions for benefiting from salary maintenance

To qualify for salary maintenance, certain conditions must be met:

📅 Duration and amount of salary maintenance

The employer is required to maintain the employee’s remuneration based on seniority and the legal or collective provisions.

• The first 30 days of leave are compensated at 90% of the gross salary.

• The following 30 days are compensated at 66.66% of the gross salary.

• The duration of compensation increases by 10 days every 5 years of seniority, up to a maximum of 90 days.

📌 Example:
An employee with 12 years of seniority will receive 50 days of 90% compensation, then 50 days at 66.66%.

Particular cases and collective agreement improvements

Some collective agreements provide for more favorable provisions, including:

• Removal of the waiting period: Compensation begins from the first day of leave instead of the eighth day.

• Extension of salary maintenance: Some agreements provide for compensation up to 150 days or more.

• Full salary compensation: Certain companies guarantee full salary coverage for their employees on leave.

Examples:

• The CCN 66 (social sector) provides 100% of salary for 3 months.

• The Esthetic CCN guarantees 90% of salary during the first 30 days, then 80% (instead of 66.66%).

⚠️ Limitations of salary maintenance

Although this obligation protects employees, it also imposes certain constraints for employers:

💡 Solution: To reduce these costs, some companies subscribe to a group contingency contract, which covers a portion or all of these expenses.

🏥 Who Pays for Salary Maintenance?

📅 Duration and compensation amounts

The duration of compensation varies according to the employee’s seniority. The longer the tenure, the longer the compensation.

🎯 Collective agreements and improvements

Some collective agreements enhance compensation conditions by removing the waiting period or guaranteeing 100% of salary.

Examples:

• The CCN 66 (social sector) guarantees 100% of salary for 3 months.

• The Esthetic CCN offers 90% of salary during the first 30 days, then 80% instead of 66.66%.

❌ Limitations and restrictions

Despite its benefits, the monthly payment law has certain constraints :

• Financial burden for the employer: The obligation to maintain salary entails a significant expense.

• Cap on benefits: Social Security only covers up to 1.8 times the minimum wage.

• Waiting period: An employee must wait 7 days before receiving benefits, unless in cases of work accident.

🔄 Role of contingency insurance

Contingency insurance plays an essential role in maintaining salary during prolonged leave. It allows employers to financially protect against costs related to allowances and helps employees maintain a stable income.

This contract can be mandatory or optional depending on the employee status and the collective agreements in place in the company.

📌 Why subscribe to collective contingency insurance?

Contingency insurance complements benefits paid by Social Security and the employer, especially when the legal salary maintenance period ends. It helps prevent income loss for employees on prolonged leave and reduces charges for the company.

💡 Example: Without contingency insurance, an employee with a leave longer than 90 days receives only Social Security daily allowances, often insufficient to cover their usual salary.

🏛️ An obligation for managers, an option for other employees

• For managers, a collective contingency insurance is mandatory. The article 7 of the National Collective Agreement for Managers (March 14, 1947) requires employers to subscribe to a contingency insurance covering death, with an employer contribution of at least 1.50% of gross salary.

• For other employees, contingency insurance remains optional, unless a sectoral agreement or collective agreement requires it.

🔄 Types of insurance deductibles in contingency plans

A collective contingency insurance contract includes various deductibles, which define when and how benefits are paid after a work stoppage.

💡 Example:
An employee with a fixed deductible of 90 days will not receive benefits from the contingency until after 3 months of leave.

• With a relay deductible, insurance intervention occurs immediately after the 60 days of employer indemnity.

⚠️ Points of vigilance for employers

Subscribing to a group contingency plan is a strategic decision for the company. Here are some points to watch:

1. Cost of contribution: The broader the coverage, the higher the insurance cost.

2. Deductible delay: A too long delay can leave the employee without resources before the contract activates.

3. Benefit level: Some contingency plans cover 100% of salary, while others only 70% or 80%.

📌 Who benefits from the monthly payment law?

✅ Who is covered by this law?

The monthly payment law applies to all private sector employees, regardless of their contract type (permanent, fixed-term, full-time, or part-time). It concerns all companies, as long as they employ salaried staff, whether small, medium, or large structures.

It requires employers to guarantee salary maintenance for employees on sick or accident leave, in addition to the daily allowances from Social Security.

❌ Which employees are excluded?

However, certain employees do not benefit from the monthly payment law:

• Seasonal workers: Due to their limited-term employment, they are not covered by salary maintenance.

• Intermittent workers: Their activity is based on occasional assignments, making them ineligible for this guarantee.

• Temporary agency workers: Although they are employees of a temporary work agency, they are not directly covered by the monthly payment law.

📌 Specific cases

Some employees may be in a grey zone regarding the application of the law:

• Teleworkers: The monthly payment generally applies unless specific clauses in the employment contract state otherwise.

• Managers and similar roles: They are covered by the monthly payment law and may also benefit from more advantageous guarantees through their collective agreement.

• Apprentices and interns: Apprentices benefit from salary maintenance, but interns do not, as they are not considered employees per se.

📅 Calculating salary maintenance

✅ Detailed explanation

The amount of salary maintenance depends on several factors:

• Employee seniority

• Reference salary (usually the last 3 months of gross salary before leave)

• Social Security daily allowances (IJSS)

• Company or industry collective agreements

📌 Differences between gross salary and net allowances

Compensation is calculated based on the gross salary, but the benefits received are often lower than the usual net salary.

💡 Calculation details:

📌 Numeric examples

Case 1: An employee earning €3,000 gross per month with 5 years of seniority.

• IJSS (50% of daily salary) = €1,500/month

• Employer salary maintenance (90% – IJSS) = €1,200

• Total income = €2,700 for 30 days, then €2,000 (66.66% – IJSS) for the following 30 days.

⚖️ Evolution of the monthly payment law

📜 History and reforms

The monthly payment law was introduced in 1978 but has undergone several changes:

• 1978: Adoption of the monthly payment law, requiring employers to maintain salaries.

• 2008: Amendments to waiting periods and improvements to benefits with the law of June 25, 2008.

🔄 Recent modifications

• Reduction of waiting periods in certain sectors.

• Harmonization of benefit rates with collective agreements.

🏛️ Future prospects

• Proposed reforms to extend the salary maintenance period.

• Reducing inequalities among different employee categories.

📜 Administrative obligations of the employer

📌 Formalities to follow

The employer must:
✅ Declare the work stoppage to the CPA within 48 hours.
✅ Provide a salary certificate for calculating IJSS.
✅ Pay the salary supplement according to the procedures set out in the law.

⚠️ Sanctions for non-compliance

• Late declaration: Financial penalties.

• Failure to pay benefits: Could lead to legal disputes at the employment tribunals.

📌 Practical tips

• Use absence management software.

• Ensure the sectoral agreements are properly incorporated.

📉 Economic impact on companies

💰 Cost of salary maintenance

Salary maintenance represents a significant expense for the employer.

🏢 Strategies to limit costs

• Subscribe to a collective contingency contract.

• Adapt sectoral agreements for better cost distribution.

🔍 Comparison with other European countries

💡 Analysis:

• Germany offers a more generous compensation.

• The United Kingdom has a more limited coverage.

📌 Dispute resolution options

⚖️ Employees’ rights

If an employer does not pay salary maintenance, the employee can:

1. Send a formal notice.

2. Refer to the employment tribunal.

3. Alert the URSSAF in case of irregularities.

📜 Procedures to follow

• Average timeframe for legal action: 6 to 12 months.

• Retroactive compensation possible upon victory.

💡 Advice for employers

• Verify the applicable collective agreement.

• Maintain documentation of payments to avoid disputes.

In conclusion

The monthly payment law in insurance is an important protection for employees in case of illness or accident. It requires employers to maintain part of the salary, supplementing the daily allowances from Social Security.

Contingency insurance can provide additional protection, but it involves a cost for the company. It is therefore crucial to carefully compare options and study the collective agreements before choosing an appropriate contract.

📌 Key points to remember:
✅ The monthly payment guarantees a minimum income in case of work stoppage.
✅ The employee’s seniority determines the duration of compensation.
✅ An insurance contract helps to secure the company’s finances.

For further information

Conclusion

The law of monthly payments in insurance is an important subject to understand for all insured individuals. It allows paying insurance premiums regularly and in installments throughout the year. In this blog article, we explained in detail what the monthly payment law in insurance is and how it works. We hope this article has helped you better understand this topic.