Why do companies pay salaries rather than donations?

Question

When I receive a 100€ salary net on my bank account after all taxes, my company had to actually cash out X€, split into their charges and my gross salary. After my charges and taxes are removed, I see the 100€ above.

The value of X depends on the country, let's assume that for France that would be 400€.

This is the case for salaries.

Why wouldn't a company rather give me a donation of Y€? They would need to pay taxes on that (not charges), and then I could (and should) pay charges (social security, retirement, etc. - similar to the charges which are deducted from my salary). I would not pay taxes on donation.

Is this solely because for a final 100€ in my account, Y is greater than X?

I would be interested in a European perspective (and to fix things - ideally French, other countries are fine too if they are not that different from France)

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EDIT: For the sake of clarity, I am not interested in any fraudulent setup. I wanted to understand whether the solution is legal, and if so why it is not used.

Answers of the type

• it is not allowed by law because whenyou work for someone the only way you can be paid is though a salary (so a legal contraint)
• it is not interesting financially (for either the company, the employee or both)

are perfectly fine.

Answer 1

I think you mean a "gift".

Clearly pay for work is not a gift. It's a payment for consideration (consideration means your work). Gifts don't have consideration. Passing it off as such is fraud.

It's also the case that the rules for companies gifting their employees are different than the ones for individuals gifting individuals. But you're not describing gifts anyway, so it doesn't matter.

Answer 2

The short answer is that France not only gets to decide how donations are taxed, but what a donation (for tax purposes) is in the first place. It doesn't matter if the company calls it a donation, because it isn't.

Answer 3

First, on a purely technical level, what's usually called a “donation” in French law is unilateral so it wouldn't be very appealing to an employer. Usually it's used for real estate as if you are just giving cash (don manuel), you don't need to involve a notary or draw up any specific act. In fact, what the donation achieves is documenting the change of ownership, with an eye towards future inheritance proceedings. There are some ways it can be used to reduce the tax burden (donation-partage) but it does not exempt anybody from paying taxes. However, since all this is only open to natural persons, it's not really relevant to your scenario. But you might still wonder, why isn't my employer just sending me money?

The “donation“/gift angle is funny but there are more plausible schemes to save a bit on mandatory contributions to the social welfare system. If the workers are self-employed, rather than employees, the company is not responsible for all these payments. The workers have to take care of it themselves and usually enjoy lower benefits (e.g. a lower retirement pension relative to what they paid into the system or earned during their work life).

A key aspect of the gig economy/platform business model is to abuse this and especially the auto-entrepreneur status. If your workers are auto-entpreneur you're not bound by minimal wage regulations and the overall burden of the tax-like payments on wage can be lower.

One reason that it is not more widespread is that it is simply illegal. In principle, if your employer can direct what you do and how and when you do it (lien de subordination), you are an employee and all the other obligations stem from that. In short, companies are free to “give” you money as long as you don't work for them. But that would defeat the purpose, wouldn't it?

Answer 4

An employer in germany can give gifts to their employees. The baseline is that any substantial gift is treated like wage or otherwise subject to taxes.

There are tons of rules about the details (in particular about gifts for occasions like anniversaries, birth day, birth of a child, Christmas, ...) but the following points are relevant here:

• Monetary gifts (includes also e.g. vouchers that can be changed back to cash money by the recipient) are treated like so much higher wages wrt. both taxes and social insurance.

• Gifts in kind are tax free up to a limit of 44 €/employee and month. If that limit is exceeded, the whole gift is treated as wage payed in kind.

• There are specific gifts which are tax free and also not subject to social insurance, e.g. public transport tickets and right now Corona boni - but these are specific things where the government grants a tax/social insurance exemption because as incentive for employees and employers.

• OTOH, for some kinds of gifts, the incentive is the other way round: for some gifts even though they are exempt from wage tax and social ensurance for the employee, the employer (company) cannot claim the full cost as business expense.

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If the recipient of the gift is not an employee, there are also rules. In the most general case, the one who receives is responsible for correct taxation and correct treatment of social insurance. In some cases, the one who gifts can pay a flat tax. If the recipient is employee somewhere else (and acceptin this gift does not run foul of anti-corruption rules), this may be exempt from social insurance fees to a substantial amout.
If the recipient is e.g. self-employed, they are themselves responsible for social insurance, and things get complex, but in some cases and for some kinds of social insurance, it may need to be added to their income.

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Nothing to do with employment: but there is also a gift tax in Germany on large gifts. Gift tax in Germany is the same as inheritance tax. The tax free amount is 20000 € within 10 years for persons that are not in a specific closer relationship.

2000 €/year is far below the tax free limit for income tax, and it is also within the mini-job limit where a flat social insurance fee is paid by the employer only.