Inflation compensation in France—what is it and who’s eligible?
Announced on October 21, 2021 by Prime Minister Jean Castex, inflation compensation is a new form of financial aid from the French government to be paid out to 38 million people in the coming months.
4 min read
Announced on October 21, 2021 by Prime Minister Jean Castex, inflation compensation is a brand new form of financial aid from the French government to be paid out to roughly 38 million people in the coming months. But how much aid are we talking about, and who will get it? N26 has the answers—read on!
What is inflation compensation?
Inflation compensation is a one-off payment of €100 designed to curb the effects of rising prices in France—especially the increase in fuel costs. Overall, prices on goods in France rose 2.6% between October 2020 and October 2021—a drastic increase from previous yearly averages. The government arrived at the payment amount by calculating the extra cost of fuel for an individual who drives 14,000 kilometers per year.
Who can get the €100 payment?
Any resident of France earning less than €2,000 net (after tax deductions) is eligible for inflation compensation, based on their reference salary from October, 2021. Anyone who is self-employed and earns a gross annual income of less than €30,000 is also eligible. In all, around 38 million people will receive this payment, including:
Employees in the public and private sectors
Students with scholarships or those receiving housing assistance
Apprentices
Self-employed workers
Temporary workers
Pensioners (with a pension of less than €1,943)
Jobseekers and those receiving welfare benefits or income support
Based on government calculations, nearly 70% of pensioners and two-thirds of students will receive inflation compensation.
How can I get the inflation compensation?
As long as you reside in France and fall into one of the above categories, you won’t have to do anything to get your inflation compensation. If you’re entitled to the check, the money will be deposited directly into your bank account—either by your employer or the organization in charge of paying your benefits (Pôle Emploi, Urssaf, CAF, Crous etc.). Here’s when you can expect your deposit based on your status:
Salary and hourly workers, and students with scholarships will receive this payment at the end of December, 2021
If you’re a civil servant, job seeker, student without a scholarship receiving housing benefit, or if you receive welfare benefits, you should receive inflation compensation starting in January, 2022
If you’re a pensioner, you’ll get your payment in February, 2022
Are you a working pensioner or a salaried employee with a side hustle? If you claim multiple statuses on your income taxes, your primary employer—or the primary source of your income—will deposit the inflation bonus. However, it’s up to you to remind your primary employer to pay your inflation compensation.Want more good news? The inflation compensation is 100% tax-free.
Why are we talking about inflation anyway?
Sure, it’s great to get money from the government, but what’s all this fuss about inflation? Put simply, inflation is an overall increase in the prices of goods and services. In October this year, inflation rose by 2.6% (compared to an average of 0.5% in 2020 and 1.1% in 2019). This rise in prices is the result of our recovery from thepandemic-related economic downturn, which has been leading to production and supply-chain shortfalls—and rising costs.Energy prices have seen the biggest hike—a 57% increase in gas prices since January 2021. The price of electricity jumped by 12%, and diesel prices rose nearly 28% in one year. Other products have only seen a minimal increase, with a 0.6% increase for food in October 2021, 0.3% for manufactured goods, and 1.8% for services.And if you’re wondering whether this trend will continue—the answer is likely yes. Prices are expected to keep rising until mid to late 2022. However, inflation is expected to fall back below 2% by 2021. You can find more information about inflation compensation in theFAQs on the French government’s website.The good news? Inflation compensation is part of a set of payments initiated by the French government in 2021 to help low-income households cope with soaring prices. The package also includes the energy check—learn more about it here.
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