Offering certain benefits in kind is an excellent alternative to increase employee compensation without raising personnel costs.
Many companies do not have the budget to increase employee salaries, yet they want to keep their workforce motivated. Offering certain benefits in kind can be an effective way to achieve both objectives.
Thus, it is possible to propose that employees exchange part of their monetary compensation for benefits in kind. For example, an employee earning €30,000 in cash could change their compensation structure to receive €27,500 in cash and €2,500 in kind. The advantage of this change lies in the taxation:
- Specifically, certain benefits in kind are not subject to personal income tax (IRPF) for the beneficiaries (health insurance, transport vouchers, restaurant tickets, childcare services, training courses, etc.). This tax saving results in more take-home pay for employees (effectively acting as an indirect salary increase).
- The company will not incur any cost increases. In fact, costs will remain the same, as benefits in kind are also subject to Social Security contributions (whether offered as a replacement for part of the cash salary or as an alternative to a salary increase).
In any case, employee participation in these “flexible remuneration plans” is voluntary (as it involves a change in working conditions). Please also note that the benefits in kind provided may not exceed 30% of the worker’s total compensation.
