Food Subsidies (Essenszuschuss) in 2020: What They Are and How To Benefit
The way to a man’s heart is through his stomach - this also applies to the relationship between companies and employees. Providing your employees with delicious meals increases their satisfaction and ultimately their productivity. Here in Germany, food subsidies, called "Essenzuschüsse" in German, represent a great alternative to a raise, and entail little effort and, above all, low costs. If you have never considered them before or find the entire topic too daunting, this text is just for you.
Advantages over a raise
When it comes to employee benefits or rewards, many companies think of raises first. However, both the company and the employee have to pay high duties for this, so that ultimately little is left. For example: with a typical raise of € 100 gross per month, about € 120 in costs occur for the employer. Of this, the employee has to pay around € 50 of taxes and duties - leaving him with a net amount of just € 50.
Thus, raises are rarely a real benefit to the employee. Non-cash benefits and food allowances are the more tax-efficient alternative - and an option that both sides can benefit from. If you don't want to arrange a daily lunch program, occasional team lunches can be a great alternative.
Difference to benefits in kind
Food subsidies and benefits in kind are often mentioned in a context, but they are different. Yet what is the distinction?
Benefits in kind, or "Sachbezüge" if we want to be German here, are goods or services that the employer provides in addition to the salary - for example, a company car, a work mobile phone or fuel vouchers. Benefits in kind are subject to a tax-free allowance of € 44 per employee and month. If this is exceeded, the entire sum must be taxed.
Other regulations, however, apply to food subsidies: Here, a tax-optimized advantage of up to € 6.50 per day and employee can be achieved*. But how does this come about?
The meal allowance gives the employee a cash benefit, as their cost of living is reduced by free or discounted meals. For this reason, food subsidies would theoretically be added to wages and thus payroll tax.
Why theoretically? Quite simply: Here in Germany, there is an official reference value for lunch, which is € 3.40 per employee per day in 2020. The actual price does not matter to the tax office - the lump sum of € 3.40 is used for every lunch. In addition, the employer can subsidize a tax-free amount of up to € 3.10. This results in a total value of € 6.50 per lunch.
Details to be considered
However, there are a few things to keep in mind when making this calculation: If the employee’s contribution is higher than the official reference value, he has no monetary advantage. After all, he paid his own lunch at the usual cost. That means, if a member of staff pays € 3.50 of his meal (or more), there is no taxable monetary advantage from the point of view of the tax office.
The situation is different if the employee's additional payment is below the official reference value of € 3.40. So if he pays only € 2.50 of his meal’s cost, there is a difference of € 0.90, which is taxed as a pecuniary advantage. The employer can take over the wage tax for this with a lump percentage of 25%, whereby at least the contributions to the social security do not apply.
The official reference value of € 3.40 is therefore either taxed at a flat rate of 25% by the employer, borne by the employee's net wage or, as in the above example, split. In addition, the employer can grant a subsidy that remains tax-free and social-tax-free up to a maximum of € 3.10 in each case.
All this Essenszuschuss-related information is not easy to decipher. Therefore, we have summarized it again to a very simple overview: A meal subsidy is tax-free if its value does not exceed the amount of € 6.50 (as of 2020), consisting of a food subsidy of € 3.40 plus a tax-free employer's contribution of € 3.10. The employee pays at least € 3.40 himself. For the sake of completeness it should be mentioned that only one subsidy per employee may be granted per working day.
Food subsidies are a clever alternative to raises. With Smunch, your employees receive excellent and healthy lunches from a new restaurant every day. Learn more about the concept and the benefits for you and your team.
Enjoy your lunch!
The Smunch Team
* Last update: January 2020