Fringe Benefits: Definition and Application
The term "fringe benefits" or "benefits in kind" regularly appears in connection with the remuneration of employees. But what is it actually all about? And is it a smart thing, or rather something you should avoid? We’ve got the answer.
Fringe benefits - the term itself has a positive connotation, as we all like to receive a benefit. The expression from labor and tax law refers to indirect and non-monetary income. “Indirect” means that the employee receives a good or service instead of money, but since he saves on the cost of purchasing this himself, it is considered an indirect remuneration. Fringe benefits are usually granted in addition to the regular salary, and hence the name: it’s a benefit that is received aside of the wages.
Advantages for both sides
If benefits in kind are applied correctly, they bring advantages to both sides - the employer and the employee. In detail, this means that the employer pays less gross wages if he replaces a part of it with natural, material or other benefits. Thus he saves social security and tax expenditures. Although the provision of benefits in kind also causes costs, these are in many cases tax deductible.
For the employee, it looks a little different: In his case, the tax office calculates the total value of all received benefits in kind, which then has to be taxed accordingly. However, here too, there is the possibility of profiting from the indirect remuneration with skillful application. The following describes the most common options.
Possible tax savings on fringe benefits
- Tax exemption limit
Each employee can receive non-cash benefits (for example, a work mobile, fuel vouchers, etc.) worth up to EUR 44 per month.
Each employee can receive tax vouchers and gifts of as much as EUR 60 up to three times a year
- Discount allowance
Employees can receive tax-free goods or services produced by their employer (for example, items, but also hotel accommodation and the likes) worth up to EUR 1,080 per year
- Corporate events
Twice a year companies are allowed to spend up to EUR 110 per employee tax-free for company events. This can be used, for example, for a summer party or a Christmas do.
- Kindergarten fees
The employer can reimburse his employee for the costs of caring for a child that has not yet reached school age.
Employee benefits are becoming increasingly important these days, especially in the context of employer branding. Employees value perks very much and for many companies, non-cash benefits are a viable way to offer them.
Especially when it comes to staff catering, Smunch is a popular option. Here, too, benefits in kind and tax benefits are applicable, offering both sides an excellent potential for savings - and delicious food!
Great food always,
The Smunch Team