Flexible remuneration is one of the essential benefits of Human Resources.
More and more companies have opted for this modality in the last year. Its great advantage is that the worker achieves a higher net remuneration without increasing personnel costs for the company.
It might seem that the company does not gain anything by implementing these measures while the worker benefits greatly.
However, the reality is that the company also benefits in different aspects such as talent retention, family conciliation, staff involvement, etc.
When companies are looking to retain talent and optimize the satisfaction of their human capital, flexible compensation has become an unrivaled ally to achieve this.
What Is Flexible Compensation?
In other words, it is a service offered to the worker who, voluntarily, may or may not enjoy it.
The price of these products is deducted from the worker’s salary, but not having to pay taxes for them means a considerable savings.
There are a series of elements that, according to current legislation, are exempt from personal income tax if they are provided by a company, such as private health insurance, daycare expenses, public transport or the restaurant ticket, as well as training that directly influences your professional future.
On average, a worker can get paid up to 10% more on the net with these measures.
On many occasions, flexible remuneration is also called salary in kind. However, this is a mistake, and the wages in kind are taxed in personal income tax.
For example, a usual gift such as the company’s Christmas baskets must be included in the Income Statement and pay IRPF for its value.
Advantages of Flexible Compensation
The flexible remuneration has excellent benefits, and one of the clearest is the loyalty and retention of talent. Despite its continuous increase, only 6% of companies offer this type of measure.
Being one of them improves our brand as an employer and makes the worker more satisfied. Not only are you saving, but you are also getting facilities in your day-to-day life.
In addition, offering these policies will put the company in a better competitive position than the competition. If you have to choose between a company that provides these benefits and another that does not, the decision is clear.
Especially since, in addition, the net salary for the employee is higher.
Flexible pay also creates extra motivation, which often results in increased productivity. It must be borne in mind that the worker’s Social Security contribution base is not affected, so they do not have to worry about it.
Finally, it should be noted that it represents an increase in the purchasing power of the workforce without increasing salary expenses. By not paying personal income tax, the worker gets more liquid each month, having many of his daily needs covered.
Differences Between Flexible Compensation And Employee Benefits
It is widespread that people do not distinguish between flexible compensation and employee benefit programs.
Although salary may be within employee benefits, the latter concept is broader.
Employee benefits include all the services offered and other aspects such as flexibility or employer branding, even if it does not impact the monthly salary.
However, the flexible remuneration only includes the restaurant ticket, public transport, nursery and private health insurance, in addition to training related to your job.
This means that an employee will pay less for the same service if this type of remuneration is offered to him for the significant savings in taxes since he will not pay the personal income tax for these services.
Products And Services Eligible For The Flexible Salary
The following products can be used as flexible compensation :
Public transport expenses are exempt from paying personal income tax up to € 1,500 per year. Including it in this type of remuneration helps promote public transport and in many cases reduces absenteeism.
Especially important in large cities such as Madrid or Barcelona, it allows workers to save a curious amount and encourages them to leave their car at home and reduce pollution.
Adding public transport costs to payroll is also a way of working on our corporate social responsibility and fighting against climate change.
Childcare expenses can be included without a maximum cost until the child reaches three years of age. Many multinationals have their daycare centers, but SMEs can also agree to offer it to their employees with children.
An additional advantage is that the company can deduct these management expenses from its Corporation Tax payments.
It is one of the most valuable ways to promote family conciliation in the company, and it is beautiful when it comes to attracting talent.
Like the rest of the elements of flexible compensation, it is voluntary since not all employees will have children or their children will be of daycare age.
However, if an employee has children, it can represent a significant differential value compared to another company.
Although the limit is three years, it does not apply immediately after the birthday but at the end of the school year.
That is, if, for example, your child turns 3 in March, they can continue to benefit from daycare as flexible compensation until the end of the course in June.
It is always taken into account until the end of the school year.
The insurance can be deducted up to 500 € per beneficiary, either alone for the workers or their families.
This saving is both for the worker’s income tax and the Corporation Tax. For example, when the employee has private insurance and passes it through the company to introduce it as flexible compensation, the company can deduct management expenses from its tax base.
The same occurs when the company directly offers medical insurance through a company policy where it is included.
The leading figure of € 500 per year per worker is maintained in both.
Another increasingly common service is the inclusion of restaurant tickets for employees.
In the cases of larger companies, they often choose directly to offer a subsidized dining room service. Still, we would be talking about salary in kind and not flexible remuneration in this case.
Regarding restaurant tickets, the savings amount to € 11 exempt from income tax per working day for the worker.
In this way, a vital need such as daily food is also saving for the employee.
On the contrary, in the subsidized dining room, the corresponding personal income tax will have to be paid.
Finally, we must also mention one of the options best known to all and that in many cases are not included in the flexible remuneration.
The training courses are subsidized in many cases and allow the worker to improve his position in the company free of charge.
These courses must be directly related to the work of the staff in the company to get these grants. For example, a manager can take a leadership or communication course but not be included in a cooking class.
Facilitating training is also a way for many companies to retain talent and prevent workers from feeling stagnant.