Benefits in Kind (BIKs) refer to non-cash perks that employees get from their employers.
Some examples include:
- Housing allowance
- Stock options
- Health insurance
- Childcare assistance
- Gym membership
- Education allowance
- Company car
BIKs can play a major role in attracting and maintaining talent. They can create a more positive work environment and decrease employees’ personal expenses. For many job seekers choosing between multiple offers, BIKs could tip the scale of their decision process.
Because BIKs have monetary value, they’re factored into employees’ salaries for tax purposes. This makes BIK important considerations in the payroll process in general, and the global payroll in particular.
How are BIKs taxed?
As a rule, BIKs in most countries tend to be subject to taxation. How different types of benefits are taxed, though, will often differ country to country.
In the United States, for example, the value of a benefit is added to an employee’s taxable income. The tax rate applied will vary depending on what the benefit is and the employee’s tax bracket.
Employers report the value of the benefit in a W-2 form, which shows the employee’s compensation total for the year. The benefit’s value is included in the employee’s gross income, which is subject to social security, Medicare, and income taxes.
Employers’ role in other countries in terms of taxing BIKs tend to be similar; often, they’re required to report BIK value to the tax authorities.
There are some benefits that are less likely to be counted toward employee taxes, though – like employee discounts for merchandise. Additionally, if a company car is used only for work-related travel, it may be partially or fully tax exempt.
How do you manage benefits in kind for a global workforce?
Most countries have some form of global benefits in kind (BIK). But tax requirements surrounding BIKs tend to differ. Companies with global operations may struggle with juggling so many different forms of taxation processes and regulation requirements.
Turning to the right global payment execution platform can ease the administrative stress and ensure a process that both preserves time and minimizes errors.