In-kind benefits or fringe benefits are non-cash perks on top of salaries that companies offer employees to increase employee well-being and boost retention rates. Examples of in-kind benefits can include private health insurance, stocks or RSU options, flexible work schedules, travel expenses, and so on.
Along with mandatory benefits, in-kind benefits can vary from country to country. While some countries must provide pension by law, other nations include it as a fringe benefit.
Are in-kind benefits taxable?
In-kind benefits are usually non-taxable. For example, when employers offer meals, they must offer them at the business location and it needs to be offered as an employee benefit.
Are fringe benefits included in gross income?
In the U.S., most fringe benefits are included in an employee’s gross income and are subject to withholding and employment taxes. The employer must record the amount “by which the fair market value of the benefits is more than the sum of what the employee paid for it plus any amount that the law excludes.”
What are the benefits of in-kind benefits?
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.
What are the advantages of in-kind benefits?
There are several advantages to in-kind benefits and both employers and employees can reap the rewards. A few advantages:
- It can improve employee engagement and morale- when employees have access to better health insurance or subsidized remote offices, it can make their lives easier and allow them to dedicate more energy towards their work.
- It can strengthen recruitment strategies- offering competitive salaries often isn’t enough to attract talent. Many employers turn to in-kind benefits to set themselves apart from the competition.
- In-kind benefits can improve employee retention- offering benefits such as free dinners or subsidized education can go a long way when it comes to employee well-being, and happier employees are more likely to stay in their job longer.
- Employers can utilize tax benefits-In the U.S., many perks, from wellness plans to cell phone reimbursements, aren’t considered part of an employee’s pay, so they are not subject to taxes.
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.