„It’s obvious that in-kind benefits is the option most chosen by companies, because on Christmas they have the possibility to offer a type of benefit that is not subject to income tax and social contributions. We are referring to the gifts that employers offer in cash and in kind, for minor children of employees, up to a maximum of 150 RON”, said Maria Cojocariu, Payroll Manager Accace in Romania.
Taxes for Christmas bonuses
NOT subject of income tax and social contribution
Subject to 16% income taxe
Subject to 16% income tax, as well as social contribution
In addition, there is a minimally taxable option, in the form of gift vouchers, which are subject only to income tax. The majority of other in-kind benefits are subject to all social contributions and income taxes, so they are not an attractive option for either party – employee or employer.
When it comes to cash benefits, they translate into bonuses and are subject to income tax and mandatory social contributions, for both the employer and the employee, thus generating the highest cost of the two categories.
“Another important aspect is the identification of the satisfaction level brought by each of the two categories of benefits among employees. More and more often we see organizations that are paying attention to the satisfaction brought by these benefits, rather than addressing the principle of offering a single benefit to all employees”, Maria Cojocariu added.
According to her, a specialist in the area of compensations and benefits should cover this topic from two points of view, both of the organization it represents (the cost-effective perspective) and of an employee within that organization (the Christmas bonus perspective).
Thus, highly technologies companies, where HR systems allow it, organize campaigns in which employees can choose a benefit from a list provided by the company. Based on the results, the company makes a decision, considering the most voted benefit.
In an ideal situation, in-kind benefits would be nominal, depending on the results of the questionnaires used in the process described above, taking into account the expectations and preferences of each employee, while respecting the budget that the organization provided for this activity. This practice would ensure a 100% satisfaction level among employees and a similarly high engagement level.
“However, in reality, identifying the needs of employees at such a detailed level is very difficult to achieve and requires a lot of time and energy from everyone. The logistical difficulty, along with the high cost generated by such an assessment, doesn’t make this proposal an effective solution or one that is preferred by employees, which is why companies prefer to stick to the traditional models of benefits”, the Accace representative concluded.