When dealing with nowaday’s dynamic labor market, the effort made to attract talents, retain and motivate employees is increasing, therefore employers are obliged to develop and implement reward strategies that respond to the different needs of their employees.
Although base salary and bonuses continue to remain the main elements of motivating employees, we see that in Romania, as well as in other countries in the region of Central and Eastern Europe such as Poland, Czech Republic, Slovakia, Ukraine and Hungary, increasingly more companies focus on fringe benefits packages.
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Types of Benefits
Types of Benefits
In Romania, the main benefits that employers grant to employees are meal vouchers, health insurance or subscriptions to private clinics, additional vacation days, mobile phone, teambuilding programs, laptop, travel expenses reimbursed, gifts for children on several occasions (June 1st, Christmas), training programs, etc. Depending on the size of the organization or its profile, we identify benefits such as subscriptions to gyms, snacks / drinks free of charge, voluntary private pension, private life insurance, discounts on merchants’/partners’ products or services, flexible working hours, facilities for recreation (relaxation room, ping-pong, billiards, massage chair, etc.), free parking for car, medical insurance for trips abroad both for employees and family members, etc.
Most of these benefits we identify in industries such as IT, banking and telecommunications. Both in Romania as well as
in other countries in the region such as Czech Republic, Hungary, Poland, Ukraine and Slovakia, the employers in IT
sector are the ones granting the most benefits to the employees.Romania does not differ greatly from other countries in the region that were the subject of the study in terms of the type of benefits granted to employees. We note that even the region’s employers choose to offer these benefits, but the most common are:
Czech Republic
- Meal vouchers
- Mobile phone
- Laptop
- Trainings
- Private pension
- Private life insurance
- Private healthcare
- Sports/ cultural activities
Hungary
- Meal vouchers
- „Szechenyi” holiday card
- Travel expenses reimbursed
- Subsidy for children’s education
- Contributions to bank-loan instalments
- Private healthcare
- Private pension
- Trainings
Poland
- Private healthcare
- Meal vouchers
- Sports
- Car
- Cultural activities
- Flexible working hours
- Trainings
- Private life insurance
Slovakia
- Meal vouchers
- Mobile phone
- Flexible working hours
- Home office
- Teambuilding programs
- Trainings
- Laptop
- Private pension
Romania
- Meal vouchers
- Private healthcare
- Additional vacation days
- Mobile phone
- Teambuilding programs
- Laptop
- Travel expenses reimbursed
- Gifts for children on several occasions (June 1st, Christmas)
Ukraine
- Mobile phone
- Gifts to employees on various occasions (birthday, company day, etc.)
- Trainings
- Travel expenses reimbursed
- Car
- Meal allowance
- Flexible working hours
- Private healthcare
Meal vouchers
Meal vouchers
Analysing the situation at regional level, we see that meal vouchers are among the most common fringe benefits, not only in Romania, but also in other countries such as Czech Republic, Hungary, Poland and Slovakia.
The exception is Ukraine, where there is no possibility for employers to provide to employees the classic meal vouchers in paper format. Instead, employers tend to offer to employees, as a benefit, a personal allowance for food, the limit being variable depending on employer’s decision and industry.
In Hungary, employers grant meal vouchers – known as „Erzsebet” tickets – as part of a flexible benefits program in which the employee has the possibility to choose the actual value that wants to benefit of. The meal vouchers are a benefit on which applies both income tax and social contributions. Regardless of the number of working days in the month, the employers can grant meal vouchers at maximum 8.000 HUF/month (approx. 26 EUR/month), amount to which applies 35,7% tax rate, representing 16% income tax and 14% health contribution, multiplied by 1,19. Over the maximum ceiling, are applied taxes in a total of 51,17% (16% income tax and 27% health contribution, multiplied by 1,19).
In Romania, starting with May 2015 the nominal value of meal voucher was increased from 9,35 RON to 9,41 RON, without being truly felt by employees.
For example, in a month with 20 working days an employee currently receives meal vouchers in the amount of approx. 188,2 RON (approx. 42 EUR), with only 1,2 RON more than before May.
Unlike Hungary, in Romania meal vouchers provided by employers are only subject to income tax, respectively 16%.
Also in Poland meal vouchers represent a benefit only subject to income tax, but with an applicable rate of 18%. Given that the employee’s yearly income exceeds 85.528 PLN (approx. 20.500 EUR), over this threshold is applied a new tax rate, respectively 32%.
Similar to Hungary, the value of meal vouchers is not dependent on the number of working days in the month, the employer can grant to the employee maximum 190 PLN/month (approx. 46 EUR/month).
In Czech Republic, the value of a meal voucher is 100 CZK so that an employee can receive as benefit in a month with 20
working days, maximum 2.000 CZK (approx. 74 EUR). From a tax perspective, the advantage is that meal vouchers in Czech Republic are not subject to income tax nor to social contributions. In practice however, the employer bears 55% of the meal voucher amount (approx. 2 EUR/voucher), being the maximum tax deductible amount, and the difference of 45% is borne by the employee. The net benefit corresponding to meal vouchers is, therefore, approx. 41 EUR.Unlike other countries which were the subject of the study, in Slovakia, granting meal vouchers is mandatory by law. Specifically, employers should provide employees with food, either in the form of a canteen, either as meal vouchers, the second option being the most common in practice.
Employees are entitled to a meal voucher for each working day, considering that they perform activity for more than 4 hours/day. Employers may grant meal vouchers in the amount of maximum 4,2 EUR/voucher, but not less than 75% of this value, respectively a minimum 3,15 EUR/voucher. Thus, in a month with 20 working days, in Slovakia an employee can receive for example maximum 84 EUR as meal vouchers.
As in Czech Republic, also in Slovakia meal vouchers are not subject to income tax nor to social contributions. By law, the
employer bears 55% of the nominal value of meal ticket (2,31 EUR = 55%*4,2 EUR), maximum tax deductible. Thus, in practice, the difference is borne by the employee by withholding it from the net salary (1,89 EUR = 4,2 EUR – 2.31 EUR). In this case, it appears that the actual benefit received by the employee for 20 days worked is actually 46 EUR.Meal vouchers – printed versus electronical form
It is worth noting that the majority of the countries in the region are granting meal vouchers not only in the classic format, on paper, but also in electronic form, as a card. For example, in Poland, employers are granting electronic meal vouchers since 2004, in Hungary starting with 2012, in Czech Republic are effectively granted since September 2013 and in Slovakia meal vouchers can be granted also electronically, but it is not a very common practice.
In Romania, the concept of electronic meal vouchers was introduced towards the end of 2013, and subsequently in February 2014 came into force the law allowing the use of meal cards.
Only one year later, respectively in January 2015, have been also published the law enforcement methodological norms, but, nevertheless, currently employers still can not grant the meal vouchers electronically.
Flexible benefits
In Hungary, for example, there is the so-called „cafeteria” system, which is a flexible form of benefits provided by employers. This system is actually a menu with benefits from which the employees, within an annual budget limit, can choose what they want depending on their needs. One of the component elements is „Szechenyi” holiday card that employees can use to purchase various services such as accommodation, meals and recreation.
Also in Romania we encounter companies that choose to offer flexible benefit packages, but their number is still a small one. One benefit that is not yet widely used in Romania is the service of „kindergarten/nursery at the workplace”. In Czech Republic, for example, employees’ children have the opportunity to go to on-site kindergarten/nursery. In this way, employees are more motivated, the absenteeism from work is reduced, creating a balance between career and private life.Flexible benefit programs are most popular in the region.
Conclusion
The usefulness and attractiveness of a benefit depend on several factors, including age, education, marital status, family, etc. For example, for young employees offering a holiday vouchers would have a greater impact while employees with children would welcome more benefits such as subsidy for children’s education or kindergarten/nursery at the workplace.
Thus, in order to be really effective, it is recommended for employers to introduce in the policy of rewarding the employees, a flexible benefits scheme, enabling employees to choose their desired benefit.
It should be emphasized that the benefits are just one of the component elements of the employer’s reward program.
An efficient program, however should be seen as a total reward system that includes all five key elements designed to increase employee involvement and commitment to organizational goals, namely: compensation, benefits, balance between work – private life, performance and recognition and last but not least development and career opportunities.
E-mail: andreea.paun@accace.com
Phone: +40 314 050 440
