Today, besides salaries and various performance bonuses, employers provide a wide range of employee benefits. These are usually beneficial for both parties.
For employers, it is a largely tax-deductible expense, and for employees, it is always something extra. This is how companies can have happier employees who contribute to their corporate culture. They can give companies a competitive advantage in attracting top employees and enhance the corporate image. Employees are motivated to better performance and have no need to look around for other job opportunities. They have the feeling that their company cares for them and wants more than just work results.
Benefits are discretionary. It is only up to the employer to decide whether or not they will be paid. Benefits provided by the employer are listed in the collective agreement, internal regulations, employment contracts, or any other contract. They often include benefits in kind provided to employees from cultural and social needs funds, the social fund, or from profit after tax.
Most common benefits
- The most widely provided benefits include in-kind catering allowances, particularly luncheon vouchers. For employers, 55% of the voucher value is a tax-deductible expense. Employees usually pay 45% of the voucher value, but sometimes employers provide a higher allowance or even pay the full price of the voucher. Any benefit provided above 55% is a non-tax-deductible expense. Catering may be provided directly at the workplace, which saves time.
- Another frequently used and popular benefit is the employer’s contributions to pension and life insurance schemes. Employer contributions are exempt from tax up to CZK 30,000 per year. The latest amendment to the Income Taxes Act (Section 6 (9) (b) and Section 15 (6)) effective since 1 January 2015 has brought changes to life insurance. In simplified terms, if surrender is allowed under an updated life insurance policy, the employer’s contribution must be subject to tax and social security. This makes the benefit more costly and less advantageous for both parties.
- A very welcome benefit in our hurried times includes holiday above the statutory minimum, sick days, and home office. Holiday above the statutory minimum may be provided to employees from the day of commencement of work or after expiry of a certain period of the employment.
- A company car used for private purposes and a mobile phone are not entirely for free but are considered nearly standard benefits by employees. In the case of a company car, 1% of its acquisition cost is added to the employee’s tax base and the base for social security and health insurance calculation and is subject to tax and social security contributions paid by the employee. The amount for kilometres travelled for private purposes is usually withheld from the employee’s salary. The costs of private kilometres may be covered by the employer; in such a case, the employee only pays the tax and the contributions. The same applies to private phone calls made on a company phone.
- A contribution to cultural and sports events, the use of healthcare, training and recreational facilities are provided from funds designated for such purposes and it is an in-kind benefit. For employees, the income is tax-exempt save for recreational and package tour benefits which are only tax-exempt up to CZK 20,000 of the in-kind benefit value per year.
Other employee benefits include contractual sick pay (including absence to care for a family member), personal or job anniversary gifts, transport and accommodation contributions, discount loans, employee shares, courses at and outside the workplace, training, use of facilities for pre-schoolers, social assistance to an employee in direct connection with an extremely difficult situation, products offered at reduced prices, a reduced working week without pay cuts, flexible working hours, and so on.
When providing benefits, employers try to satisfy the needs and interest of all employees. As a result, the company creates a portfolio of benefits according to its scope of business, possibilities and employee needs to derive the maximum benefit for both parties.