Company Fringe Benefits: What You Need To KnowWritten on August 24, 2016 by Kirk Rice LLP
A fringe benefit is a form of reward used by employers to engage, track, reward and retain their employees. It is a non-monetary form of compensation provided to employees, common examples would be mobile phones, computers, and cars.
In this article, we talk about the common types of fringe benefits available for employers.
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What are the advantages of providing benefits?
- In many instances, it is advantageous for an employee to take in a benefit rather than receive the additional income needed to purchase the benefit themselves.
- Employers have the ability to take advantage of group purchasing power which provides large discounts for products in comparison to the single purchasing power of one employee.
- Employers can establish flexible benefits packages ,allowing employees to opt for specific benefits within a budget, which may increase with their grade.
Tax-free benefits. Do they exist?
There are strict conditions regarding tax-free benefits, the main one being that these benefits must be available to the entire workforce. Examples of tax-free benefits available are:
- Provision of a company gym, whether it’s provided free or at a subsidised price.
- Healthy food in the company canteen.
- Annual health checks, counselling and eye tests where employees are required to use computers as part of their job.
- Sick pay scheme which usually includes a comprehensive back to work support service. Incidentally, an employer can also spend up to £500/year on medical treatment to enable identified employees to return to work following sickness or injury.
- Death in Service benefit which pays a cash sum to the employee’s beneficiaries. The cost of insuring the workforce is substantially less than any personal insurance that an employee might have.
- Provision of a nursery or childminding facilities for staff.
- Contribution towards moving costs (up to £8,000) if a new employee is required to relocate as part of their job role.
Flexible Working, Home Working and Commuting – Benefits Available
With the ever-increasing popularity of flexible and home working arrangements, it is useful for employers to understand their options with regard to benefits. Employers can contribute a tax-free amount of up to £4/week towards any cost an employee incurs from home-working. For further advice on the tax implications of home-working please contact us.
A popular scheme has been the Cycle to Work scheme which provides tax-free loans to employees for bikes and associated safety equipment. For more information on the scheme see this Government guide.
Season ticket loans whereby an employer loans employees up to £10,000 on low or maybe interest-free terms is another popular benefit. If a season ticket loan isn’t a requirement for your company then perhaps provision of a company parking space might be attractive.
Mobile Phones
An often overlooked benefit is the provision of a mobile phone. If the phone is used solely for business purposes, it is tax-exempt, however a stipulation of this tax-free benefit is that the phone must be owned by the company and not the individual.
In summary, there are several options for employers to provide benefits without the need for either the employer or employee having to pay tax or National Insurance on the value of the benefit. We would recommend that employers understand the tax rules and limitations and that they regularly check for any changes. For further information on employment benefits, please see our factsheet.
(See the Government’s guide for employers providing benefits to employees).
Michael Powell is a Financial Planner at Kirk Rice Accountants. Michael has more than 20 years’ experience in Financial Planning for individuals and business owners. If your business requires assistance with employment benefits please do feel free to call Michael or email info@kirkrice.co.uk.
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