Tax-free payment in kind

1. Introduction to the principle of tax-free payment in kind

A tax-free payment in kind is often seen as an attractive alternative to salary increases. But what exactly is that? The core of the principle is the ability to provide employees with certain benefits tax-free in addition to their salary by providing them not in the form of money but in kind. A win-win situation for both sides: Employees receive a net-similar amount in addition to their salary and the company saves non-wage costs.

That's how it works

The tax-free payment in kind is regulated in §8 EStG. In contrast to withdrawing money, which is normally fully taxed, the employer can grant the benefit in kind tax-free up to a certain exemption limit. This limit is currently 50 euros per month. It is important that it is an exemption limit and not an allowance, which means that the entire amount becomes taxable as soon as the limit is exceeded by even one cent. If the payment in kind exceeds the exemption limit, it is considered a monetary advantage in full and is taxed at 100 percent.

Requirements for tax-free payment in kind

In order to actually be able to grant the benefit in kind tax-free, a number of basic requirements must be met. For example, the benefits must not be money or monetary compensation. The withdrawal may also not be paid out in cash. This means that the employee has no legal right to receive the benefit in money instead. Such benefits can be provided, for example, in the form of fuel vouchers, gift vouchers or regional cash collection cards.

As part of the digital transformation, regional benefits cards in particular are becoming increasingly important. They combine the principle of tax-free payment in kind with support for the local economy and thus have the potential to create a sustainable win-win situation for companies, employees and local retailers.

Now you're probably wondering how you can effectively implement such models in your company. Let yourself be carried away into the exciting world of tax-free payments in kind and find out more about it in the following chapters.

2. Benefits and opportunities of tax-free payment in kind for companies

Before we dive deeper into the topic, we should first clarify what exactly a tax-free payment in kind is. A tax-free payment in kind applies when employers offer their employees material values in addition to their salary. These benefits are tax-free up to a certain amount on a monthly basis. This principle not only provides financial benefits for both parties, but also offers companies a wide range of opportunities to motivate employees in a variety of ways.

Economic benefits

The most obvious advantage of a payment in kind is its tax exemption. It enables companies to offer their employees a financial incentive without them having to pay additional taxes. This makes it an attractive way to increase benefits without drastically increasing personnel costs. In addition, such a payment in kind can save some social security contributions.

Improving employee retention and motivation

A payment in kind is more than just a financial advantage. This is a measure that companies can use to motivate their employees in an individual and personal way and to reward their performance. The possible applications are diverse and can range from food stamps and health services to mobility solutions. These individual benefits can help improve employee satisfaction and therefore employee retention.

Supporting regional economies

Companies can make targeted use of benefits in kind to support local businesses and the regional economy. By using cash cards, which can be redeemed in local stores, more money flows into the regional economy and thus strengthens it sustainably. This commitment can both improve the public perception of the company and make a contribution to society.

In summary, benefits in kind offer companies a variety of benefits and opportunities. They are an effective tool for employee retention, motivation and at the same time an opportunity to sustainably support the local economy. With the right strategy and implementation, they can become an integral part of corporate policy and offer long-term benefits.

3. How does a tax-free employer subsidy work?

Do you know what a tax-free employer subsidy is and how it can benefit your company? In this section, we want to introduce you to exactly this process. It is simple, beneficial and offers great potential for satisfying and retaining your employees.

Definition of a tax-free employer subsidy

A tax-free employer subsidy, also known as a benefit in kind, is an additional monetary plus that an employer can give its employees without having to pay taxes. This type of subsidy is often given in the form of vouchers or cards that can be redeemed at specific stores or services.

Process and implementation of the tax-free employer subsidy

Implementing this system in your business is pretty easy and only requires a few steps. If you have decided to go this route, the first step is to select a provider for the payment in kind to be issued later. In most cases, these are specialized companies that offer you various options in terms of the amount and type of benefits in kind.

As soon as you have concluded a contract with the provider of your choice, they will issue the respective reference cards. These are then issued to employees. With many providers, you can decide for yourself how much this subsidy will be paid out. This gives you the opportunity to meet your employees exactly according to their needs.

Finally, the last step is to correctly record the subsidy in payroll. This is the only way to ensure that the payment in kind is recognized as such and favored for tax purposes. It is important to mark the corresponding amount in the payroll account as a payment in kind.

Requirements and limits

There are some framework conditions for tax-free payments in kind. The current limit is 50 euros per month per employee. It is important that this limit is not exceeded, as otherwise the entire subsidy will be subject to tax and social security contributions. It is also essential that employees have no opportunity to exchange this monetary advantage for cash.

By establishing an effective tax-free employer subsidy system, a company can not only save costs, but also increase employee satisfaction and retention.

Areas of application and possible uses of benefits cards

Payment cards in kind are not only an effective means of motivating employees, but also open up a wide range of areas of application. They can be used in various areas of the company and offer a variety of opportunities to offer benefits to both employees and the company.

Attractive addition to salary

One main area of application of benefits cards is as a supplement to the regular salary of employees. This form of compensation is both cost-effective for the company, as it provides tax benefits, and attractive for employees, as it increases their net pay.

Incentive systems and bonuses

Another area of application is the use of benefits cards in kind as a reward system for special benefits. Employees can be rewarded for outstanding performance with vouchers, which they can redeem in a variety of regional stores. This motivates and increases satisfaction, while also supporting local companies.

Health promotion and employee retention

Payment cards in kind can also play a role in the area of health promotion. By providing a tax-free lunch allowance via a benefits card, companies can support the health of their employees.

Supporting the local economy

Last but not least, benefits cards contribute to strengthening the local economy. An employer that provides employees with benefits cards in kind also promotes local businesses. This can both improve the company's image and make employees feel more connected to the region.

Whether it's promoting employee loyalty, supporting regional businesses or creating attractive incentive systems, the flexible use of benefits cards in kind opens up a wide range of opportunities for companies and ultimately creates a win-win situation for everyone involved.

5. Promoting employee loyalty through the use of benefits cards

In the modern working world, not only do salary and career paths play an important role in employee retention, but increasingly also additional benefits such as the provision of tax-free benefits in kind. It is an effective way to promote employee loyalty and increase their job satisfaction.

Motivation as a key factor for employee retention

Tax-free benefits in kind in the form of benefits cards can be used as a motivational tool. They give employees a range of choices about how they would like to use their benefits in kind and thus offer a personal touch that other forms of reward systems cannot offer. When you give employees leeway and choices, they feel valued and engaged.

Strengthen collaboration and promote team spirit

In addition to being individually adaptable to the needs of employees, they can also help promote a stronger sense of community. Regional benefits cards, for example, enable employees to support local companies, which in turn promotes a sense of belonging and sense of community within the company.

Longer-term commitment through appreciation

Finally, the provision of tax-free benefits in kind can help promote long-term employment relationships. Employees who feel valued and respected have more incentives to stay with the company in the long term. They can see the use of benefits cards in kind as a sign of appreciation for their work and commitment.

It is obvious that the use of benefits cards in kind can help improve employee retention in many areas. They increase employee motivation, promote a stronger sense of community and signal appreciation, all of which contribute significantly to employee retention. However, it should not be forgotten that the introduction of tax-free benefits in kind should only be one aspect of a comprehensive strategy for employee retention.

6. Supporting local businesses and sustainably strengthening the economy through regional benefits cards

Regional benefits cards are an effective tool to strengthen and promote the local economy. It offers employers the opportunity to express their appreciation for their employees while supporting regional businesses.

Why regional benefits cards?

The principle of regional benefits cards is based on offering employees a tax-free benefit in kind in the form of a credit card, which they can redeem in local shops. The idea behind this is to strengthen regional retail and thus contribute to a sustainable and solid economic structure.

Strengthening local retail

In times of online shopping and large international corporations, it is a challenge for local businesses to remain competitive. Payment cards in kind, which can be redeemed on a regional basis, deliberately direct the flow of money to local businesses and entrepreneurs and help secure their existence. This shapes the cityscape and townscape and promotes the diversity of retail trade.

A sustainable contribution to the economy

Through the use of regional benefits cards, financial resources remain in the local economy and do not flow to international corporations. This strengthens the region's economic strength and contributes to stable and sustainable economic development. At the same time, employees benefit from tax-free benefits that increase their net salary and can improve their productivity and satisfaction.

Supporting the local economy and sustainably strengthening regional economic structures are important concerns. By using regional benefits cards in kind, companies can make their contribution and at the same time offer valuable benefits for their employees. What is necessary for this? An awareness of the importance of regional economic structures, the willingness to take responsibility for one's own environment and the courage to use innovative and sustainable models such as those in kind.