Flexible pay is a compensation system that allows employees to allocate up to 30% of their gross salary to certain benefits in kind, thus customizing their pay package according to their needs and preferences.
Instead of receiving their full salary in cash, workers have the option to allocate a portion to products or services such as health insurance, pension plans, restaurant tickets and other benefits.
This model has been gaining popularity in recent years because of its ability to improve employee welfare without generating significant additional costs for companies. It is not about paying more, but paying better.
What is flexible remuneration?
Flexible pay is a system of remuneration that allows employees to decide how they want to receive part of their salary. Some of the gross salary may be converted into tax-free profits or products, allowing the employee to maximize the value of his payroll.
Types of benefits
The products or services that employees can choose from within this scheme include:
- Health insurance: Medical coverage for the worker and his family.
- Savings plans: Contributions to retirement funds.
- Restaurant Ticket: To use in the meals of day to day.
- Child care cheques: For the coverage of expenses of children’s education.
- Public transport: Public transport passes.
- Training: worker training
- Renting of vehicles for use by the worker
Benefits for company and employees
Flexible pay offers a system in which both employers and employees benefit. Employee satisfaction and well-being improve, while the company optimizes costs and attracts talent, generating a more engaged and productive work environment.
Benefits for employees
One of the main attractions of flexible pay for employees is that it allows them to tailor their pay to their personal circumstances, increasing their satisfaction and motivation. Some of the most important advantages are:
- Tax optimization: The benefits listed in the previous section are exempt from taxes (IRPF), which increases the purchasing power of the employee by reducing the taxable base.
- Personalization: Each worker can adjust their pay according to their priorities, whether it’s saving for retirement, improving their health or reducing daily food expenses.
- Improved well-being: By providing services that cover needs such as health, transport or food, employees feel more supported by the company, which improves their quality of life and performance.
Benefits for companies
For companies, the implementation of a flexible pay system has many benefits:
- Attracting and retaining talent: A flexible pay system is a differentiator that can attract new employees while improving the retention of existing ones.
- Improved working environment: Employees value the ability to choose, which translates into greater job satisfaction and consequently a better team climate.
- Cost optimization: It does not imply a direct increase in the wage bill and if a specific suitable software is selected, it will also not represent additional administrative costs. They also benefit from increased team productivity and engagement.
- Compliance with welfare policies: Many organizations seek to promote the overall well-being of their employees, and flexible compensation is an effective tool for meeting this goal.
Legal and tax aspects
Under the regulations of the Workers’ Statute and the IRPF Law, products and services paid by this formula are exempt from IRPF. This way the payments are made from the gross salary of the employee.
Tax considerations in flexible pay
Some key aspects to consider include the tax exemption limits that each benefit has:
- Health insurance: 500 € per year per insured. Extendable to spouse and children or 1,500 € per year in case of disabled people.
- Restaurant ticket: 11 € per working day with a limit of 2,420 € per year.
- Ticket Transport: 136,6 € per month with a limit of 1.500 € per year.
- Nursery: Up to 3 years of the child/s. No limit.
- Training: being relevant to the job. No limit.
- Savings Plans: Max. 100,000 € per year.
Flexible pay is an excellent tool for both companies and employees
On the one hand, it allows organizations to optimize their investment in human resources, improving employee satisfaction and productivity. On the other hand, it offers employees the possibility to personalize their payroll and obtain higher benefits.
However, its implementation requires good planning, a good selection of management software and proper advice from an insurance broker to find the best insurance products on the market.
The O.Brokers team is at your disposal to advise you on the best solution for your company. Contact us for personalized guidance.
