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Your company probably already offers benefits in kind (BIK) to employees locally. However, if your team can develop an excellent approach to global benefits, you are poised to attract the best talent.
Understanding the expectations of international employees has become a rule as global barriers for business are erased. Whether you transfer employees to another country or hire globally, it is vital to understand how benefits in kind work globally.
What are benefits in kind?
This term refers to non-cash benefits that you provide your employees outside of their salary, have monetary value, and most are taxable.
Benefits in kind are also known as in-kind benefits, notional pay, fringe benefits, or perks.
What are some types of benefits in kind globally?
According to UK accounting company Crunch, these are the main types of BIK that might be taxable:
- Company car
- Private health insurance
- Assets provided to an employee that have significant personal use
- Self-assessment fees paid by the company
- Phones with personal use
- Non-business travel expenses
- Non-business entertainment expenses
Other in-kind benefits include relocation assistance, commuting expenses, daily allowance for meals or travel, and childcare expenses.Other in-kind benefits include relocation assistance, commuting expenses, daily allowance for meals or travel, and childcare expenses. Click To Tweet
Benefits in kind are common among executives and employees who have transferred to other countries. However, when you’re looking for international talent, it is common for candidates to have various expectations regarding benefits offered, depending on the labor laws they’re accustomed to in their country of origin.
Benefits in kind will vary by country. For example, in countries like Luxemburg, employees are used to benefits such as lunch vouchers and a company car for both business and personal use. In Mexico, many employees also expect vouchers and private insurance as part of an attractive job offer.
How are benefits in kind taxed?
Benefits in kind are taxable, but you must have expert advice in every country to avoid any tax misfiling.
For example, in Ireland, if employees’ total income, including benefits, surpasses 1,905 euros per year, their benefits are taxable. Also, benefits given to their families are taxable as well.
In many countries, there is a limit for personal allowance before being taxed. The personal allowance limit can usually be found on the website of the local tax authorities.
In the UK, the personal allowance is 12,500 British pounds, so any employee with a salary under this amount will not be taxed on benefits in kind.
Regardless of the personal allowance, some benefits in kind will not be subject to tax, depending on the local tax regulations.
- Cell phone for personal use
- Subsidized meals or allowance for meals (if it is not a regular occurrence)
- On-site recreational facilities provided by the employer
- Taxable benefits in kind in Canada include:
- Company vehicle
- Room and board
- Childcare expenses
- Group insurance
- Medical expenses
While employees are responsible for filing and paying taxes for their benefits in kind appropriately, your company has responsibilities for certain benefits. For example, according to Crunch, in the UK, “National Insurance Contributions are payable by companies on the benefits in kind provided in a tax year, at 13.8% of their determined value.”
What are some common global benefits in kind?
The key to your success is identifying what benefits in kind you can choose to offer your employees and which are mandatory.
In countries like Dubai, private insurance is mandatory. However, in many countries it is not, and is a highly sought-after benefit in kind.
According to the Organization for Economic Co-operation and Development (OECD), the U.S. is the only country among 41 nations that does not mandate any paid leave for new parents.
While parental leave is not necessarily a taxable benefit, it is an expected benefit in kind that you will have to offer. It is also a benefit in kind that will have an impact on your finances, as you might have to find temporary replacements for some workers during their leave.
If you’re hiring in a country where healthcare is mandatory, there are taxes to be considered. For example, according to Crunch, in the UK, “National Insurance contributions are payable by companies on the benefits in kind provided in a tax year, at 13.8% of their determined value.”
This is why understanding the local laws and regulations surrounding employee benefits in your country is a crucial first step to offering benefits in kind.
How can you compliantly offer benefits in kind globally?
As you can see, adapting your benefits package to adhere to laws and employee expectations in every country you hire in is a complex task. On top of that, establishing an entity in another country and finding local experts that can advise you is a lengthy, expensive endeavor. If you need to hire top international talent quickly, you can hit a wall if you cannot offer significant benefits.
Empower your HR team with the right partners, which can save you thousands of dollars and months (or even years) during your international expansion. The Employer of Record (EOR) model was created precisely for this purpose.Empower your HR team with the right partners, which can save you thousands of dollars and months (or even years) during your international expansion. Click To Tweet
An EOR gives companies access to compliant international entities by serving as the legal employer and taking care of payroll, taxes, and HR functions. EORs also have relationships with international partners that allow companies to offer benefits in kind to their local employees and to attract top talent.
What about compliance?
An EOR is 100 percent responsible and liable when it comes to compliance, adhering to all local rules and regulations. If you want to learn more about how to hire international employees and offer them benefits in kind quickly, affordably, and compliantly, we invite you to learn more about EORs and the advantages of building a global team.