Benefits and salary exchanges – things to think about

Benefits and salary exchanges – things to think about

Often, a reasonable or even high salary just isn’t enough to be an attractive employer. Candidates often highly value the company’s various benefit packages as well. What benefits should employers focus on? And how do salary exchanges work as part of a benefits package?

There is a long list of common benefits. These include everything from the more common benefits such as a wellness allowance and spectacles for VDU use to parental leave supplements and insurance negotiated as part of collective agreements. Benefits also include subsidised lunch, extra days of holiday, access to holiday accommodation, or a company car.

However, there are also benefits other than the purely financial ones. For an employee, “benefits” may also include work tasks that are interesting, flexible working hours, or the company working sustainably and profiling itself in areas related to certain core values. Companies are increasingly reflecting their focus on sustainability in their benefits packages. This may include allowing employees to engage in volunteer work outside the company during certain limited working hours.

What benefits should we offer?

When it comes to what benefits an employer should offer, there’s no right or wrong. Nor are there requirements to actually offer any benefits beyond what is negotiated in a collective agreement.

However, there are some benefits that many workers almost take for granted today, such as a wellness allowance, which is widespread in many industries. Which benefits the employer should ultimately invest in depends on the company’s circumstances and what it wants to achieve with certain benefits. In the decision-making process for the development of benefit packages, it’s a good idea to survey interests within the organisation in order to have a good basis for decision-making prior to the evaluation of what is suitable for the workplace in question.

Another possibility is to offer as wide a range of benefits as possible in the hope of encompassing all employees, while also setting an annual usage limit so that the costs do not spiral. Regardless of which path you as an employer choose to take, it’s important to estimate the cost of introducing a benefits package and take into account the increased administration.

Tax exemption

Benefits are generally taxable. However, there are certain benefits that are classified as tax-free, and these are regulated by the Swedish Tax Agency. In order for a benefit to be tax-free for the employee, it must be offered equally to all employees. Otherwise, the benefit is taxable and the employee will be taxed on its value and the employer will be required to pay employer contributions on the value of the benefit.

Salary exchanges as part of a benefits package

A lot of employers offer salary exchanges for various benefits as part of their benefits package. A salary exchange means that an employee can exchange part of their gross salary for a benefit. This may be, for example, a car, cleaning support, or extra pension contributions.

As a rule, benefits that are tax-free or that are taxed at a flat rate can be more advantageous in terms of cost, while benefits that are taxable often don’t provide a saving for either the employee or the employer. A tax-free benefit can be, for example, education, while housing and a car can be advantageous in cases where the standardised amounts are less than the market value.

Salary exchange for pension contributions

It’s not entirely uncommon for a employer to offer a salary exchange for pension contributions. An advantage for the employer in allowing employees to exchange their salaries for pension contributions is that the tax and employer contributions on pensions are lower than if the same amount had been paid in a regular salary. Of course, this also means that the employer has the opportunity to set aside more money for the employee’s pension and still achieve cost neutrality. As usual, however, it’s important not to forget to take into account the administrative costs in managing the extra work that such a benefit entails. 

Things to consider with salary exchanges

It’s important to have clear rules and guidelines regarding salary exchanges as the employee may otherwise risk losing out on them. Employees with a monthly salary that exceeds SEK 45,864 (2021) after any salary exchanges are the ones who benefit most from these. For employees who have a salary below this figure, social security benefits are negatively affected and salary exchanges can therefore result in a loss for the employee. It can be important for employers to be aware of this both in the development of their benefits packages and in their communication with employees.

At Azets, we have extensive experience in benefits and regulations regarding benefits packages. If you as an employer have questions or concerns about this or want suggestions on suitable benefits packages, please don’t hesitate to get in touch.

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