Lump sum meal allowance: when is it worth it and when is it better to avoid it?

Quick overview

A meal allowance is a cash contribution towards meals that is tax and levy free, subject to a limit. It is particularly worthwhile for employers who want to reduce administration and for employees who want flexibility. On the other hand, it can be disadvantageous when the limit is exceeded or for long shifts, where traditional meal vouchers are more advantageous.

• up to the limit = tax and levy free
• above the limit = tax + levy
• more flexibility than meal vouchers
• disadvantage for long shifts and home office

Not sure how to set up your company’s meal voucher allowance to be tax correct? We’ll be happy to advise you.

What is a meal allowance?

A meal allowance is where an employer gives their employees a direct cash payment in lieu of meal allowances in the form of meal vouchers or subsidised canteen lunches. Even though this amount is intended for meals, it does not matter how the employee uses it or what he buys with it.

The aim of introducing this new option is to save the employer time and money that has to be invested in purchasing and registering meal vouchers, where a significant part of the cost is the commission to the providers of the meal vouchers (usually between 5 and 7%). This does not mean that meal vouchers are being abolished. This still leaves employers with these three options for paying their employees:

• paper meal vouchers or meal cards,
• subsidising lunches in the company canteen or canteen,
• a meal voucher lump sum.

Where can I find the flat-rate meal voucher adjustment?

The law, or rather an amendment to the law, regulating the meal allowance was passed and came into force in 2021 as part of the tax package. So where to find the section on the meal allowance in the statute book?

The 2021 tax package is published in the Act amending certain tax laws and certain other laws. The Income Tax Act provides the broader context.

Traditional vouchers vs. meal vouchers

For classic meal vouchers, the employer is able to claim up to 55% of the cost of the factory canteen meal or the cost of the meal voucher as a tax expense. The remaining 45% is then deducted from the employee’s salary. Thus, for example, if it is a paper meal voucher worth CZK 100, the employer pays CZK 55 and the employee pays the remaining CZK 45 from his/her salary.

This principle remains the same for the meal voucher lump sum. In this case, however, it works in such a way that the employer directly pays the CZK 55 to the employee as a cash amount and the remaining CZK 45 is not deducted from the employee’s salary.

So how does meal voucher flat rate accounting work? This amount is tax-free, including the payment of social security and health insurance. It is also not included in net pay, so it is not subject to garnishment or insolvency.

However, this is only the case if the amount paid by the employer does not exceed the limit of 70% of the upper limit of the meal allowance that can be granted to salaried employees during a business trip lasting between 5 and 12 hours. The upper limit of the meal allowance is set each year by the Ministry of Labour and Social Affairs.

If you are unsure how to set the correct flat rate, we recommend consulting an attorney – the wrong setting can lead to unnecessary deductions.

When is a meal voucher lump sum worthwhile?

The meal allowance is most likely to be paid when the above-mentioned upper limit of the meal allowance is not exceeded. In this case, the amount is neither taxable nor subject to execution or insolvency and the employer can put it towards tax expenses.

However, once the situation arises that the amount of the meal allowance ceiling should be exceeded, then the employer must already pay the employee’s 33.8% insurance premium, the employee’s 11% insurance premium and 15% income tax on the amount. Whereas in the case of an excess meal voucher, only 15% income tax is payable.

In practice, we often see employers setting a lump sum above the statutory limit thinking that this will help the employees. In reality, however, they are significantly increasing their costs through levies. We have dealt with several clients in which unnecessary costs in the order of tens of thousands of crowns per year were incurred due to a wrongly set benefit.

Advantages and disadvantages of a meal voucher lump sum

A meal allowance has significant benefits for both the employer and the employee. However, it also carries several disadvantages. Here is an overview:

From the employer’s point of view, the meal allowance

Advantages

• Less administration involved in setting up a meal voucher = no time to invest in purchasing and recording meal vouchers.
• Employees may be more positively affected by a meal voucher than a traditional meal voucher = improved recruitment.
• Money saved on commissions to companies selling meal vouchers.

Disadvantages

• Tax savings and overall value for money are reduced if the flat rate is above the limit.
• Lack of control over how employees use the money.
• It is harder for home office employees to prove time worked and therefore in this case a traditional meal voucher is more likely to be worthwhile due to the lower penalties in the event of not proving time worked.

Lump sum meal allowance from the employee’s position

Benefits

• There is no specified purpose for the meal allowance money = you can do with it what you want.
• Many caterers do not accept meal vouchers = the meal voucher does not give you a limited choice.
• Meal vouchers are not time limited = you don’t lose your money due to forfeiture of the voucher.
• Meal plan money cannot be subject to foreclosure or insolvency.
• Unlike traditional food stamps, you do not put your own money into a food stamp.

Disadvantages

• The unspecified purpose of a food stamp can lead to neglect of good lifestyle habits.
• For shifts longer than 11 hours, a meal voucher is not worthwhile compared to a traditional meal voucher. A meal allowance can be given twice for such a long shift, whereas a lump sum can only be given once.

Summary

The meal allowance is a modern and administratively simple benefit that pays off, especially if the statutory limit is met and it is not subject to tax or levies. It is advantageous for employee flexibility and employer cost savings, but unsuitable when the limit is exceeded or for specific working patterns such as long shifts. Getting it right is crucial as mistakes can lead to significant financial consequences.