Employee benefits are playing an increasingly important role, especially in certain industries. They are often the deciding factor in whether a candidate accepts a job or not. It is therefore definitely not worth underestimating them. In this article, we’ll look at what benefits actually include, what the tax implications are, and what the benefits are – for both employers and employees.
An employment benefit is a form of benefit provided by an employer to employees over and above normal pay and statutory obligations. They are therefore completely voluntary for employers and it is up to their discretion whether to offer benefits.
On the other hand, there are also legal obligations that are considered benefits in other countries. In our country, however, they are compulsory and must be provided by every employer. These include, for example, four weeks of holiday, various additional payments (for overtime, weekend work, etc.).
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The amount paid as a benefit may meet the characteristics of a tax expense, but it may also be exempt from taxation and not count towards health and social security contributions. It is not included in net pay, which means that it is not subject to deductions from wages.
However, the amount of benefits has limitations. As of 2024, the new rule is that benefits are exempt from employee income tax only up to an amount equivalent to half of the average wage. The average wage this year is CZK 43,967. Therefore, if the cost of benefits exceeds CZK 21,983.5, they will already be subject to taxation and levies. However, there are exceptions in the form of employee training, the provision of beverages at the workplace or employer pension or life insurance contributions.
Employee benefits can benefit both employers and employees in several ways:
Tip: Is your employee not following work procedures? Has he or she caused you damage and refuses to take responsibility for it? Or does he or she want to sue you wrongfully? We will assess your chances of success and take care of the best course of action.
Tip: Read more about benefits and payroll deductions.
There are a variety of benefits. They can be in material form, in the form of a superior service or in monetary form. The most typical employee benefits include:
Meal allowances are one of the most common benefits in the Czech Republic. They can take several forms. Some employers have cafeterias within their company where they pay for all or part of their employees’ lunches. In some companies, however, you may also find canteens that are available to employees all day and offer free breakfast, snacks, coffee and desserts in addition to lunch. However, this is a rarity that you will rarely encounter, for example in IT companies that are generally known for their extensive benefits.
Food vouchers are the most common form of meal allowance. These work on the principle that the employee receives a meal voucher worth e.g. 100 crowns, which can be redeemed in various restaurants or grocery stores. A common practice is that the employer pays only part of the meal voucher and the rest is deducted from the employee’s wages. This is because the employer is allowed to claim a maximum of 55% as a tax expense. The increasingly popular flat-rate meal voucher works in a similar way. However, this differs in that the employee receives 55 crowns as a meal allowance on top of their salary.
Tip: Until recently, meal allowances only took two forms – either as paper meal vouchers or cards or in the form of a factory canteen or canteen operation. Now we have a third option – a meal voucher lump sum. Who does it pay for and when? Find out in our next article.
Pension or life insurance contributions are another very popular benefit. The most common form is that the employer contributes only if the employee pays a part of it himself (e.g. the employer contributes CZK 1,000 per month and the employee CZK 500). It is also common practice that the entitlement to this benefit does not arise immediately, but only over time, e.g. after the expiry of the probationary period or after working for one year.
For employers, this type of benefit is particularly advantageous because it is not subject to the half-monthly average earnings rule and therefore involves tax savings. Employers can contribute up to 50,000 per year to their employees. This money is treated as a tax expense, which is not covered by insurance contributions,
The transport allowance can take several forms. It can be in the form of group transport provided directly by the employer, public transport tickets or reimbursement of fuel consumption. In some cases, the employee may also receive a commuting allowance from the employment office. For example, jobseekers who have been registered with the employment office for more than 5 months and have obtained a job that is outside their municipality of residence may be eligible.
Employee shares and other incentive plans are only just entering the Czech labour market, but are rapidly gaining popularity. This benefit consists in the fact that employees also receive a share of the company they work for in addition to their salary. This motivates them to work better, because if the company does well, the shares do well too. As the share price rises, so does the employee’s wealth.
At the moment, employee shares are quite disadvantageous for employers in terms of tax. However, a change is currently being discussed that could solve this problem.
Tip: We have devoted an entire article to employee events. Read about the ESOP employee incentive program and its benefits.
Other common benefits include various benefit cards that allow employees to play sports, pay for cultural experiences, premium healthcare, etc. This also includes sick days, which are extra paid days off. Employees can use these if they are not feeling well but do not want to take sick leave. Longer paid holidays, 13th and additional salaries, company cars, etc. are also quite common. In short, there is a lot to choose from.
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Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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