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Flexible remuneration plans as a social benefit for workers

Have you heard about flexible remuneration plans? Have you ever requested this type of remuneration? Today we tell you the most important details that you need to know if you want to incorporate it into your company.

Flexible remuneration plans are a remuneration formula that allows employees to receive part of their annual remuneration through the delivery of a series of products offered by the company.

Participation in the Plan is done through a agreement signed between the company and the employee, which establishes an agreement to modify the remuneration system. The employee voluntarily requests that he receive part of his gross monetary remuneration in goods or services. The peculiarity and great advantage is that these products or services are regulated in the Law 35/2006, Personal Income Tax, and are tax exempt or have advantageous tax treatment.

What advantages does it mean for the employee?

  1. Tax savings, because you pay less taxes.
  2. Personalization of remuneration and adjustment to individual needs.

What advantages does it mean for the company?

  1. It is a strategy to attract candidates who could potentially work in the company, as well as to gain loyalty among the company's workers.
  2. In relation to the above, it makes visible the company's investment in each employee and generates a competitive difference compared to other companies.

What products are generally included in flexible compensation plans?

  1. Remuneration in kind not taxable:

  • Accident insurance.
  • Training courses, both those that are financed by the company itself and those that are from other entities.
  1. Remunerations with advantageous tax treatment:

  • Savings insurance linked to retirement: The non-tax imputation of savings premiums implies that contributions are not taxed in personal income tax up to €100,000. Taxation will occur at the time of receiving the retirement benefit.
  • Transfer of vehicles in renting: The employee will pay tax on an amount equivalent to the 20% of the market value of the vehicle. It must be contracted and paid by the company.

Some important formalities to keep in mind:

  • This is an individual and voluntary agreement. The plan derives from the existence of a novation agreement of remuneration between the employee and the company, in which it is not necessary to indicate the exact amount. If it lasts for several years, an annual renewal is sufficient.
  • It is very important to formalize this agreement, since if it is not done, the Inspection may consider that it is a monetary mediation, which would eliminate the tax advantages.
  • The Workers' Statute establishes that the maximum in kind cannot be higher than 30% of the annual fixed remuneration.
  • Before proceeding to implement a flexible Remuneration Plan with an employee, it is important to review whether the agreement establishes the possibility of making the agreement's remuneration more flexible. If you do not expressly do so, the employee would have to charge an amount higher than the amount agreed upon.
  • It has no effect on Social Security, nor does it affect the contribution base.
  • Nor does participation in the plan affect the gross annual remuneration that is taken into account to calculate compensation for salary terminations.

HR / Law

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