Employee benefits and compensation rules have changed in 2024. In this article, we look at key changes that affect nutrition, retirement savings, training, and other important aspects related to employee benefits and compensation.
Employee meals: new limits and regulations
Employers can provide meals to their employees in a variety of ways: providing vouchers, organising canteens or compensating for meals with cash payments. Regardless of the form, the same limits and requirements apply to all options.
From 2024, the tax-free limit for meals is 70 per cent of the maximum daily allowance in the public sector, which is equal to 116.20 kronor this year. This means that if an employee has worked a minimum of 3 hours and does not receive travelling allowance, compensation for meals within this amount will not be subject to personal income tax and social security contributions. Any amount exceeding the limit is subject to taxation.
Additionally, an employer may exempt meal reimbursements from taxation if the employee’s workday exceeds 11 hours.
Pension savings: tax exemption
Employers can contribute up to 50,000 EEK per year to employees’ pension savings without incurring taxes and social and health insurance contributions. Employees can also receive a tax deduction of up to 48,000 kronor per year for their personal contributions to pension funds.
Training and professional development
Payment for the training of an employee connected with professional activities may be exempt from taxation. It is important that the payment is made directly to the educational institution. For the employer, such expenses are considered tax-recognised, which makes this benefit beneficial for both parties.
Benefits for sport, culture and recreation
From 2024, employers may provide their employees with benefits for sports, cultural activities, wellness programmes and recreation under new rules. A general limit has been introduced for this group of benefits. The limit is half of the average salary, i.e. 21,983.50 kronor. Within this amount, the benefits are not subject to tax and contributions, but such expenses will not be recognised as tax deductible for the employer. Conversely, in the case of an employee’s bonus over the limit, the bonus over the limit will not be exempt, but for the company such an «over the limit» bonus will become tax-recognisable. This type of bonus includes: multi-sports, payment for vouchers, payment for day care, paid education of employees’ children, payment for health improvement purposes (vitamins, eyeglasses, dentist, massages, etc.). All payments can be made not only for the employees themselves, but also for their family members.
Corporate events
An employer may organise cultural and sporting events for employees and their families. The costs of such events are not taxable, which makes it possible to organise corporate parties, New Year’s celebrations and other events without additional tax consequences for employees. However, such expenses are also not recognised as taxable for the employer.
Working lunches and meetings
Lunches and dinners organised as part of business meetings are exempt from taxation. However, they should not be treated as compulsory meals under labour law.
Flexible working hours
The ability to choose the start and end of the working day is becoming increasingly popular among employees. A flexible schedule allows employees to manage their own time within a set working interval, which has a positive effect on motivation and labour productivity.
Overalls and protective equipment
The employer is obliged to provide working clothes and protective equipment if the working conditions require it. These costs will not be taxable and do not increase the base for social security contributions, which is particularly relevant for working professions. They are tax costs for the employer.
Soft drinks in the workplace
Providing tea, coffee, water or juices to employees does not give rise to tax consequences. However, these expenses will not be recognised as taxable for the employer. The exception is protective drinks and drinking water for employees.
Gifts to employees
Gifts for holidays or other events, even if they are not monetary, are taxable. An employer should take this point into account when organising corporate incentives.
Additional holiday days and sick days
Employers may grant employees additional days of leave beyond the mandatory four weeks per year. This condition should be stipulated in corporate documents, which ensures transparency and respect for employees’ rights.
Where an employee uses a company car for personal purposes, this is taxable. An employer must take this into account when calculating the tax base for an employee:
- 1 per cent of the value of the vehicle, except with or without low or no emissions
- 0.5 per cent of the cost of a low-emission vehicle (hybrids)
- 0.25 per cent of the value of a non-emission vehicle (electric or hydrogen vehicles)
Transport allowance for transport to work
The employer can provide the employee with a transport allowance either in the form of a cash payment or by organising the travel itself. In both cases, this income is taxable to the employee and also requires the payment of social and health insurance contributions.
For the employer, such expenses will be considered tax recognised, but the condition is that the procedure for granting the allowance must be specified in the company’s internal regulations, collective or other agreement.
Service phone
If a business phone is used for business purposes only, all expenditure on it is considered tax recognised for the employer and no taxable income arises for the employee.
However, if an employee uses a telephone for personal purposes and does not reimburse the employer, these expenses may also be recognised as tax deductible for the company only if such a bonus is fixed in the company’s internal regulations, collective agreement or employment agreement. In this case, an employer who is a VAT payer will not have full tax deduction rights. For an employee, such a bonus will be regarded as taxable income which is included in the base for calculating social and medical insurance contributions.
Goods and services provided to employees at below market value
The difference between the market value of a good or service and the amount paid by the employee is taxable. The employee pays tax and social and health insurance contributions on it.
Payment for temporary accommodation of an employee
If the employer provides the employee with temporary accommodation at the place of work (if it is not the same as the place of residence, i.e. not in the same area), the amount up to 3,500 EEK per month is exempt from taxation and contributions.
For the employer, such expenses are also considered tax recognised, and they may be recognised in full without a limit on the amount. An important condition is that the conditions for granting this bonus must be specified in internal regulations, collective or other agreements.
Corporate kindergartens
The costs of running corporate kindergartens are tax recognised for the employer as these institutions are educational institutions.
This favourable type of income (in non-cash form) is subject to the general limit for tax exemption under § 6, section 9, item d of the Income Tax Act, which is CZK 21,983.50 for the year 2024.
If the employee, in combination with other benefits (e.g. compensation for sports, health improvement, culture, etc.) does not exceed this limit, the allowance for attendance at a corporate kindergarten is exempt from taxation. The calculation takes into account the cost of kindergarten services similar to public kindergartens in the area. The cost in state-run institutions usually ranges from several hundred to 1-2 thousand kronor per month (excluding meals).
If an employee pays for day care on his or her own, nothing is included in the calculation of the tax exemption limit. In the case of partial reimbursement, only the difference between the normal price and the employee’s actual payment is taken into account. For example, if an employee pays 500 EEK for corporate daycare (the normal cost is 1,500 EEK), the difference of 1,000 EEK will be counted towards the exemption limit.
If the company pays for a non-corporate day care centre or education for the employee’s children, such bonus is exempt within the overall limit for «Culture, Sports and Recreation».
Results
In 2024, many rules regarding employee benefits and compensation have been revised and adapted. It is important for employers to keep up with these changes in order to organise benefits correctly, avoid unnecessary taxation and create a comfortable working environment for their employees.
Stay on top of the changes and provide your employees with the best environment to be productive and successful!
