Many companies are exploring new ways to enhance their employee benefits packages and support better work-life balance. One strategy some employers are using, is allowing employees to purchase tax-free employee benefits directly from their gross salary.
Here, we’ve outlined everything you need to know about gross salary benefits to help you decide if this kind of offering would work well for your company and your employees.
Why do employers offer gross salary employee benefits?
Gross salary benefits provide numerous advantages for both employers and employees. Employers benefit from lower costs, while employees gain affordable access to valuable services, thus supporting a healthier work-life balance. Additionally, these benefits help employers enhance their employer branding, attracting and retaining top talent.
The difference between net salary and gross salary
Gross salary income refers to the amount employers pay employees before deducting taxes, social security (national insurance) payments, and other payroll costs. Employees typically see this figure on their monthly payslips and end-of-year tax statements. This figure is frequently referenced when discussing someone’s annual or monthly earnings.
On the other hand, net salary income, or take-home pay, is what remains after all deductions, such as taxes, social security (national insurance), and other payroll expenses, have been subtracted from the gross salary.
What are the most common gross salary employee benefits?
Generally, gross salary benefits are tax-free employee benefits regulated by local tax authorities. Benefits often differ across countries, depending on benefit value, purpose, and type. Common examples of gross salary employee benefits include:
- Company cars or employee cars (often combining gross and net cost contributions)
- Healthcare benefits (tax-free treatments, surgeries, and group insurance)
- Childcare, babysitting, and tutoring services
- Additional occupational pension contributions
What are cost benefits?
Effectively, employees benefit from more affordable access to healthcare, commuting options, and other services, with costs deducted directly from their gross salary. This reduces employees’ taxable salary, resulting in lower income tax payments on their monthly earnings.
Employers benefit through reduced payroll-related expenses such as social fees and insurance costs. Often, employers pass these savings back to employees as additional contributions towards their chosen benefits.
Why are gross salary benefits important today?
Advancements in employee compensation and benefits technology have simplified the integration of gross salary benefits with payroll systems and external suppliers. Now, employees can conveniently browse and select these benefits via a personalized employee benefits portal.
What should employees consider before purchasing a gross salary benefit?
While gross salary employee benefits offer valuable perks, employees must consider potential financial consequences associated with regular deductions from gross salary. These deductions don't only reduce the employee's net salary, but may also impact eligibility for current or future welfare benefits.
Pension and insurance providers (both public and private) commonly use gross salary figures to calculate:
- Vacation pay
- Sick pay and/or incapacity benefits
- Pension contributions (both occupational and state pensions)
- Parental benefits
Interested in learning more?
Employees should fully understand all payroll and financial implications before selecting a gross salary deduction. At Benifex, we enable employers to tailor benefit offerings according to salary levels, pensions, and local social insurance regulations — including proactively notifying employees of any potential negative financial impacts.
Benifex is a global provider of employee benefits, employee engagement, and reward solutions — partnering with companies such as Ericsson, IKEA, L’Oréal, Teva, and Vodafone to offer diverse, modern employee benefit choices. Book a demo today to learn more!