8 tax-free employee benefits

When a Finnish employer is looking for a skilled professional in the jungle of the labour market, it’s good to have a few aces up your sleeve! Competitive salaries and interesting jobs are undoubtedly on the radar of many job seekers, but when it comes to assessing the attractiveness of a job,companies offering tax-free employee benefits can take a back seat.

Although the provision of various fringe benefits may represent an additional cost for the employer, they can be seen as an investment in both the well-being of employees and the positive atmosphere in the workplace. Additional benefits often also encourage employees and increase their commitment to both the work community and the company.

However, when designing different types of benefits, it is also good to take into account the limits set by the tax authorities, within which both the employee and the employer benefit. It is therefore worth bearing in mind the key difference between tax-exempt employee benefits and benefits in kind; tax-exempt employee benefits should be available to all staff and should not be dependent on work performed. Benefits in kind, on the other hand, may be limited to certain employees. In this case, the benefit in kind, often defined in the employment contract, is part of the employee’s salary, i.e. compensation for work done, and therefore taxable income.

So what benefits can an employer offer tax-free? Here are eight great suggestions! Watch the video below, which summarises the article.

1. Health care

Employers are obliged to provide occupational health care for their employees, so that various health checks or basic occupational health activities do not naturally constitute a taxable benefit for the employee. However, in addition to the so-called basic health care, employers may also provide their employees, on a voluntary basis, with various additional medical and occupational health services, provided that these can be considered to be normal and reasonable. You can read more about providing healthcare for your employees on our blog.

The condition for tax exemption for health care services is that the employer has a contract with an approved provider, i.e. the benefit is provided by the employer. However, the tax exemption of the benefit does not depend on whether the employer is billed directly by the provider or whether the employee subsequently charges the employer for the treatment.

A normal and reasonable supplement to basic occupational health services could be, for example, dental services provided by the employer. The employer may have arranged for dental care to be provided by a public or private dental scheme, specifying which services are covered by the benefit. As a guideline and a threshold for tax-free benefits, treatments that support the ability to work can be considered: dental check-ups and cavity fillings support the general well-being of the employee and thus the ability to work, so the treatments can be provided tax-free. By contrast, aesthetic dental treatment is not covered by the tax-free benefit, according to the same line of reasoning.

2. Recreational and leisure activities organised by the employer

Recreational and leisure activities are activities undertaken primarily for the benefit of the employer, to maintain and improve the well-being and performance of all staff, or to maintain and improve workplace relations, and which do not have a significant impact on the cost of living of staff.

Recreational and leisure activities must be organised by the employer, i.e. the employer determines what kind of activities take place, when and where (i.e. the contract is concluded with specific service providers, the services covered by the contract and any time limits).

The benefit can be provided by offering the company’s own premises and equipment for employees’ recreational and leisure use, or through an external service provider, with the employer paying the costs directly to the service provider. The employer can also pay for group exercise organised by an external provider, for example, on its own premises or, for example, for a standard shift in a specified sports facility.

If it is decided to carry out recreational activities on the premises of an external service provider, the employee can choose the most suitable times and locations. However, it is essential that the employer has concluded a contract with the service provider and pays the service provider directly. It is therefore not possible for the employee to be reimbursed for the recreation and leisure services which he himself chooses and pays for, since this would not be a recreation and leisure activity organised by the employer, i.e. exempt from tax.

The range of recreational and leisure activities can be very varied, from light snack bars to leisure clubs and holiday resorts. If the activity can be considered to contribute to the well-being and job satisfaction of employees, is equally accessible to all staff and has a reasonable cost (i.e. the financial benefit to the employee), there is every reason to offer the benefit tax-free, also from the taxpayer’s point of view.

3. Staff discount

Employers can offer their employees a tax-free staff discount on products and services produced or sold by the company itself. As with other benefits, the benefit must be available to all employees and must be reasonable. Reasonable means a discount that would be equivalent in amount to the discount given to the company’s best customers. Of course, it should be borne in mind that, despite the discount, the return covers the cost price of the company.

Staff discounts are often personal to the taxman, except for general household purchases, such as food, which can be purchased at a reduced price by other family members in the same household.

Exempt staff benefits differ from benefits in kind in that they are not included in salary.

4. A token gift

There are anniversaries coming up at work, great! The most common anniversaries are those celebrating employees’ milestone anniversaries, marriage or retirement.

You can add to the festive atmosphere tax-free by commemorating the anniversary hero with a small gift, other than in cash or equivalent. In other words, the gift must be in the form of goods or a predefined service, such as tickets to a specific event. However, if the gift is to be given in the form of a gift voucher, allowing some choice for the recipient, its use must be limited to a specific range of products or services. A gift item or service of the employee’s free choice can therefore be considered part of the employee’s salary, in which case it is no longer a tax-free benefit.

5. Travel ticket support

At the beginning of 2021, the taxation of the commuter ticket was reformed. Previously, employers were allowed to offer employees a tax-free travel allowance of up to €300. However, the reform has been designed to encourage a shift to more ecological ways of travelling for work, which means an increase in the annual upper limit for tax-free commuting benefits up to €3,400.

In practice, the tax-free benefit can be applied to a personal commuting ticket or combined with a commuter bicycle, in which case the total tax-free amount of the bike and ticket costs can be up to a maximum of €3 400. Of course, despite the increase in the tax-free benefit ceiling, the employer can still choose to limit the amount of the benefit offered.

It is possible to arrange a travel card benefit through various service providers, such as Smartum, Edenred or ePassi.

The employer does not incur any additional salary costs if the benefit offered remains below EUR 3 400 per year. The employer is also entitled to deduct the cost of the benefit granted from his income tax.

6. Care benefit for a sick child

When a child under the age of 10 living in the worker’s household falls ill, the worker is entitled to take four days’ temporary leave to care for the sick child or to make other arrangements for the child’s care. However, in addition to this , the employer may also provide care for a sick child for up to four days for the same illness.

In practice, this means that the employer can arrange care for the child (sign a contract and pay the carer) so that the worker can carry out his or her duties despite the child’s illness. This is on condition that it is temporary and that the worker would be entitled to childcare leave with full pay. However, it should be noted that a care arrangement of more than four days is no longer considered to be temporary, but the care costs are considered to be a living expense for the employee and are treated as taxable wages.

Unlike many other tax-free benefits, the sick child care benefit can also be allocated tax-free only to key employees of the company.

7. Massage

A relaxing tax-free employee benefit: Massage. Who doesn’t get stuck at work sometimes! An employer who cares about the relaxation of its employees can provide massages to employees as a tax-free benefit. For example, an agreement can be made with a company providing massage services so that a masseur comes to the company’s premises once a month to give a massage. Employees can also have a massage at the masseur’s place of business.

However, the employer may not reimburse an employee for his or her own visits to a masseuse or physiotherapist against a receipt or invoice, as this is interpreted as wages. The visits must therefore be based on a contract concluded by the company and the invoice must be sent directly to the company. The cost of the massage benefit must be reasonable. Personally, for example, a monthly massage service would still be reasonable.

8. Sport and culture subsidies

The sports and culture benefit differs from the employer-provided recreational and leisure activities mentioned above in that, in the case of this benefit, the employee can choose how to use it.

An employer can offer an employee €400 per year, tax-free, to be used for various cultural or sporting activities. The benefit is personal to the employee and must be offered to all staff. In practice, the sports and culture benefit is often offered in the form of “vouchers”, i.e. physical or electronic vouchers with a fixed value, which the employee can use to buy the cultural or sports services of his or her choice at the time of his or her choosing.

Tax-free employee benefits can be arranged through, for example, Edenred, ePassport or other similar service providers. In order to use the benefit at a destination of your choice, the only condition is that the sports or cultural service provider in question accepts vouchers for recreational and sports activities as a means of payment.

Although the benefit is primarily intended to pay for the activity itself, it can also be used to pay for equipment hire that is intrinsically linked to the activity and for various memberships that entitle the employee to use, for example, sports facilities. In the case of cultural events, the tax exemption is determined by the nature of the event, for which more detailed guidance can be found on the tax authorities’ website. However, as a general rule, the benefit can be used to visit theatres, museums and concerts.

So here’s the best trump card to choose!