Benefits in kind

Benefits in kind are any form of benefit or consideration offered by an employer to an employee which is in lieu of the monetary part of their pay or salary. Often it will take the form of something such as a company car, insurance such as private medical insurance, gym membership or a mobile phone.

Some benefits in kind are attractive to employees because they do not attract tax or are taxed at a lower level. Thus, for example, those benefits which are currently non-taxable include:

• child care facilities,
• staff canteen and dining facilities (if available to all directors and employees),
• use of cycles and cycle safety equipment for getting to and from work
• contributions to approved pension schemes, and
• sports facilities (again if available to all directors and employees)

whilst others, such as:

• private health insurance,
• cars,
• living accommodation (unless job related),
• vouchers,
• private fuel, and
• loans over a certain level,

are taxable in whole or in part.

Normally, it will be up to you to agree with your employer or employee (as appropriate) what benefits in kind are to be received or given, and often it will follow a practice which has become established within the work place. You should therefore:

• if you are an employee, start by looking at your contract of employment or staff handbook to see what benefits you are entitled to and if you are not receiving these, raise this with your employer or human resources department, or
• if you are an employer give consideration to what benefits can be given to employees and decide whether there is, for example, a tax benefit either to them or to you in paying part of their salary in the form of a benefit

However, you need to be aware that there are a number of situations in which the extent to which you are entitled to pay benefits in kind, or to differentiate between employees in the amount of benefits which are paid, can be curtailed. For example:

• If you are paying staff the national minimum wage then there are strict rules about benefits in kind, such as free meals, accommodation or discounts off company products. The law states that the only benefit which an employer can count against the minimum wage is accommodation. Here the employer can deduct up to 50p an hour for each hour worked up to a maximum of £19.95 a week. No other benefits in kind can be set against the minimum wage and any employer who does so will be breaking the law.
• If you fail to give some staff benefits that you give to others then, depending upon the reason for the difference, you may be held to be discriminating against certain staff members. Thus, for example, if you were to give male staff a benefit that was not available to female staff then this could be direct discrimination on the grounds of gender. If you made available to all staff the right to have a drink paid for at the local pub every Friday night this could discriminate indirectly against those whose religious or cultural beliefs prohibited alcohol or who had to be home before sunset for religious reasons.

If you are in any doubt as to the circumstances surrounding the payment or receipt of benefits in kind, or if you have a specific problem with which you would like some help, either phone employmentlawhelp on 084 4804 4800, request a free, no-obligation call-back using the form to the right, or email us on advice@employmentlawhelp.co.uk and we will be more than happy to discuss with you the precise needs which you have.