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5 advantages of the fringe benefits – from a professional’s point of view

15 May 2010

Nowadays more and more employers recognize the importance of establishing a supporter system that took aim the employees’ satisfaction. By this system the employer can provide those fringe benefits upon the wages or salaries, which facilitate the improvement of living- and working conditions. The scheme, that makes it possible, is the Cafeteria system, as it is called and well known in Hungary. It is very popular among numerous Hungarian employers, partly because of the special, discounted taxation of certain elements.

The cafeteria system - new aspect

This system demands a new aspect, dissimilar approach from the employees: in an optimal situation, elements can be chosen by the employees themselves, for a certain year. Only good experiences are related to this system, because it is encouraging, keeps the individual preferences in evidence and counts on it in a better way. At a newly established cafeteria system, informing the employees needs an accentuated importance. From a professional, HR point of view, the following advantages can be stressed.

Satisfaction

The employees’ satisfaction is more than important, and attention must be paid on it. To define the reasons leading to satisfaction was always complicated.

The elemental factor is clearly the salary; however the working atmosphere, the reduction of overtime and stress related to the work, the appreciation of the performance are important as well.

As the fringe benefits are similar to the salary but not exactly the same, it can be a good instrument of the motivation. The variety of the elements can be chosen, should not be in connection with the performance of the employee. Only the existence of the fringe benefits it selves could cause satisfaction.

Generally and naturally the appreciation of the performance, especially when it goes together with some extra income eventuate the employees’ satisfaction.

Although the employer should care, that the cafeteria elements shouldn’t be the tool of estimating efficiency. The Section 69 (1) of the Act CXVII of 1995. on the personal income tax formulates, that a public regulation of the individual cafeteria frames has to be defined related to a distinctive parameter that is independent from the efficiency.

Loyality

For raising loyality of the employees the health fund and pension fund contributions have accentuated importance.

The employees’ attachment to the company are being intensified by the contributions paid by the employer and debited on the cafeteria frames. These kinds of inpayments besides the raise of loyalty meet the requirements of several age-groups. The younger employees prefers the health fund contribution which aim is the health promotion, as opposed to the pension fund contribution, that is out to assure the financial safety and preserve of the accustomed living standard for the seniors.

Meeting the individual requirements at a higher level

The biggest advantage of the cafeteria system is the ensured opportunity of choice. It means the employee can choose the elements available meeting his/her preferences controlled by the law and the employer, debited on the cafeteria frames. The importance of ensuring the independent choice is a must, because by compulsorily chosen elements the employer confront the employee, that results the converse of the original goal. For example the compulsorily given holiday voucher, although its acceptance is wide-ranging, can not satisfy all the employees, because of the different preferences.

The independent choice at the same time ease the position of the employer by giving the possibility of the choice for the employee.

Cost efficient

Compliance with rules, keeping the monthly and annual maximum determined amount of the benefits in consideration, the tax must be paid by the employers is only 25%. The internet contribution is even an exception, because it remains tax free in 2010 as well. Comparing to the salary, it is worth to give fringe benefit because we are able to save 30% of the costs.

Flexible Solution

This benefit system, which can be an effective instrument for the management, provides cost saving solutions and can raise employees’ satisfaction as well.

As the conditions and regulations of the system can be various at each company, the employer has the chance to create the own profile, taking the characteristics of the scope of activities and the acceptance of the elements in consideration.

The importance of fringe benefit can be confirmed with the before mentioned 5 positive reasons and with the fact itself, that several companies, keeping the demand of the employees in consideration, kept this type of benefits even after the changes had been introduced in 01.01.2010. Nowadays the so called ‘cafeteria’ passes and the holiday vouchers are well known and overall accepted methods of payment in Hungary.