What are In-Kind benefits? Insight on how to provide and report perks to your employees

Introduction

The Coronavirus pandemic presented a significant change in the workforce as millions of non-essential positions shifted to remote work. Even though the world has regained normalcy since the pandemic, work systems have changed to benefit both businesses and employees.

Hybrid and remote working arrangements have allowed businesses to reach the best talent globally. Still, it can be difficult for employers to know how to attract and retain the best talent beyond a flexible working environment.

In-kind benefits, also known as benefits in kind (BIK), are additional benefits employers can provide their employees with in addition to their base wages or salaries.

This article highlights everything you need to know about in-kind benefits, examples of in-kind benefits, the tax policies surrounding in-kind benefits, and how partnering with Skuad can help you provide your employees with the best benefits today.

What are in-kind benefits?

In-kind benefits are perks employers offer their employees in addition to their salary. In-kind benefits are used to incentivize prospective employees to join your team and are designed to keep current employees happy.

Although in-kind benefits are always optional for employers, certain benefits like health care and paid time off have become expected amongst full-time employees. As a result, businesses may need help finding quality candidates willing to forego them. In addition, offering supplemental in-kind benefits may suggest to prospective candidates that your organization values its employees as individuals.

Some in-kind benefits can have monetary implications (such as a 401k or pension plan); other in-kind benefits have no direct financial reward to employees (such as free company-branded merchandise).

Any monetary benefits businesses offer their employees are taxable, and the employee must report to the appropriate tax agencies.

The most valuable in-kind benefits

Employers standardly offer several in-kind benefits, some with monetary implications. Consider the following in-kind benefits examples to determine which benefits might appeal to your employees.

Childcare expenses

Childcare expenses are one of the primary ways in which organizations can support their employees. While many countries worldwide have mandatory paid parental leave laws, some countries like the United States have no mandates, meaning it's up to the individual employer what benefits they wish to offer.

A competitive parental leave time in the United States is three months of paid time, although some companies opt for up to one year. Beyond offering parental leave, companies also provide employees with financial assistance regarding childcare as an in-kind benefit.

Examples of childcare benefits include providing employees with on-site daycare to combat the cost of sending their child to daycare or hiring a nanny and reimbursing employees for a portion of their childcare expenses.

Medical in-kind benefits

Medical in-kind benefits are one of the most common types of benefits employers offer and are a bare minimum for many employees. Medical in-kind benefits may include paying for all or part of the following:

• Health insurance
• Dental Insurance
• Vision insurance

Moving expenses

Moving expenses can add up quickly, and if employees plan to relocate to a new area long-term, they often spend thousands of dollars on moving costs.

Employers commonly offer relocation packages to employees who have to move for work. However, employers who wish to provide premium packages for their employees may offer a standard package to assist with moving expenses, even if the employee is moving for personal reasons.

Housing costs

Employers can cover a portion of housing costs as an in-kind benefit. Although this is commonly offered when employees have to relocate for work temporarily or permanently, it can also be an attractive benefit to employees living in cities experiencing competitive housing prices.

Food

Food is a common in-kind benefit that employers may offer to their on-site employees. Whether providing lunch daily, having a free snack bar, or hosting pizza parties on Fridays, food is an affordable perk that employees appreciate.

Other examples of in-kind benefits

In addition to these common types of in-kind benefits, consider the following examples of in-kind benefits:

• Company cars
• Training programs
• Paid days off on holidays and days of religious significance for employees
• A set number of paid vacation days or unlimited vacation days
• A set number of paid volunteer days each year
• Higher education scholarships
• On-site fitness center or gym membership reimbursement
• Profit-sharing plans
• 401k plans
• Pension plans
• Discounts at other businesses
• Non-monetary gifts

The above examples of in-kind benefits are commonly offered, but employers are encouraged to determine what would be most appreciated by their employees and to provide benefits accordingly.

Pros and cons of in-kind benefits for employees working internationally

It becomes more challenging to offer employees in-kind benefits when companies expand globally. When companies hire employees within their country of residence, all employees are subject to the same payroll and benefits mandates.

However, as companies hire employees residing in other countries, they must ensure their benefits packages are commensurate with that country's payroll and benefits mandates.

For example, companies in the United States are not required to provide employees with any supplementary health insurance benefits, so this is always considered an in-kind benefit in the US. However, supplementary health benefits may be a mandatory benefit in some other countries, which means that employers will be required to offer all employees these benefits, and they will not be considered benefits-in-kind.

Consider the following pros and cons of in-kind benefits for international employees.

Pros

• In countries where employer mandates are less restrictive than your business's country of residence, your company's standard benefits package may offer more supplementary benefits.
• Employees may be willing to accept a lower base salary if your company offers comprehensive in-kind benefits packages, ultimately saving your company money.
• Offering in-kind benefits to international employees helps attract and retain the best talent.

Cons

• Some countries may have more mandated benefits, which means that your company's standard benefits package is less competitive to employees who reside in that country.
• The cost of living might be higher in different regions, meaning you will be expected to offer employees a higher pay rate, affecting the number of in-kind benefits you can offer them.

Partnering with a global employment and payroll platform like Skuad when hiring international employees is the easiest way to ensure that your company offers competitive and comprehensive benefits packages to international employees.

Tax policies: taxable and non-taxable benefits

Although most in-kind benefits have monetary implications and thus are taxable (e.g., paid vacation days, 401k plans), some in-kind benefits are non-taxable.

Non-taxable in-kind benefits are those with no cash value to employees; thus, they are not expected to pay taxes. However, any in-kind benefit with a monetary value to the employee is taxable.

Below are a few examples of tax-free in-kind benefits:

• Health insurance
• Food and drinks
• On-site fitness centers
• Employee discounts

Part of the implications of hiring international employees is remaining compliant with national and international tax laws. When companies hire foreign employees, they will need to offer benefits packages that meet the minimum requirements of the employee's country of residence.

Consider the following methods of including in-kind benefits in your benefits package.

Home country model

The home country model of offering in-kind benefits is designed to provide employees with the same salary and benefits that they would typically receive in their home country while working internationally.

The home country model is generally reserved for employees working for short periods outside their home country to avoid tax complications. However, even when used for short windows, employees' take-home pay and benefits can be affected if the country of residence has strict tax laws.

Localized method

The localized method of offering in-kind benefits assumes that an employee will be located in one area long enough that their employer can tailor their benefits package to their current country of residence. Unlike the home country model, the localized method assumes that an employee will have a longer-term international residence.

Common in-kind benefits provided under the localized method include assistance with housing costs and food expenses.

Global method

The global method of offering in-kind benefits aims to reduce the friction associated with providing benefits to employees who reside in multiple countries or regularly travel internationally for work.

Provide the best benefits for your global team with Skuad

Providing employees with a comprehensive benefits package is one of the easiest ways to attract the best international talent and improve employee retention.

However, building a compliant and comprehensive benefits package across all global markets is a near-impossible task without partnering with a global employment and payroll platform that can provide your company with local expertise on mandatory and supplemental benefits in the countries you wish to hire.

Skuad's global employment and payroll platform can help you provide your international employees with the best benefits packages, allowing you to focus on growing your global team.