What is Benefits In-kind? Payroll Process for Benefits In-kind

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What are Benefits In-kind?

Benefits in-kind refer to non-cash benefits provided by the employer to the employee in the form of goods or services. Assistance aimed at addressing employee needs such as meals, transportation, clothing, healthcare services, or educational support falls under this category.

Legal Framework:

• The Labor Law No. 4857 defines the general framework for benefits in kind within employee-employer relationships.
• The Social Insurance and General Health Insurance Law No. 5510 regulates whether benefits in-kind are subject to social security premiums.

Benefits in-kind aim to improve employee welfare while also offering tax and premium advantages to employers.

What Are the Types of Benefits In-kind?

Various types of benefits in-kind can be provided to meet the needs of employees in their professional lives:

1. Meal Allowance
• Free meals can be provided in the workplace cafeteria.
• Meal cards, vouchers, or coupons can be distributed.
• Agreements can be made with restaurants or similar establishments to offer meal benefits.
• Payments for meal costs can also be made.
2. Transportation Assistance
• This includes covering transportation costs, providing public transport cards, or offering shuttle services.
3. Clothing Assistance
• Employees may be given clothing or footwear directly or provided with vouchers to purchase such items.
4. Healthcare Assistance
• Health insurance, regular medical check-ups, or direct coverage of healthcare expenses may be offered.
• These benefits support employee health while ensuring that the employer fulfills their responsibilities.
5. Educational Assistance
• Support is provided for the education expenses of employees or their families.
6. Other Types of Assistance
• Various types of benefits in-kind can also be provided, as agreed upon in employment contracts or particularly in collective bargaining agreements. Examples include the provision of detergent, towels, and similar items.

What Are the Differences Between Benefits in Kind and Cash Benefits?

Benefits in kind and cash benefits differ in terms of their provision and legal obligations.

Who Can Receive Benefits In-kind?

Benefits in-kind are a significant part of the social support employers provide to their employees and are generally directed toward the following groups:

1. Active Employees: Full-time or part-time staff working in the organization can benefit from support such as meals, transportation, or clothing.
2. Employee Families: Under collective bargaining agreements or employer policies, benefits such as education and healthcare support can also be extended to employees' spouses and children.
3. Retired Employees: Some organizations may continue to provide benefits such as clothing or healthcare assistance to long-serving employees after retirement.
4. Interns: Basic support like meals and transportation can be provided to interns as well.

What Are the Advantages of Benefits In-kind?

Benefits in-kind offer various advantages for both employees and employers:

1. Tax Advantages:
• Certain benefits like meals and transportation can be exempt from taxes and social security premiums within defined limits.
2. Employee Motivation and Retention:
• Assistance that meets employees' specific needs increases job satisfaction and strengthens employee loyalty.
3. Cost Management:
• Employers offering benefits in-kind instead of cash payments can enhance employee satisfaction at a lower cost.

Are Benefits In-kind Mandatory?

Benefits in-kind are typically provided at the employer's discretion. However, collective bargaining agreements, occupational health and safety regulations, or sector-specific requirements may oblige employers to provide certain benefits in kind.

1. Collective Bargaining Agreements and Employment Contracts

Some collective bargaining agreements or individual employment contracts may contain provisions obliging employers to provide benefits in-kind. For example, if a collective bargaining agreement explicitly states that employees must receive meals, clothing, or transportation assistance, the employer is obligated to provide these benefits.

2. Sector-Specific Regulations

Certain sector-specific regulations may require employers to provide specific benefits in-kind. For instance, in the food or healthcare sectors, the provision of hygiene materials to employees may be mandatory.

3. Employer Policies

Some organizations may establish regular provision of benefits in-kind as part of their corporate policy. Although initially offered at the employer's discretion, these benefits may become a written requirement in workplace regulations over time.

How Are Benefits In-kind Recorded in Payroll?

Properly reflecting benefits in kind on the payroll is crucial to ensure employers fulfill their legal obligations and employees' rights are protected. In this process, the nature of the benefit and compliance with legal regulations must be carefully evaluated.

1. Determining the value of benefits in-kind

The first step in reflecting benefits in-kind on the payroll is determining their monetary value. This is calculated based on the market value of the benefit provided to the employee. For example:

• The monthly balance loaded onto a meal card,
• The market value of clothing provided,
• The total cost of transportation support.

This value is considered as an addition to the gross salary on the payroll.

2. Tax and Social Security Premiums

Click here to access the 2024 payroll parameters in Türkiye.

The taxation and inclusion of benefits in-kind in social security premiums depend on the type and limits of the benefit:

• Income Tax:

Under Article 61 of the Income Tax Law No. 193, benefits in kind fall within the scope of wages and are subject to income tax. However, certain types of benefits (e.g., meal and transportation allowances) may be tax-exempt within specified limits.

• Social Security Premiums:

According to Article 80 of the Social Insurance and General Health Insurance Law No. 5510, benefits provided in kind are generally not subject to social security premiums. However, if these benefits are provided in cash, they must be included in the premium base.

Click here to learn about the important regulation on meal allowances and SGK premium exemptions.

3. Inclusion on Payroll

Processing benefits in-kind on payroll is done based on their type and legal status:

• Benefits subject to tax and social security premiums are added to the gross salary and displayed on the payroll.
• Benefits exempt from tax and premiums are listed as a separate category on the payroll and processed in accordance with exemption limits.
4. Legal Declarations

Benefits in-kind added to the payroll must be reported to relevant authorities by the employer:

• e-Declaration: Used for social security notifications to the Social Security Institution (SGK).
• Tax Authorities: Reflected in periodic declarations based on the income tax status of the benefits.

Important Notes

• Certain types of benefits, such as meal and transportation allowances, are subject to daily or monthly exemption limits. Amounts exceeding these limits are subject to tax and social security premiums.
• If an in-kind benefit is paid in cash, it falls under the category of "cash benefits," leading to different tax and premium calculations.
• It is essential to monitor legal updates and current legislation.
• In addition to the base salary, recurring benefits such as food, healthcare, clothing, fuel, meals, transportation, and housing must be considered in severance payment and notice payment calculations.

Conclusion

Accurately and comprehensively reflecting benefits in-kind on payroll is critical for employers to meet their legal obligations and protect employees' rights. Expert payroll management and up-to-date knowledge of regulations are essential to avoid penalties arising from any errors in this process.

Should you have any queries or need further details, please contact us.