When Are Employee Perks, Not Perks?

Mercer PeoplePro Blog Employee Perks

When Are Employee Perks, Not Perks?

Employee perks play a large role in employee benefits programs. Many employers, whether in finance, law or another type of business, use employee perks to attract skilled candidates that they want on their team. From financial incentives like performance bonuses and stock options, to more modest employee benefits like paid cell phone coverage, employers often use these perks as leverage.

For employees though, not everything that seems like an employee perk really is. That’s because some employee perks are taxable while others are considered non-taxable.

Use this guide to learn more about what perks really benefit employees and which ones may not be quite as good as they seemed on paper or in a face-to-face interview.

Insurance

The cost of health, dental, vision and even accident insurance can be very high for an individual. That’s why many companies offer these incentives to employees as part of their compensation for working with them.

With the exception of group term life insurance, which can be taxable over a certain estimated value, insurance is a non-taxable benefit for employees. Since an employer generally pays less than individual would by buying plans in bulk, these types of insurance incentives are common and often beneficial for both parties.

Education

Most educational costs are non-taxable if they benefit your employer and are not for you personally. For example, taking a class or course that could help your skills at work won’t be taxed. Your employer paying for that pottery class when you work in finance – that’s a taxable perk.

Even programs that allow you to obtain advanced degrees can be non-taxable if they benefit your employer by improving your on-the-job skills.

Moving Expenses

Relocating to another city or state can be a costly proposition, and that’s why many employers will offer to pick up the tab if they really want you to work for them. In general, moving expenses for longer distances are non-taxable benefits for employees. However, if you move less than 50 miles, the value of the move or the money you recoup from your employer will be taxable.

Company Cars

Company cars are non-taxable when used for work purposes. However, if you use your company car to commute to and from work, that portion of the usage is taxed. Mileage reimbursement is sometimes used to offset these taxes.

Paid Cell Phone Plans

For most people these days, a cell phone is no longer a luxury item. It’s something that they need on a day-to-day basis. That’s especially true for people who do work that’s time sensitive and may require working during irregular hours for special projects.

When a cell phone is given to an employee for work purposes, the value of the plan won’t be taxable for the employee. That means that a cell phone paid by your employer will actually be free of charge to you, making it a real perk.

As long as the phone is used for work, you’ll also be able to use it for personal calls as well if your employer doesn’t have any policy against this.

Stock Options

Stock options are a common incentive for employers to offer to a skilled employee. While not actually cash in hand, they do have value, and because of that, they are a way of giving an employee more for their work.

As an employee, you have the option to buy stock at a certain price. At the time of purchase, you won’t be required to pay tax just for owning the stock. However, if you do sell the stock in the future, you will be required to pay tax on profit over the original purchase price.

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