For many employees, benefits are one of the top things they look for when considering a job opportunity. Rewards and recognition play a crucial role in retaining talent within your organization, as these incentives not only boost morale but also foster a sense of loyalty and commitment.
While bonuses and other rewards are welcome incentives, they can also be a double-edged sword. They may trigger fringe benefit taxes (FBT) for the employer and employee. From the name itself, FBT is a tax on benefits of significant monetary value given to employees in addition to their regular salary, making these perks more costly for everyone involved.
This is where de minimis benefits in the Philippines come into play. By law, these benefits provide tax-exempt perks to employees, enhancing their compensation packages without the burden of additional taxes.
Delve into the concept of these benefits, their purpose, tax implications, and how you, as an employer, can effectively incorporate them into your compensation packages to improve employee satisfaction while minimizing tax burdens.
What Are De Minimis Benefits?
De minimis benefits in the Philippines are employer-provided benefits of a monetary value not subject to income or withholding tax. These include minor perks like meal allowances, uniform allowances, and rice subsidies, as long as their total annual value does not exceed PHP 90,000.
Unlike de minimis benefits, fringe benefits in the Philippines—such as company cars or housing allowances—are subject to a 35% fringe benefit tax. Employers must distinguish between the two to ensure proper tax treatment and compliance.
These benefits are governed by Section 2.78.1 of Revenue Regulations No. 2-98 and Section 33(C) of the National Internal Revenue Code, as amended by the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
What Are the Types of De Minimis Benefits in the Philippines?
Here’s a comprehensive list of de minimis benefits and their allowable limits to ensure compliance and maximize the advantages for both employers and employees.
- Rice subsidy – allows employees to receive either a cash allowance or a sack of rice, capped at ₱2,000 per month, or one sack of 50 kg rice
- Annual uniform and clothing allowance – limited to ₱6,000 per year
- Medical cash allowance – available to support employees’ dependents, with a maximum of ₱1,500 per semester or ₱250 per month
- Laundry allowance – covers the cost of cleaning work uniforms, with a cap of ₱300 per month
- Tangible personal property – awards given to employees to recognize their service or achievements; limited to ₱10,000 per employee per year
- Daily meal allowance – a benefit given for employees working overtime or night shifts; should not exceed 25% of the basic minimum wage per region
- Monetized unused vacation leave credits – provided they do not exceed 10 days per year
- Holiday and significant anniversary gifts – maximum of ₱5,000 per employee annually
- Benefits from collective bargaining agreements (CBA) – productivity incentive schemes can be provided up to a combined annual limit of ₱10,000 per employee
5 Advantages of Offering De Minimis Benefits
De minimis benefits boost employee satisfaction, streamline management, and help minimize tax liabilities. Explore how these small but impactful benefits can enhance your workplace and align with your compensation strategy.
Benefits for employers
1. Enhanced employee morale and satisfaction
When employees see that you care about their well-being, they are more likely to be engaged, motivated, and committed to their work. These small yet thoughtful perks can significantly boost employee morale and satisfaction and make them feel valued and appreciated, which could mean increased productivity and low turnover rates.
2. Cost-effective way to provide additional compensation
De minimis benefits provide additional compensation without placing a heavy financial burden on your company. Since these are tax-exempt, you can deliver extra value to your employees while managing your budget effectively.
3. Compliance with labor laws and tax regulations
Offering these benefits ensures compliance with relevant labor laws and tax regulations, reducing the risk of legal or financial issues arising from non-compliance.
Benefits for employees
1. Increased take-home pay due to tax-exempt nature
Since de minimis benefits are tax-exempt, employees receive the total value of the benefit without additional tax deductions, effectively increasing their take-home pay.
2. Additional financial support for personal needs
These benefits provide employees with extra financial support, covering various expenses such as transportation, meals, or small personal items and easing financial pressures.
Smart Benefits, Smarter Business
Integrating de minimis benefits into your compensation strategy can be a game-changer for employee satisfaction and tax efficiency. These small, tax-free perks can uplift employee morale while keeping costs in check, creating a more attractive and compliant rewards package.
Elevate your benefits game and ensure you’re on top of hiring regulations. For expert advice from a leading recruitment agency in the Philippines on implementing these benefits, check out our other blog posts. Contact Manila Recruitment today so we can help you build a thriving, happy team.
DISCLAIMER: The information in this webpage / blog / article / infographic we have published and the associated commentary are presented as general information and not a substitute for obtaining legal advice in this area. Manila Recruitment does not accept liability for any action taken based on the information presented or for any loss suffered as a result of reliance on the information provided.
Passionate about promoting the ingenuity of Filipino talent, Arvin is a sought-after resource person in the field of career development. He regularly delivers keynote speeches and conducts workshops throughout the Philippines, sharing his insights and strategies for improving employability and promotability.
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