In-kind benefits are non-monetary forms of compensation provided to employees in addition to their regular salary.
Also called “benefits in kind,” perks, or fringe benefits, almost anything of value offered to employees beyond wages or a salary can qualify as “in-kind.” Organizations offer these non-cash perks to their workforce to increase job satisfaction and improve work-life balance. They can also be a boon for talent acquisition in competitive global markets.
The variety of benefits considered “fringe” is far and wide; think goods, services, or facilities that hold tangible value—almost any non-monetary perk is a benefit in kind. Common examples of in-kind benefits include:
- Private health insurance
- Free access to flexible workspaces
- Travel and entertainment expenses
- Pension contributions
- Company cars
- Remote work stipends
These benefits can significantly improve employee quality of life while potentially offering tax advantages for both the employer and employee. Many countries have specific regulations governing the taxation and reporting of in-kind benefits.
For global organizations, in-kind benefits are crucial differentiators in competitive labor markets. These employee benefits frequently reflect local customs and preferences, with variations in typical offerings across different regions and countries. What might be considered a standard benefit in one country could be viewed as a premium perk in another.
Tax policies for benefits in kind
Perks are not created equal. Depending on the country in which an organization conducts business, certain benefits in kind face tax liability, while others don’t.
In most cases, benefits that exist for personal use or pose a personal gain for employees are taxable. Even if a benefit isn’t taxable for an employee, the employer might be able to write off the cost of providing the benefit.
Let’s explore which perks are taxable for employees, which are tax-deductible for the employer, and how benefit-related expenses can be reported.
Taxable benefits
Most non-cash employee perks are taxable unless expressly noted in a country’s tax code. Some of the most common taxable benefits are:
- Discretionary bonuses
- Gym memberships
- Non-business travel and entertainment
- Non-business meals and housing
- Gift cards and vouchers redeemable for cash
- Electronics and computers provided for personal use
- Relocation expenses
Common excluded, nontaxable benefits in most countries include:
- Health insurance plans
- Qualified retirement contributions
- Group-term life insurance
- Dependent care assistance
- Adoption assistance
- Employee discounts
- Working condition benefits used solely for business purposes
The value of taxable non-cash perks must be included in the employee’s wages. Employers must carefully track and report these benefits, as failure to do so can result in penalties and sanctions.
Tax-deductible benefits
Benefits in kind create new opportunities for business tax deductions. Although these perks aren’t deductible wage expenses, employers can typically deduct the costs associated with providing the perks.
Some common in-kind benefit deductions for business owners are:
- Administrative costs to provide employees with the benefit
- Depreciation from employee perks like company cars
- Interest paid on any perks financed by the company
Most expenses employers incur for nontaxable employee benefits are 100% tax-deductible. However, for the 2025 tax year, certain benefits, like employer-provided meals, have reduced deductibility, and some deductions will be eliminated by 2026.
Given the changing landscape of tax-deductible benefits, organizations should maintain detailed records of benefits provisions and consult current tax guidelines for proper reporting requirements.
How to report in-kind benefits
Taxable fringe benefits that are provided to employees and non-employees, such as partners or independent contractors, have different tax liabilities.
- Employees. Benefits in kind are usually subject to employment taxes and should be reported accordingly.
- Non-employees. In-kind benefits aren’t subject to employment taxes but should be reported with appropriate forms. Consult your local tax agency for up-to-date information.
Regardless of employment status, employers should include the value of any taxable fringe benefits in the recipient’s pay. Employers cannot deduct wage expenses for those perks, but they can deduct the cost of providing them as business expenses on the company’s tax return.
The most popular in-kind benefits
According to the 2024 Employee Benefits Survey from the Society for Human Resource Management (SHRM), 97% of organizations now offer some form of health coverage to their employees, making it the most widespread in-kind benefit.
The landscape of employee benefits has expanded significantly, with the number of available benefits increasing by 23% from 2022 to 2024, the SHRM survey reports. Some of the most popular benefits in kind, according to the survey, are:
- Healthcare coverage (88% of employers rate as “very important” or “extremely important”)
- Leave and retirement benefits (81% rate as crucial)
- Flexible working arrangements (70% of employers prioritize)
- Family care benefits (67% consider essential)
- Mental health and wellness programs (82% offer employee assistance programs)
These extra benefits are not mandatory. However, companies that provide perks stand to improve job satisfaction and decrease the chances of employees jumping ship.
Recent data from PeopleKeep shows that 81% of employees consider an employer’s benefits package a driving factor in deciding whether they accept a job.
1. Healthcare coverage
Healthcare remains the cornerstone of employee benefits. The average annual premium for employer-sponsored health insurance in 2024 reached $25,572 for family coverage, marking a 7% increase from the previous year. Employers are increasingly offering comprehensive packages that include:
- Medical, dental, and vision insurance
- Prescription drug coverage
- Preventive care services
- Telehealth options
- Specialized treatments and therapies
Rising healthcare costs add to the expense of these vital in-kind benefits. Mercer determined that employers plan to maintain their current health benefits despite increasing costs. The kicker? Forty-five percent said they were likely or very likely to shift rising expenses onto their employees.
2. Leave and retirement benefits
Modern leave and retirement packages have evolved significantly, with 81% of employees rating these as crucial benefits. The maximum 401(k) contribution limit increased to $23,500 for 2025, with additional catch-up provisions for older workers. Key components include:
- Paid family and medical leave
- Flexible paid time off (PTO) policies
- Retirement savings matches
- Stock ownership opportunities
- Enhanced parental leave programs
In discussing the top benefits to watch in 2025, Maria Trapenasso, Head of Human Capital at NFP, emphasized, “Forward-thinking organizations are increasingly recognizing the potential return on investment that offering personalized leave policies can have on employee productivity and, ultimately, retention.”
3. Flexible working arrangements
Workplace flexibility has become a decisive factor in employee satisfaction. An International Workplace Group (IWG) survey found that 85% of businesses reported increased productivity after implementing flexible policies. These working dynamics include:
- Hybrid scheduling with core collaboration hours
- Results-based performance metrics
- Global time zone accommodation
- Work-from-anywhere policies
- Flexible equipment stipends
IWG’s CEO, Mark Dixon, commented on the survey, stating, “Our research shows that businesses that haven’t already considered the financial and strategic benefits of flexible workspaces need to do so now. Otherwise, they face being seen as out of touch, both with their competitors and with the demands of the modern workforce on what constitutes a great day at work, which means losing out on the best talent.”
4. Family care benefits
Family support has gained traction as a popular in-kind benefit, with 56% of employers prioritizing child care benefits and 50% prioritizing senior care benefits, according to Care. What’s in a modern family care package? They typically include:
- Childcare subsidies
- Elder care support
- Adoption assistance
- Fertility benefits
- Dependent Care Flexible Spending Account (DCFSA)
5. Mental health and wellness programs
Mental health has emerged as a critical workplace priority. The average return on investment for mental health programs is $4 for every $1 spent, making these programs both ethically and financially sound investments.
Organizations are taking a holistic approach to mental wellness by offering:
- Comprehensive employee assistance programs with unlimited counseling sessions
- Digital mental health platforms and apps
- Stress management workshops and resilience training
- Mental health first aid certification for managers
- Dedicated mental health days separate from regular sick leave
The most successful programs integrate these offerings into the company culture while maintaining strict confidentiality standards.
Pros and cons for employers
In-kind benefits offer different upsides and drawbacks for employers with distributed workforces. Since employers aren’t required to provide these additional perks, it’s important to consider the pros and cons of in-kind benefits to understand how to use them effectively.
Pros
- Competitive benefits attract and retain top talent.
- Perks improve employee satisfaction and morale.
- Benefits reduce the total cost of employment.
- Plan contributions can be deducted from tax liability.
Cons
- Benefits carry higher costs with fewer choices for smaller businesses.
- Administrative overhead costs can balloon.
- Rising health insurance costs are challenging to plan for.
- Mistakes can lead to compliance issues, costly fines, and lawsuits.
Attracting and retaining top talent is no easy feat, and it can get expensive. By offering non-salary benefits as part of a global employee benefits strategy, your business stands a better chance of retaining the employees you attracted to your organization.
Benefits in kind FAQs
These frequently asked questions address common concerns about implementation, taxation, and impact of benefits programs across different regions.
Are in-kind benefits mandatory?
Most in-kind benefits remain discretionary offerings that employers can choose to provide. However, certain countries mandate specific benefits through labor laws or collective bargaining agreements.
For example, many European nations require employers to provide paid vacation time, while some Asian countries mandate housing allowances for specific worker categories. In the U.S., organizations with 50 or more full-time employees must offer health insurance under the Affordable Care Act.
How do in-kind benefits impact employee retention?
Research demonstrates that comprehensive benefits packages have a significant and measurable impact on employee retention rates. Most employees (58%, according to Gallup) say improving their benefits package would influence their decision to stay with their current organization.
The effectiveness of in-kind benefits on employee retention extends beyond pure compensation. Researchers report two in three employees would change jobs for better benefits. In pursuing top talent, 72% of U.S. employers plan to address their employees’ financial well-being with enhanced benefits packages.
Today’s distributed workforce values holistic benefits, like wellness allowances and mental health initiatives—and employers are responding to the demand. A Wellhub report found that 95% of companies tracking ROI observe positive returns on their well-being investments, with more than half achieving returns exceeding 100%.
What countries offer the best in-kind benefits?
Nordic regions are among the top countries for employee benefits, with Denmark, Sweden, and Norway offering extensive paid leave, healthcare, and work-life balance benefits.
The Netherlands ranks highly for flexible working arrangements and work-life balance, while France mandates profit-sharing schemes for larger companies.
Germany stands out for its comprehensive health insurance system and worker protection benefits, including mandatory paid sick leave and vacation time.
Are in-kind benefits taxable?
The taxation of benefits varies significantly by jurisdiction and benefit type. Generally, benefits used for personal purposes are considered taxable income, while those necessary for business operations are often tax-exempt. For instance, health insurance premiums paid by employers typically avoid taxation, while the personal use of a company car usually creates a taxable benefit.
What tax advantages do in-kind benefits offer?
In-kind benefits can create substantial tax advantages for both employers and employees. Organizations can typically deduct the cost of providing benefits as business expenses, including health insurance premiums, retirement plan contributions, and educational assistance programs.
Employees often enjoy tax-free treatment of specific benefits, such as health insurance coverage and retirement plan contributions up to specified limits. Additionally, some countries offer tax credits or enhanced deductions for employers providing specific benefits like childcare assistance or environmental transportation alternatives.
Discover an employee-centered benefits solution
The benefits organizations offer their workforce play a pivotal role in employee acquisition, morale, productivity, and retention. Companies that extend in-kind and supplemental benefits to employees can attract and retain top talent better than those that don’t.
As a global Employer of Record (EOR), Velocity Global helps organizations craft and administer tailored employee benefits that keep international talent happy. Our integrated Global Benefits solution helps improve workforce loyalty by offering attractive rewards that stand out from the competition in value and cost.
Contact Velocity Global to learn more about offering competitive and compliant benefits catered to talent in over 185 countries.
