Today’s tight job market means that employers should consider stepping up their games to attract top talent. One way to entice employees and maintain the status quo with your existing crew is to offer fringe benefits; sweeten the pot, so to speak. It attracts high-quality hires, retains employees and rewards your team.
Get back, Jojo — before you start adding a host of fringe benefits to your roster, let’s talk about what it means for your company and your employees. And we’ll cover what changed with the 2017 tax act (H.R. 1).
First things first: you need to understand how fringe benefits impact your employees personal bottom lines. Some fringe benefits are taxable. Some are not.
We’ll start with taxable fringe benefits (the list is much shorter):
- Group-term life insurance over $50,000
- Value of personal use of employer-provided vehicle
- Relocation compensation that exceeds actual expenses
- Frequent-flyer miles that are earned during business use and then converted to cash
Exempt fringe benefits include the following:
- Health insurance (up to certain dollar amounts)
- Health Savings Accounts
- Accident insurance
- Group term life insurance coverage—limits apply based on the policy value
- Qualified employee benefits plans, including profit-sharing plans and stock bonus plans
- Employee stock options
- Education assistance
- Relocation expenses that match the actual expenses
- Achievement awards (that are NOT bonuses)
- Employee discounts on goods or services the employer sells
- De minims low-cost fringe benefits such as low-value birthday or holiday gifts, tickets to events, customary awards like retirement gifts or other special occasion gifts (wedding, baby gifts, coffee, soft drinks, and snacks.)
- Supplemental unemployment benefits
- Cafeteria plans that allow employees to choose among two or more benefits consisting of cash and qualified benefits
The Internal Revenue Service provides a comprehensive guideline on how you, as an employer, should handle fringe benefits. Take a look at Publication 15-B (2017), Employer’s Tax Guide to Fringe Benefits. Yes, it’s for 2017. The 2018 guide has not been published yet, but this gives you something to start with. Proceed with caution, though, not everything in this publication is accurate since the new tax bill was enacted into law.
The New Tax Bill
But, and this is important, the new tax bill limits the tax deductions employers can claim for certain fringe benefits, which may cause employers to rethink what they will offer employees. For instance, the tax bill eliminates the business deduction for parking and qualified public transportation benefits. Employees will, however, be able to pay these expenses with pre-tax income if their employer offers a salary deduction program. The new legislation suspends exclusions for qualified bike-to-work reimbursements starting January 1, 2018, through December 31, 2025.
Beginning this year, employers that provide paid family and medical leave will receive a tax credit if at least two weeks of leave is provided, and employees are compensated a minimum of 50% of their regular wages. The tax credit ranges incrementally from 12.5 percent to 25 percent, depending on the percentage of compensation employees receive during their leave. The credit can only be applied toward employees who earn less than $72,000 annually.
Fringe benefits do make a difference to employees. According to a 2017 Society for Human Resource Management (SHRM) study, 29 percent of employees surveyed would consider the possibility of taking on a job with a different company if the benefits package was better than what they currently have, and 32 percent would be motivated to stay based on benefits.
Fringe benefits are a balancing act. As an employer, you want to offer programs that are attractive to your employees and provide an incentive to keep them from jumping ship as well as entice new talent to come on board. At the same time, it’s important to know how benefits impact your bottom line. Consult with your accountant and then talk to a professional at Journey Employer Solutions. We can help you seamlessly implement programs that make sense for you and your employees.