What does salary in kind consist of? How is flexible remuneration applied with health insurance? We resolve your doubts about payroll and personal income tax.
Health insurance has grown in our country to reach 13 million insured people, coinciding with the outbreak of COVID and the collapse of the health system that it has brought with it.
In this article we focus on health insurance as flexible remuneration, to see how it is reflected in the payroll and in personal income tax, in income. We will also see what it means for the company to implement this type of salary in kind.
Flexible remuneration, also known as salary in kind, is a part of the salary that the company offers to enjoy in the form of goods or services to its employees. It cannot exceed 30% of the gross amount received by the worker , and can range from transportation to daycare, as well as restaurant vouchers.
As we explain in this article on flexible remuneration , this concept refers to the offer of a good or service by the company, normally, at a price lower than the market price and which is deducted from the payroll. This salary in kind, as we said, can be in the form of food vouchers, vehicle rental, training and also insurance, specifically, life insurance and health insurance .
Advantages of implementing health insurance as flexible remuneration
The formula of health insurance for companies as part of the salary in kind has been widely accepted in our country for a few years, since it represents a tax and protection advantage for the employee, which hardly represents any extra cost for the company . What’s more, it gives more value and helps employee loyalty.
Advantages for employees
- Tax benefit: health insurance is exempt from personal income tax up to 500 euros, which means that you will obtain considerable savings on paying taxes. Not only that, the employee, his spouse and his children can benefit (€500 each).
- Group insurance: the company that contracts health insurance for several people within special flexible remuneration plans usually obtains more advantageous prices by contracting several policies. For this reason, it is usually offered at a cheaper price than that achieved by an individual client.
- Protection: beyond the savings of this modality, having the extra protection of health insurance for the employee and, if desired, for their family, results in their health and, by extension, their happiness.
- Freedom to accept or not: the employer cannot force part of the salary to be collected in this way, so it is important to note that employees who do not wish to do so can waive this salary in kind.
Benefits for companies
- Tax benefit: Premiums paid for health insurance for your workers can be deducted from Corporate Tax.
- Increase in net salary: With these savings, the company can increase the net salary of its workers without incurring any cost to it. Increasing the economic salary in that same proportion would have a very significant extra cost compared to this alternative.
- Retention of talent: In many cases, it is not only the salary that leads employees to remain in the company, but many factors such as work-life balance, work environment, having health insurance… what we call “salary” weigh. emotional” .
- Employee well-being: Enjoying the benefits of health insurance has a direct effect on the health of workers, who better control their pathologies. In the long run, all this can translate into improved productivity, competitiveness and a decrease in absenteeism due to sick leave.
Do you want us to inform you how to implement it in your company? At Moné Seguros we have been offering this type of complementary social security plans for workers for decades. Contact us so we can help you launch this flexible remuneration plan.
How is health insurance reflected on payroll?
When health insurance is part of a flexible remuneration or salary in kind, it must appear reflected on the payroll. One of the main advantages is that the first 500 euros derived from this health insurance will be exempt from personal income tax for the worker, spouse and children under 25 years of age. The only exception in Spain is the Basque Country, where this insurance does not enjoy exemption from personal income tax.
How is health insurance taxed if it is salary in kind?
Remuneration in kind for health insurance for a worker, his spouse and his children is exempt from personal income tax up to 500 euros per year per beneficiary and 1,500 per beneficiary with a disability, as long as the policy is part of his salary in kind. Of course, the part of the premium that exceeds that amount will be subject to tax withholding.
Flexible remuneration and health insurance Does it include family members?
Yes, the worker can take advantage of the possibility of reducing his income and have the company pay for the health insurance for the employee and the members of his family unit that are included.
Example of flexible remuneration with health insurance
A worker earns 30,000 euros per year and pays personal income tax at 30% (in the range from €20,000). She decides to take advantage of her company’s flexible remuneration plan with payment of health insurance in kind. The cost of the policy for her, her spouse and her two children is 1,600 euros per year and it is the company that is responsible for that expense. As it does not exceed 500 euros per beneficiary, this amount would be exempt from personal income tax in the income tax return. The salary benefit that she would obtain is that that amount of salary in kind would be exempt from personal income tax; To give us an idea, 30% of the 1,600 euros is 480 euros. And, of course, the initial cost of the insurance is cheaper than what she would have individually.