Convenience of providing employee benefits compared to increase of gross wages

Abstract

Using tax allowances when providing contributions for life insurance, pension insurance and food, employers significantly decrease their costs in comparison with the traditional increase of wages of employees (the saves range in several hundreds of crowns per one employee). These benefits are more profitable than increase of wages for employees, as well. The paper analyses and mathematically reasons these financial benefits, and compares advantages of employee benefits and wage increase.A disadvantage for employees is that these financial means (contributions for pension and life insurance) can not be immediately used for their needs, and are bound with the negotiated types of insurance. This is, perhaps, also the reason why employees of selected firms preferred wage increase before employee-benefits. The above-mentioned employee benefits can become an important factor of stabilisation of current employees, or acquiring new, needed employees. The paper briefly characterises these employee benefits.

Keywords

• tax
• pension insurance
• contributions on food
• employee benefits
• life insurance