Work-related cost scheme: Secondary employment with tax benefits

Various recent studies have shown that the labor market is starting to get quite overstretched. According to recent research by BDO Accountants, more than eighty percent of employers are already having major problems attracting the right people.

Questions that concern many employers are therefore how a company can ensure that good employees choose a company and, no less important, how a company can ensure that the good employees that a company has want to continue working with the company. In order to be able to answer these questions adequately, companies must ask themselves what the wishes and demands of the employees of the future are.

Taken seriously

In a general sense, the young(er) employees want it [generatie Y (1980-1996) en generatie Z (1996-2010)] a good balance between work and private life, good training and development opportunities and freedom and independence to carry out their work. Modern employees want to be taken seriously and heard. And modern tools that are also used at home. They pay, shop, travel, play and communicate digitally, so they expect the same in the working environment. Make them fill out all kinds of paper forms and they drop out. And homework has become more important for many employees, partly thanks to the corona crisis. Employers should, if at all possible, make room for this.

In a financial sense, they expect a reasonable salary, a good pension scheme and good fringe benefits. With the latter, they want some choice, so they will appreciate some freedom. A bonus scheme is also appreciated by many. Not everyone finds performance-based pay equally attractive, so be careful about it. It takes a certain type of person. The type that can handle a little more risk and uncertainty. For example, the older generations[babyboomers(1950-1965)andgenerationX(1965-1980)placegreateremphasisonagoodpensionschemeandsufficientdevelopmentopportunitiestomaintainemployability[babyboomers(1950-1965)engeneratieX(1965-1980)hechtenbijvoorbeeldmeeraaneengoedepensioenvoorzieningenvoldoendenotwikkelingsmogelhandelsomhuninzetbaarheidhoudenoppeilte[babyboomere(1950-1965)oggenerationX(1965-1980)størrevægtpåengodpensionsordningogtilstrækkeligeudviklingsmulighedertilatopretholdederesbeskæftigelsesegnethed[babyboomers(1950-1965)engeneratieX(1965-1980)hechtenbijvoorbeeldmeeraaneengoedepensioenvoorzieningenvoldoendeontwikkelingsmogelijkhedenomhuninzetbaarheidoppeiltehouden

In this course from Finance Academy E-learning, you will learn everything about the work-related cost scheme, zero assessments, specific exemptions, the free space and allowances.

After following the e-learning you will be able to:

  • provide an explanation of primary and secondary employment;
  • provide a description of the concept of wages under the work-related cost scheme;
  • describe concepts such as specific exceptions, zero valuation, mediation costs and discretionary scope and give examples of these;
  • to apportion a company’s personnel costs according to the tax consequences of the labor cost scheme;
  • outline and implement a step-by-step plan for introducing the labor-related costing system in a company;
  • advise on the administrative processing of the labor costs scheme.

Reputation

Everything starts, of course, with bringing in people who are a good fit for the position that is available. A company’s reputation as an attractive employer can play a role here, but for a smaller employer that reputation often only applies to a small circle around the company.

BDO Accountants recently conducted a survey of fourteen hundred employees in large and small companies in the SME sector with the central research question ‘What moves my employees’. BDO Accountants’ survey has shown that 64.9% of all employees prefer development opportunities with a reasonable salary rather than a high salary with fewer opportunities.

Don’t hide behind agreement

Working conditions are therefore important. Organizations should therefore not hide behind a collective agreement. If they stick to it, she can be sure they won’t stand out from every other employer in the industry. An attractive employer tries to go the extra mile, and this does not necessarily have to be reflected in higher wages. Employees like to do meaningful work and value development opportunities. Then make it clear how their work fits into the whole picture. How they support that image and thus how important their work is. An employer can also offer its employees flexible fringe benefits. The employees can then partly choose which terms of employment they want. They then choose, for example, to take their extra statutory holiday as leave or to use it to pay for a study or a bicycle.

Employers can use the introduction of work-related expense schemes to organize all sorts of fun things for their employees. Remember, this must be done smartly and carefully. to do. Employers cannot simply make changes to the terms of employment. To change the terms of employment, the employees’ consent is required. Changes in terms of employment that benefit the employee rarely lead to discussion. Everyone is happy about it and will therefore agree. It will be different if the change is a deterioration. It then helps to get support from the co-operation council or staff representation in advance.

Labor cost scheme

The work-related cost scheme was introduced in 2011 and had to change the scheme up until then
replace the current system with twenty-nine different systems for the various allowances and provisions in order to achieve a reduction in the administrative burden for employers and a reduction in implementation costs for the tax authorities.

The basic principle in work-related costs is that all allowances and benefits in kind for employees constitute wages. This also applies to costs that are 100 percent business-related. There is a free space within which unemployment benefit and benefits in kind can be made tax-free. The employer is free to decide which allowances or benefits are in question. He will often choose reimbursement that he already provided under the old scheme or that he is obliged to pay on the basis of a collective agreement. The free room is an annually fixed percentage of the total taxable salary in a company. It is not necessary to keep track of what is reimbursed or provided per employee. For example, an employee can be provided with a bicycle without taking into account a maximum amount and without checking whether the employee has already had a company bicycle in previous years and whether he uses the bicycle often enough for commuting. The only limitation on the costs that fall under the job costing scheme is the usual test. The sum of allowances and benefits in kind awarded to the free space must be no more than 30% higher than usual. If this is the case, the excess amount constitutes taxable salary.

Taxed salary

If allowances, benefits in kind and provisions exceed the allowance, then the excess constitutes taxable salary. That salary is not taxed to the employee, but is included in a final collection at a rate of 80%. This final tax is borne by the employer and is not passed on to the employee.

The latest evaluation shows once again that the labor-related cost scheme is still not
excels in the desired simplicity. So that will be for now. The starting point
back that most, if not all employers want to comply with the law and therefore
want to do good. Considering the complexity of the scheme is a number
golden rules are observed:

  • ‘keep it simple’; many employers create themselves unnecessarily or unnoticed
    complicated working conditions. Always consider before an employment relationship
    is entered or changed, why it happens and how it can be treated administratively and tax-wise. The financial professional plays an important role in this;
  • ensure a clear and as complete as possible statement of the quotas and provisions in the company and a flow diagram of the tax structure thereof. Consider the entry process and the underpinnings of the various entries;
  • continuously follow up on whether the actual impact in the financial administration and in the payroll administration is in accordance with what was predicted.

E-learning

The work-related costing system is explained in detail in the e-learning that accompanies this article, and there is also a lot of attention to the introduction of the work-related costing system in the company and in the administration. In addition, many tips are included in the e-learning to make the best possible use of the work-related cost scheme to support an employer’s attractiveness to employees.

Author: Drs. Ron Kieft RA, independent consultant in administrative organization, internal control and financial management.

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