I received this question in my inbox today:
We want to convert some earnings of our employees to de minimis benefits in order for them to have a bigger take home pay. Is it possible to just make the policy and procedures and implement or do we need particular tax documentation because certainly, the withholding tax to be paid would be less than what was previously remitted.
Any input would be highly appreciated.
Cutie, if my understanding is correct, you want to DECLARE EXISTING benefits as de minimis benefits because they are not taxable, is this correct?
The finance manager of one of my clients wanted to do the same thing and I stopped him for two major reasons:
1. It's not legal, therefore... it's illegal, nuff said.
2. Even if it's legal, it's not a good idea because it defeats the purpose of giving these benefits for people to appreciate and enjoy.
What I did with ExeQserve and another company that outsourced their HR to us is take advantage of the tax-free benefit provisions by offering them as is. This means that ExeQserve Employees are enjoying meal allowance,clothing allowance, rice subsidy, laundry allowance, medical expense reimbursement and communication allowance exactly within the limits and instruction provided by the law. These make them happy ( I hope!)
What I did was offer these on top of their regular salaries and benefits (i.e., service incentive leaves, HMO, group insurance and performance based incentives). This makes their compensation a little bit more competitive compared to others who don't enjoy the same set of benefits.
So what's my recommendation? My recommendation is that you follow my example or if you intend to save and then at the same time give your employees more, offer to give them the tax-free benefits as a reward in their next salary review instead of giving the conventional salary adjustments. That's the legal way. It also reflects that your company offers competitive benefits package.
Hope this helps.
P.S. keep receipts!