Employee benefits give more monetary value than a corresponding pay rise

At Edenred, we calculated how much a beneficiary of employee benefits gains in monetary terms when receiving tax-free and tax-deductible employee benefits compared to a corresponding salary increase.  

An employee will receive 348 euros more per year from the lunch benefit and the sport and culture benefit than from the corresponding pay rise. The financial benefit of the employee benefits to the user is the non-taxable part of the benefits. This is the additional money that the person receives on top of their salary, after tax. 

The salary should be up to 500 euros higher in order to receive the same monetary value as from the Lounari and Virike benefits

Our calculations demonstrate that when a Finn receiving the median salary* has access to the Lounari and Virike benefits, they would need an increase of almost EUR 500 in their monthly salary in order to receive the same monetary value as they would from employee benefits. Even for the lowest granted amount, the difference in lunch benefit alone is 120 percent per month, in comparison to a corresponding pay raise.

At best, Finland's most popular employee benefits, the lunch benefit and the sports and culture benefit, leave employees with EUR 246 per month. That's 29 euros more than a corresponding pay rise would leave them with.

* The median gross salary for Finns is EUR 3 028. The median value is a more accurate reflection of the most common salary level than the average, because the median value does not take into account the highest and lowest monthly salaries.

Calculations show the savings that the employee receives from employee benefits

In our calculation, the sums in hand are calculated at the maximum amounts an employee is allowed to receive in non-taxable employee benefits. These are the most common amounts for lunch and sports and cultural benefits. The impact of employee benefits on the monthly income is illustrated by the median salary and the average tax rates for Finns. 

There are two types of lunch benefit: the employer can either give it directly on top of the salary or, alternatively, the benefit can be a so-called lunch deduction. In the lunch deduction, the employer pays 25 percent of the employee's benefit. The tax-free amount for the sports and cultural benefit is always the same,  EUR 33 per month. In terms of wage increases, the key variable is the increase in the tax rate.  

When employees' purchasing power is increased through employee benefits, both the employee and the employer gain from it. The employee gets more purchasing power from the employee benefits than the corresponding amount from the salary increase would be. Thanks to the tax benefits, it is also cheaper for the employer to offer more salary in the form of benefits than to offer the equivalent amount as a traditional salary increase. Our previous calculation shows how a employee can save a total of almost EUR 3,000 on the most common employee benefits.

See the latest calculation here.

Food is now 16% more expensive, lunch benefit boosts employees' purchasing power

The Finnish Tax Administration raised the maximum amount of the lunch benefit for this year to EUR 12.70 per working day. On average, there are 21 working days per month. The increase from the previous year is 12.4 per cent. All in all, last year's price increases had the biggest negative impact on real wages for Finns in more than 60 years. According to Statistics Finland, over a 6-month period, real wages in Finland fell by 5.7% in October-December and by 4.8% in January-March. 

In practice, the significant increase is an additional opportunity for employers to help their employees by offering lunch benefit in the midst of rising food prices. Food is now more than 16 percent more expensive on average in Finland than a year ago. During inflation, saving on food costs can usually mean less and more processed food purchases in homes

Employee benefits vs. corresponding amount in salary increase

The impact of two different lunch benefits on the income

1. Lunch benefit on top of salary 

Median salary 3 028 €  
Benefit amount per month 266 € 
The employee pays tax on 75%. 266 € x 0,75 = 200 €. The taxable amount is 200 €
The median wage has an income tax rate of 26.4%. 200 € x 0,736 = 53 € 
The tax on the entire benefit is 53 €
266 € - 54 € = 213 € 
Employee receives monthly:  213 €  

Lunch benefit on top of salary, with an corresponding pay rise 

Increase in median wage: 3 028 € + lunch benefit 266 € = 3 294 €
The median wage has an income tax rate of 26.4%. 3 028 € x 0,736 = 2 229 €
After the pay rise, the tax rate is 28%. 3 294 € x 0,72 = 2 371 €
2 371 € - 2 229 € = 142 €
Employee receives monthly: 142 €  

2. Lunch benefit as a lunch deduction 

Median salary 3 028 € 
The maximum amount of lunch benefit is 266 € per month, of which the employee receives 66 € tax-free. 
Employee receives monthly: 66 € 

Tax-deductible lunch benefit, corresponding amount as a salary increase  
An increase in the median salary: 3 028 € + 66 € = 3 094 € 
The median wage has an income tax rate of 26.4%. 3 028 € x 0,736 = 2 229 € 
After the salary increase, the tax rate is 27%. 3 094 € x 0,73 = 2 259 € 
2 259 € - 2 229 € = 30 € 
Employee receives monthly: 30 €  

The combined effect of Lounari and Virike on salary

1. Lunch benefit on top of salary + Virike benefit

Median salary 3 028 €  
Benefit amount per month 266 €  
The employee pays tax on 75%. 266 € x 0,75 = 200 €. The taxable amount is 200 €
The median wage has an income tax rate of 26.4%. 200 € x 0,736 = 53 € 
266 € - 53 € = 213 €  
The tax-free Virike benefit is 33 € per month. 213 € + 33 € = 246 € 
Employee receives monthly: 246 €  

Lunch benefit on top of salary, corresponding amount as a salary increase + Corresponding amount of Virike benefit as a salary increase

An increase in the median salary: 3 028 € + lunch benefit 266 € + Virike benefit 33 € = 3 327 € 
The median wage has an income tax rate of 26.4%. 3 028 € x 0,736 = 2 229 € 
After the salary increase, the tax rate is 28 %. 3 327 € x 0,72 = 2 395 € 
2 395 € - 2 229 € = 166 € 
Employee receives monthly: 166 €  

Tax-deductible lunch benefit + Virike benefit 

Median salary 3 028 €    
The maximum amount of lunch benefit is 266 € per month, of which the employee receives 66 € tax-free.
The tax-free Virike benefit is 33 € per month.
66 € + 33 € = 99 €.
Employee receives monthly: 99 € 

Tax-deductible lunch benefit, corresponding amount as a salary increase + Corresponding amount of Virike benefit as a salary increase

An increase in the median salary: 3 028 € + lunch benefit 66 € + Virike benefit 33 € = 3 127 € 
The median wage has an income tax rate of 26.4%. 3028 € x 0,736 = 2 229 € 
After the salary increase, the tax rate is 27 %. 3 094 € x 0,73 = 2 283 € 
2 283 € - 2 229 € = 54 € 
Employee receives monthly: 54 € 

How much would you have to be paid to get as much monetary value as you get from the benefits?

The calculation above shows how high the gross salary has to be to equal the amount of the median salary plus the Lounari and Virike benefit. 

• To have the same monetary value as the median salary plus the lunch benefit and sports and culture benefit, the gross salary needs to be 3 505 €. That is 477 € more than the median wage for Finns.
• To have the same monetary value as the median salary plus the tax-deductible lunch benefit and sports and culture benefit, the gross salary needs to be 3 211 €. This is 183 € more than the median wage in Finland. 

1. Lunch benefit on top of salary + Virike benefit:

The median salary of 3 028 € leaves 2 229 € after tax.
Lunch benefit on top of salary and the Virike benefit will leave you with a total of 246 €.
2 229 € + 246 € = 2 475 €. 

To get 2 475 € from salary, gross salary must be 3 505 €.
The tax rate on a gross salary of 3 505 € is 29.4% = 2 475 €. 

2. Lunch benefit as a tax deduction per month + Virike benefit:

The median salary of 3 028 € leaves 2 229 € after tax.
The total for the lunch benefit as tax deduction and the Virike benefit is 99 €.
2 229 € + 99€ = 2 328 €. 

To get 2 328 € from salary, gross salary must be 3 211 €.
The tax rate on a gross salary of 3 211 € is 27.5% = 2 328 €.

Employer, do you want to know what tax benefits you get when you offer employee benefits?