Italy: Rewarding employees: new clarification of the rules of employee benefit plans in Italy
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The Italian tax administration has issued new guidelines clarifying how employers can use benefits to reward employees. In particular, the Authority decided that the plans cannot be used to reward individual performance but only to retain employees and distribute company profits.
Employee benefit packages are having an increasing impact on corporate resource management, and local tax authorities are increasingly having to deal with the tax impact of these packages. Italian tax administration (Risoluzione nm 55 / E of September 25, 2020) recently issued important clarifications confirming both general principles already expressed in previous decisions and setting new, clearer limits on the use of benefits to reward employees.
“Rewarding” benefit plans provide for the replacement (even partial) of performance bonuses by benefits in kind that are not included in the income of employees. They differ from so-called “traditional” social benefit plans offering employees goods and services in addition to their normal salary to support their purchasing power and improve the quality of their private and family life.
On the one hand, the Italian tax administration has reaffirmed that social benefit plans cannot be used as a substitute for the fixed or variable remuneration of employees and that employers cannot allow employees to choose between payments. in cash or in goods and services, or provide a cash payment to make up for unused benefits.
On the other hand, the tax administration has stated that benefit plans whose main objective is to reward and induce employees (that is to say “reward” benefit plans) are allowed. , in addition to plans with a purely social purpose. It also specified the authorized scope of this type of plan.
In particular, a rewarding benefits plan can only be used to reward employees following achievement of the company’s results or to retain them. The company may not award rewards of different value to different employees based on an evaluation of the activity and / or work performance of the employees. This means, for example, that it would not be possible to use the presence of an employee in the office as a criterion to establish the value of their benefit package.
In other words, the company can provide goods and services to employees to reflect the value created by the positive results of the company, but it is not possible to link the benefits to the performance of an employee. individual employee. Employers should take this principle into account when reviewing or implementing benefit plans.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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