Working the Fringes

3 Hot Nontaxable Benefits to Consider

A respectable benefits package is pretty much a must-have for any size company these days. And you’ve probably been deluged with information about “core” benefits such as retirement plans, health care insurance, etc.

But, along with offering employees these essentials, you also may need to give a little more. A good way to differentiate your company’s benefits from competitors’ is to “work the fringes” — that is, provide additional fringe benefits. Here are three hot — and nontaxable — ones to consider.

1. Flexible Work Hours

At least once in the last several years, you’ve probably heard the catchphrase “work-life balance.” This is the tricky scheduling feat most of us try to pull off as we seek to give equitable amounts of time to work and our families, friends and personal interests.

Offering employees flexible work hours can go a long way toward helping your staff attain an acceptable work-life balance. This might mean setting some core business hours during the day when workers must be present and allowing employees to vary their start and finish times around these core hours. Or it could mean allowing compressed work weeks, where employees can choose to work four 10-hour days rather than five eight-hour ones.

Also look at how you handle vacation and sick time. Many companies are tossing out the distinction between the two and combining vacation and sick days into one “paid time-off bank.” Others are offering employees more vacation time than the traditional two weeks or are letting workers buy additional days off.

2. Continuing Education Funding

In light of today’s ever-evolving technology and a general desire to never stop learning, education funding is a particularly popular fringe benefit. And there are a couple of ways you might provide it.

First, you could implement an educational assistance program in which you offer each employee up to $5,250 of tax-free education. This may include undergraduate or graduate classes, though the participant need not actually enroll in a degree program. The education doesn’t have to be job-related (unless it relates to sports, games or hobbies), and you can set eligibility requirements and limits as long as you don’t discriminate in favor of highly compensated employees.

Alternatively, you could offer education as a working condition fringe. This approach differs from an educational assistance program in that you don’t need a written plan, coverage can be selective, and there’s no $5,250 annual cap. Eligible course work, however, is limited to purely job-related learning.

In the case of either type of payments for education, the expenses are deductible to the business.

3. Transportation-related Coverage

Getting to and from work is a significant challenge for many employees. Fortunately, the IRS allows workers to treat the value of employer-provided parking, carpool transportation and transit passes as a fringe benefit and exclude this amount from their gross income within prescribed limits.

Meanwhile, as an employer, you can deduct the value of qualified parking and transportation benefits you provide. The parking must be on or near your business premises or on or near a location from which employees carpool to work.

You may also offer mass transit benefits — either transit vouchers or transportation itself, such as a shared carpool van. If you provide parking benefits, employees may exclude from gross income a maximum of $215 a month in 2007. If you provide transit passes or vanpooling, employees may exclude up to $110 per month in 2007.

Need Another Reason for Good Fringe Benefits?

The primary advantage of good fringe benefits is fairly obvious — you garner a hiring advantage over your competitors. And as the costs of finding, training and retaining staff remain high, you just can’t underestimate the importance of this point.

But if you need another reason, think about taxes. As mentioned, the three fringe benefits we’ve discussed here are not taxable to employees. And, in some cases (such as transportation or education benefits), you actually qualify for a deduction. As you can see, there’s more than one reason to “work the fringes.”

Find out how our Boston Accountants and Consultants can add value to your business. Email us or call us at 1 (888) 875-9770.

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