To develop an attractive employee benefit package, there are many items that need to be taken into consideration. Although the daily commute is easy to overlook, offering benefits to your commuting employees will positively impact your company’s overall employee benefit package.
However, when creating a benefit plan, many things need to be taken into consideration that are not always obvious. Still, minor aspects could affect the long-term employee compensation strategy. Since all employees in the company are affected by the commuting policy, the changes are challenging to implement and could face resistance, so this article will give you some tips to consider to get it right from the beginning.
There are multiple ways to provide commuting benefits to the employee, and we will discuss the most common ones below. However, before we focus on how to deliver, and we need to identify the needs of your employees.
- Where is your office located? Is it easily accessible by public transportation? Is it easily accessible by car? Is the area significantly affected by rush hour traffic jams?
- Does your location have designated parking spots? How many places are available? What are other facilities available (car repair shop, electric charging point etc.)?
- What is the workforce arrangement of your company? What functions?
- Do your employees need to travel for work? Is it domestic or international? Do your employees work on customers’ sites/designated locations?
- What’s the percentage of employees working from home before and post-pandemic?
Once you understand the needs of your commuters, you can make an informed decision on how to approach your benefit strategy. In this article, we will discuss the most common commuter benefits that employers offer in the Netherlands.
It’s important to note that employer is not obliged to provide commuting benefits to the employee. However, it is a market standard, and most candidates expect to get one included in their salary package. Also, please note that we will discuss the general tax regulations, and the rules might differ for 30% ruling and other treaties; in this case, don’t hesitate to get in touch so we can find a solution together.
Fixed travel allowance
Employers can provide a tax-free allowance to the employee for their fixed work-home-work commute. The employee can choose the means of transportation (private car, public transportation, biking, walking).
Dutch corporate tax code allows for a maximum tax-free allowance of up to 0,19€/km. Therefore, the calculation is 0,19*distance home-office in kms*2*214(working days). Employers must make adjustments to this reimbursement whenever the employee changes their place of residence and re-calculate the amount pro-rated in case the employee does not work full time, or their employment is terminated within a year. This method requires the least amount of monthly administrative work. This approach was quite popular with companies in the Netherlands because the employees work from one office and their commute route rarely changed. However, due to COVID-19 and the implementation of “work from home” policies, employees did not need to commute to work. As a result of this shift and change in tax regulations, employees will now need to provide evidence that they commute to the location at least 36 weeks or 128 days per year to receive this allowance tax-free.
Reimbursement of public transportation costs
There are two ways to approach reimbursement of public transportation costs: reimbursement of the actual incurred costs or reimbursement of a subscription for public transport.
The employer can reimburse the costs of public transportation tax-free, but the employee has to provide evidence such as tickets, or an exported record of their trips from their ‘OV chipkaart’ (the pass used to travel in the Netherlands). This method is more time-consuming to process since the records should be audited and verified, but it gives the advantage to the employee that the total costs are covered.
Employees with a longer commute usually prefer to arrange a subscription for their trip to take advantage of the discount price. The employer can cover the costs of this subscription; however, there should be an evaluation process in place to determine whether it is a tax-free benefit or not. The comparison of costs should demonstrate that the price of the monthly subscription (or 1/12) of the annual subscription is or as high as the costs that would incur if the employee purchases tickets without a discount. If the subscription price is higher than the costs of the business-related trips, then the difference is the employee’s taxed salary.
Business OV-chipkaart is common commute arrangement by Dutch employers. The card makes different types of transportation available to the employees and encourages them to find the most efficient way to commute. A significant advantage of this option is that the invoicing is centralised, all the records of all activated OV-chipkaarts are available in the portal, which reduces the administrative work. However, the rule for determining whether the benefit for the employee is tax-free remains the same, and the records must show that the provided budget was used for business trips or commuting. With the NS-Business card, employees can travel with any mode of public transportation, including the train, bus, NS bike, and shared cars (Greenwheels). There is no subscription fee for the card, but the company could add a subscription for employees to get extra discounts on their trips. The NS business card could provide service in different sizes of companies, from small-business (1-5 people) to large corporations (250+). You can find the overview of the subscription options with pricing here.
In the Netherlands, it is common to provide the employee with a company car. For some positions that require travelling and visiting customers/sights (sales, business development, etc.), it is necessary to do the job successfully and efficiently. Depending on the size of the company and the number of employees that require a company car, the way the internal processes are executed and policy is written will vary. However, most businesses in the Netherlands would lease vehicles for their employees and choose a leasing company as a partner that will help manage the fleet.
The majority of international companies lease company cars from one of the following companies:
The employer would agree with the employee on the budget for the car, and the leasing company would handle the request and deliver the car. The budgets vary based on the seniority of the position and requirements for the vehicle. The lease price is influenced by:
- the model and make of the car, the engine power (car list price)
- the type of fuel
- the number of kilometres per year in the contract
- the duration of the contract
- insurance coverage and the maintenance/assistance services included
To create a budget for the company car benefit, it is good to know the current market trends and prices and account for the budget for fuel to avoid misalignment for the amounts approved. In addition, we always advise our clients to make a car policy as detailed and precise as possible to make sure that employees are aware of their responsibilities and liabilities, which helps reduce disputes and makes internal communication more efficient.
Cars are assets, and to make the best return possible, an analysis should be made. It is an excellent benefit for the employees and strengthens your position as an employer if done correctly.
Most companies are leasing cars because it decreases the liability for the business while maintaining a good level of services provided to the employee and reducing the management costs from the employer side. Also, lease costs can be offset against the revenue, and the VAT can be deducted. If the employee is provided with a vehicle, any other transport-related reimbursement will be taxed. The benefit remains tax-free if the employee uses up to 500 km on an annual basis and can provide data to support it. Otherwise, the employee has to pay for private use (bijtelling), and the employer should process the deduction through payroll. The tax base is determined by BPM, CO2 emission and the list price of the car in the Netherlands. Please refer to the official regulation or get in touch with us to discuss your situation in detail.
These are the most common ways to add value to your employee’s compensation package through different commute arrangements. When drafting the commute policy for your business, keep in mind that the HR field is affected by various facets (tax, economy, trends) that are constantly changing and new laws are regularly implemented. These are some of the principles that our team follows when writing a policy.
- User friendly and clear
- Adapt and be flexible
- Communicate well (spend time to explain to your employees)
- Listen to your employee’s feedback
How to develop an attractive compensation package for my business?
As an experienced human resource solution provider, Octagon Professionals has a deep insight into the process of establishing an employee remuneration package for international companies. We can help you develop a package of benefits for your company’s employees that fits your business requirements and processes. Contact our HR consultants and let them help you attract quality talent.
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