Perquisites

Published Apr 29, 2024

Definition of Perquisites

Perquisites, often referred to as “perks,” are additional benefits provided to employees over and above their regular salary or wages. These benefits are usually non-cash and are given either to improve workers’ overall compensation packages or to provide incentives for improved performance. Perquisites can vary widely from one organization to another but typically aim to enhance employee satisfaction and loyalty, thereby contributing to a positive work environment and culture.

Examples

Common examples of perquisites include company cars, subsidized meals at the workplace, health and insurance benefits, discounts on company products, memberships to gyms or clubs, and flexible working hours or remote work options. For instance, a tech company might offer its employees the latest smartphones or gadgets as part of their employment package, while a manufacturing firm could provide protective clothing or equipment at no cost to the worker.

Imagine Sarah, a project manager at a multinational corporation, who receives a company car as a perk. This car is not just for her professional use; she can also use it for personal errands. As part of her perquisite package, she also has access to a premium health insurance plan that covers her entire family, which is a significant financial saving and peace of mind for her.

Why Perquisites Matter

The importance of perquisites lies in their ability to make an employment offer more attractive and competitive, especially in industries where talent competition is fierce. They play a crucial role in not just recruiting but also retaining top employees by acknowledging their hard work and importance to the company. Furthermore, well-structured perks can improve morale, increase job satisfaction, and promote a healthier work-life balance, leading to improved productivity and reduced turnover rates.

However, it is essential for companies to carefully design their perquisite programs to be equitable, inclusive, and in compliance with tax regulations, as some perks may have tax implications for the employer or the employee.

Frequently Asked Questions (FAQ)

How do perquisites differ from bonuses?

Perquisites differ from bonuses in several key aspects. While bonuses are typically monetary rewards given for achieving specific goals or for performance excellence, perquisites are non-cash benefits provided to employees. Bonuses are generally considered one-off payments, whereas perquisites can be ongoing benefits throughout an employee’s tenure with the company.

Are all employees entitled to receive perquisites?

Not necessarily. The provision of perquisites often depends on the employee’s role, seniority level, and the policies of the company. In some cases, perquisites are offered as part of the compensation package for high-level executives or for roles that require special incentives. However, companies are increasingly offering perquisites to all employees as part of a broader strategy to enhance job satisfaction and organizational commitment.

What are the tax implications of perquisites?

The tax implications of perquisites can vary by country and the nature of the perk. In many jurisdictions, certain perquisites are considered taxable income for the employee and must be reported as such. Companies must be diligent in understanding and complying with tax laws related to employee benefits to avoid penalties. Typically, an organization will need to differentiate between perquisites that are necessary for the job (and therefore not taxable) and those that are offered as an additional benefit (which may be taxable).

Can perquisites negatively impact company culture?

If not managed correctly, perquisites can potentially lead to perceptions of inequality or favoritism within an organization, which may harm company culture. It’s critical for businesses to ensure that perks are distributed fairly and transparently to avoid such issues. The best practices include clearly communicating the criteria for eligibility and making sure that perquisites align with the company’s values and goals, ensuring they reinforce a positive and inclusive culture.