Financing Benefits: Here Are Your Opportunities

Do you want to offer your employees attractive benefits but are unsure if the costs are manageable for your company? You are not alone. Many employers wonder if they can afford the right benefits. Taxes on such reimbursements can amount to as much as 80%.

Fortunately, there are many more options than most entrepreneurs think. In this blog, we will explain how the Work Cost Scheme (WKR) works and which rules from the Tax Authority make it possible to offer plenty of benefits completely tax-free.

Tax-Free Benefits

For many employers, financing the benefits themselves is not the problem. A gym membership, meditation app, or meal doesn’t have to be expensive, and a satisfied and healthy employee often generates additional revenue for a company.

What can unfortunately become costly is the tax that may come into play when reimbursing these items. Can be, as there are plenty of smart ways to manage this.

When you, as an employer, reimburse benefits for your employees, the following tax-free benefits are possible:

1. The Free Space (WKR)

In 2015, the Work Cost Scheme (WKR) was made mandatory in the Netherlands. This means that all employers have a certain tax-free budget available annually to arrange reimbursements for their employees. This budget is also known as the free space.

The size of the tax-free budget depends on the wage sum of the company. For the free space, it applies that from January 2025, you may spend a maximum of 2% of the taxable wage sum up to €400,000 plus 1.18% of the remnants of that wage sum on tax-free reimbursements.

A few examples of benefits from the free space:

• Gym memberships at a gym or yoga studio of choice;

• Coaching focused on personal development and well-being;

• Certain online shops or services (with discounts);

• Cultural activities;

• Childcare, and much more.

The WKR means that all employers have a certain tax-free budget annually to arrange reimbursements for their employees.

While the size of the free space varies significantly from company to company, many employers will have enough opportunity to reimburse a nice package of benefits tax-free.

Do you want to calculate what your free space is? Read more about secondary employment conditions and the Work Cost Scheme.

2. Nil Valuation

For some companies, the WKR can become full quickly. For example, due to a company holiday. Fortunately, not all reimbursements are deducted from the free space. Certain specific provisions used in the workplace are valued as nil (€0.00) by the Tax Authority and are therefore not taxed.

A few examples include:

• Refreshments at the workplace that fall outside of meals (coffee, tea, and snacks, for example);

• Public transport subscriptions when used for work;

• Work clothing;

• Home office provisions such as a desk, office chair, or second screen.

It is important to know that nil valuation always concerns remuneration in kind. Financial reimbursements never fall under nil valuation.

3. A Targeted Exemption

Lastly, the Tax Authority has also exempted a number of specific benefits or reimbursements from tax. These reimbursements do not fall under the WKR and can therefore always be offered tax-free.

This includes:

- Travel expenses of up to €0.23 per kilometer;
- Certain work-related training and coaching;
- Evening meals during overtime in the evening.

Many targeted exemptions have a maximum amount. If the amount exceeds this, part of the amount still falls within the free space.

> Offering a pension scheme obviously costs the employer money, but is fiscally more attractive than paying out extra wages.

Additionally, the employer can offer a pension scheme tax-free. How does this work? The part of the pension that the employer pays does not fall under wages, meaning no social premium needs to be paid on this. Offering a pension scheme costs the employer money, but is fiscally more attractive than paying out extra wages. While in 2025, you often pay around 20% in social premiums on your employees' salaries (depending on the sector), you pay nothing on pension premiums.

Furthermore, it is customary for the employee to also contribute. The agreed amount for the pension is deducted by the employer from the gross salary and is therefore exempt from income tax.

4. Benefits Outside the WKR

Do you want to offer a specific benefit, but does it not fit within the free space and there is no targeted exemption or nil valuation? Then you can still do this.

Besides the free space, nil valuation, and targeted exemption, there are still a few extra options. For instance, the government introduced a new bicycle scheme in 2020. This ensures that the costs for a lease bicycle scheme fall outside the work cost scheme. Instead, you can lease a bicycle with gross-net discount.

The same applies to payroll giving, or donations directly from gross pay to a charity. Do you want to give your employees the option to make donations? This can also be done under the gross-net scheme and is therefore cost-free for the employer and beneficial for the employee. In fact, due to the tax benefits involved, it costs less to give more.

If a benefit does not fall under a special scheme or exception from the Tax Authority, you can still offer it. Unfortunately, in this case, you will have to pay a final tax of 80% on it.

Make Smart Use of the Free Space with Alleo

Do you want to maximize your free space and the accompanying opportunities? You can, with our platform. In the Alleo benefits platform, you can easily offer your employees a beautiful selection of flexible employment conditions that, if you wish, fit precisely within the free space Work Cost Scheme.

By cleverly responding to the opportunities to offer tax-free benefits, it becomes much easier to make an affordable and attractive offer to your employees. And as described in our previous blogs about engagement and employee well-being: the right benefits not only lead to healthy and motivated employees, but often also to higher productivity and increased revenue. This investment is more than worth it.

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