A salary increase makes you happy, but not for long…
The effect on employee retention and engagement is minimal – and above all, temporary. It often takes only a few months for the higher income to become the new normal. However, there are many additional benefits surrounding the topic of salary that you can propose to your employees as an alternative to a pay raise. We have taken a closer look at ten of them.
Alternatives to a pay raise
- More vacation days (unpaid leave, etc.)
- Reduced working hours
- Flexible working hours
- Childcare and caregiving support
- Further training and educational opportunities
- Corporate health promotion and fitness
- Travel allowances
- Public transport subsidy
- Electric car or e-bike
- Meal allowance
1. More vacation days
An additional 6th week of vacation, unpaid leave for further training or longer stays abroad, an extra day off on your birthday, or an unlimited vacation model can be attractive alternatives to a salary increase. Another option for time-limited leave is a sabbatical.
2. Reduced working hours
Reduced working hours for the same pay can be an incentive for your employees, with the goal of reducing weekly hours without decreasing work performance. Working more effectively is the key here!
3. Flexible working hours
According to a Kununu study, flexible working hours are the most desired benefit, cited by around 70%. Alongside home office and remote work options, flextime without core working hours, trust-based working hours, and 4-day weeks are also attractive alternatives to a salary increase.
4. Childcare and caregiving
As an employer, you can cover contributions for your employees' nursery, kindergarten, or day care, paying this in addition to their salary. In Austria, subsidies up to €2,000 annually for children up to the age of 14 are tax-free. In Germany, there are tax-free options including for short-term childcare up to €600/year. Covering the cost of short-term caregivers for dependent relatives (up to €600) is also an option if your employees occasionally have to step in for work on weekends.
5. Further education opportunities and subsidies
You can cover the costs of continuing education such as workshops, master's degrees, or language courses for your (growth-oriented) employees tax-free and exempt from social security contributions on top of their salary. However, the further education must be relevant to the employee's role or internal job change.
6. Corporate health promotion and fitness
All services that improve general health are tax-free and exempt from social security contributions for employees up to €600 per year. These include preventative measures, stress management courses, or smoking cessation programs. Another option is supplementary health insurance that you can provide for your employees.
7. Travel allowances
In Germany, employers can pay their employees a travel allowance for their commute – taxed at a flat rate of 15% wage tax, but exempt from social security contributions. This is based on the distance allowance of €0.30 per kilometer (starting from the 21st km €0.35).
In Austria, a direct subsidy is taxable. However, the coverage of public transport tickets (see point 8) or employees utilizing the commuter allowance is tax-free.
8. Public transport subsidy
Employees do not have to pay taxes or social security contributions on subsidies for public transport either. An annual pass for public transport or trains (e.g., The German BahnCard or the Austrian Climate Ticket), which may be used for both business and personal purposes, are definitely welcome benefits for your employees.
9. Electric car or e-bike
The business and private use of an electric car, e-bike, or bicycle is completely tax-free for your employees, provided the CO2 emissions are at zero percent. For e-bikes, this regulation currently applies only until 2030.
10. Meal allowance
Whether it's a canteen, food vouchers, or a meal allowance for restaurant visits during the lunch break.
In Germany you can pay your employees up to €7.50 (€4.40 benefit in kind + €3.10 employer subsidy) per day for lunch.
In Austria it is up to €8 for restaurants and delivery services or €2 for groceries from the supermarket or bakery. More info on the rules for tax-free meal vouchers in Austria here.
Tip: Apps like Lunchit, givve Lunch or MyEdenred Pay are now digital alternatives to paper meal vouchers.
Further rewarding benefits
- Gifts: Up to €186 in non-cash gifts per employee and year possible.
- Company accommodation: e.g. in a hotel or for commuting employees.
- Work equipment for private use: Notebook, PC, mobile phone, etc.
- Loans: up to 2,600 euros tax-free and exempt from social security contributions.
- Company car: for professional and private use.
- 20 percent time: to work on additional ideas that do not (have to) relate to actual tasks.
- ...
As you can see, there are plenty of tax-free extras that pay off for both sides.
Benefits of additional perks for you as an employer
- Financial advantages due to tax deductibility
- Long-term relationship building & employee retention
- Image cultivation and increasing employer attractiveness
- Higher salary satisfaction among employees
Measurable advantages over other employers
Particularly calculation-oriented employees who carefully weigh up performance and compensation want to see and receive measurable advantages over other employers. If the general conditions, such as salary and time management, are right, they have a solid basis for delivering full performance.
In addition, the calculative factor is easiest for you as an employer to manage.
For example, through flexible working hours, modern workplace design, or benefits for exceptional performance.
All information regarding tax advantages and subsidies is non-binding and does not replace individual consultation with tax advisors or specialized agencies.
