Flexible or tailored salary

The evolution of the concept of salary

Our salary is the compensation we receive from our employer. Traditionally it has suffered a tension between two opposing tendencies, the one we wish to have in order to feel satisfied in exchange for the work done, and the one that the company wants or can pay.

As a result of this tension, as well as social and economic changes, and always affected by the fluctuations of the crisis and the expansive economic cycles, the concept of salary has evolved and changed, especially once the 21st century has entered.

We have gone from the fixed payroll that only varied depending on seniority, the variable salary determined by commissions on sales only for commercials, the remuneration in kind (with great development at the end of the last century) and the current concept of flexible salary and / or as.

Even in recent years there is talk of emotional salary, although this concept encompasses aspects that have traditionally been related to the work environment, which are not exactly a form of retribution in itself.

What concepts does the flexible salary include?

The flexible salary extends the concepts that have previously formed compensation in kind, generally under a favorable tax legislation for both the company and the worker.

The first concepts of remuneration in kind included:

  1. Receipts or restaurant cards, or business canteens.
  2. Company car. Normally in the form of renting or leasing.
  3. Housing in charge of the company, whether owned by the company or rent.
  4. Company pension plans for workers.
  5. Life insurances.
  6. Shares of the company itself.

Subsequently, others such as the following have been added:

  1. Childcare or childcare checks in the workplace.
  2. Transport cards.
  3. Health insurance for the worker and his family, including dental insurance.
  4. Training aid not related to the company.
  5. Leisure solutions such as extra days off, vacation trips at an advantageous price, etc.

Actually, many of these concepts have always existed, only that they were reserved for managers or senior positions.

The difference with respect to years ago is that, apart from the extension of what constitutes remuneration in kind, has been achieved, since it is within the reach of all workers.

What is the custom salary?

The current great revolution is that, in addition to what has been commented on in the previous paragraph, progress is being made towards choosing which interests or not to include in our remuneration. This is the leap from the concept of salary in kind to flexible or tailored salary.

The needs and preferences of workers with family or young children are not the same as those of a single person who may not be interested in a childcare package at all, but appreciate the possibility of obtaining more vacations or trips at a low price.

The generalization of this remuneration model is partly due to the fact that insurance companies have launched into the business of offering SME consulting services for the remuneration of their employees, obviously with the objective of giving out their financial products.

Thus it is possible that small companies that do not have a large Human Resources structure can offer customized compensation packages to their employees.

Is compensation more advantageous?

The answer is yes for various reasons.

For the company, this type of remuneration usually implies a lower burden of social expenses, since some concepts either do not contribute or do so advantageously before Social Security.

In addition, it also means a lower treasury bankruptcy since they usually have different payment terms than payrolls and are cheaper than a payroll itself.

In certain cases there are also tax advantages in the taxation of the company for offering this type of compensation to workers, although this usually varies greatly depending on the tax policies in force at any time.

And is it more advantageous for the worker? First of all, we have to consider that if a company offers for example, food benefits say £9 per day, it does not usually mean that in case of not wanting them, the equivalent of £9 per day will go up in cash the payroll. That is, the alternative to a salary in kind is not the same salary amount in liquid terms.

On the other hand, the taxation of income tax of salary in kind is usually less than that of monetary salary.

Also, we must bear in mind that when we talk about insurance, travel, courses, etc., in general, the company will get better conditions than we would have individually if we hire the same services.

In short, although we always think that we deserve to earn more than what we are paid for our work, it’s not a failing that we have the possibility of complementing our salary with certain non-monetary benefits and services.