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Voluntary Benefits: “What is, ultimately, in force?”

The offer of benefits to an employee, in addition to the agreed salary

(whether this is the statutory or higher than that), is a practice of several employers, which in the last years of the deep economic crisis tends to become an established practice.

These benefits are classified as “voluntary” and may be a certain amount of money, a benefit in-kind (e.g. vouchers for supermarket purchases, food, meals during work) or even an expenditure on behalf of the employee (e.g. conclusion of a group insurance contract and payment of the premiums).

As a result of this practice, the employee receives the salary agreed with the employer and in addition, actually, earns more “income” during the employment relationship, which is valued at the amount of the benefit offered. The fact that these benefits are paid in the course and because of the employment relationship, often gives rise to a confusion as to their nature and, in particular, to whether they can be characterized “salary” for the employee.

The answer to this question is not simple and has repeatedly addressed the Greek courts at the highest level. However, it should be noted that this question has, even beyond the legal, also a business- and of course economical dimension, as for many entrepreneurs the adoption or not of such a choice, is a central question.

An initial response to these questions is attempted here.

Is it an Employer’s Right Or Obligation?

In principal, the offer of these (voluntary) benefits takes place in the context of the exercise of the employer’s freedom to give to the employee “something extra” to the salary that has been contractually agreed upon. Thus, the employer (should) be able to discontinue the offer of each voluntary benefit at any time and without providing any reason while the employee cannot be able to raise a claim for the continuance of such offer.

However, it is possible that the offer of a voluntary benefit become a business practice (custom) due to its continuous and long-term granting and to its acceptance by the employee, which results in a tacit agreement between the employer and the employee that the benefit is part of the latter’s salary. In this case, the employer is obliged to offer the benefit and can no longer stop granting it unilaterally.

However, if the employer, at the beginning of the offer of a benefit, makes it clear to the employee (e.g. in the employment contract) that he reserves his right to discontinue its grant at any time, without justification and without the agreement of the worker, thereby formulating the so-called “reservation of liberty”, it cannot – in any event – be considered that the benefit has a salary nature and therefore the employee will not be entitled to claim its payment.

Employer’s “Reservation of Liberty” And “Withdrawal Clause”:
The Distinction of the Legal (And also Economical) Consequences of Each

The Arios Pagos (Supreme Court of Cassation) for the first time its decision with the no. 1174/2017 separated the concept of the “reservation of liberty” from that of the “withdrawal clause” which the employer may enter at the beginning of the granting of a voluntary benefit.

In the case of the “withdrawal clause”, the employer may discontinue the benefit by exercising the right to withdraw by a unilateral declaration addressed to the employee. As a result, both the “reservation of liberty” and the “withdrawal clause” allow the employer to unilaterally discontinue the offer of the benefit.

There is, however, a substantial difference between them: Entering a “reservation of liberty” rules out the creation of a business practice (custom) and thus implicit contractual commitment of the employer to provide a benefit and the employee’s corresponding claim for its payment. On the other hand, entering a “withdrawal clause” does not function in the same way: the employee’s entitlement to the benefit is born thus the exercise of the right of withdrawal results in the loss of that claim for the future.

As soon as the worker becomes entitled to the benefit, this amount should be taken into account for the purposes of determining both the severance allowance and also any other benefit of the employee provided by law and for the determination of which the amount of the salary paid is taken into consideration (indicatively: ad hoc bonusses). As the choice of one or other clause has direct financial consequences for the burden on the business, the particular value of this distinction is easily understood.

The Real Dimensions of Voluntary Benefits in Labor Relations

More and more companies, burdened by the unreasonably diverse charges on business nowadays, seem to face voluntary benefits as a means of limiting their contractual obligations towards their employees and hence saving (or potentially saving) costs. The procedure followed is more or less common for both the current employees of the company and for those in recruitment: both are required to accept as a fixed remuneration a certain amount, which is however split down to the statutory minimum wage (which will be mentioned in the employment contract) and to the remaining amount that (explicitly or implicitly) will be offered to the employees as one of the above-mentioned types of voluntary benefit.

On the one hand, the current employees agree to sign an amendment to their contract of employment, in which the reduction of their salary to the statutory minimum is recorded, while the ones in recruitment agree to sign a contract of employment accepting the statutory minimum salary as a conventional salary. Both categories of employees aim at more permanent compliance with the additional voluntary benefit, which will complement the amount of the agreed salary.

Voluntary Benefits: Its Tax Treatment

As far as taxation is concerned, the legislator does not deal with the voluntary benefits in a consistent way. In principle, the general taxing rule applies for their taxation, if their value exceeds € 300,00 per year. However, the sub-cases of how to determine their value, but also the explicit exceptions to the rule, are several (and related to the amount of benefits per category envisaged), so that the employee must search in which sub-case the benefit he receives is categorized in order to know if he will be taxed for this benefit. A typical example of this is the coupons for food (i.e. the widely used coupons for the supermarket), which are not taxed if they do not exceed € 6,00 per day, or € 120,00 per month.

For the tax legislator, therefore, the legal characterization of the benefit is irrelevant, but the amount of the benefit is particularly important.

Evdokia Kornilaki
Senior Associate