De Minimis Benefits

Given the relatively poor state of the country’s roads, news about corruption in politics, and the fact that every time you attempt to avail of government benefits you have to queue up for hours only to be told that your request cannot be processed, most employees are watching their pay slips and tax deductions with a keen eye, eager to see that their taxes are going to good causes so that the nation can continue to progress in the manner that we see today. Whenever new talk of “benefits” arises, such employees cannot help but look at the news with a degree of skepticism; what kind of benefit for the government could be backing up this new “benefit” for employees?

As it turns out, there is a benefit for employees that is clear-cut in its function to provide more assistance without increasing their tax deductions. We’re talking, of course, about de minimis benefits, described by Revenue Regulations (RR) No. 1-2015 as “Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive schemes provided that the total annual monetary value received from both CBA and productivity incentive schemes combined do not exceed ten thousand pesos (P10,000) per employee per taxable year.”

De minimis benefits are not subject to income tax, which means that employees can take full advantage of them without worrying if they are going to come out of their own pockets. De minimis benefits include: monetized unused vacation leave credits for private employees; monetized value of vacation and sick leave credits for government employees; medical allowances; a rice subsidy; uniform and clothing allowance; actual medical assistance; a laundry allowance; achievement awards; gifts; daily meal allowances; and benefits under CBAs, among others. In total, employees can claim up to P104,225 in de minimis benefits annually.

There is a catch, however; it is the employer’s prerogative to offer de minimis benefits or not, as these benefits are not mandated by law. Many employers do not offer them, while some only offer these benefits to tenured employees. Meanwhile, other employers only offer a rice subsidy, but do not offer monetized, unused vacation leave credits, which could add up to a lot of money in cases where the employee is earning above the minimum wage.

Despite this, there are still ways for employees to take advantage of de minimis benefits. For instance, having a clothing allowance and laundry allowance helps employees appear presentable when talking to their colleagues and potential clients, without having to shell out a huge amount to invest in a whole new wardrobe. If your employer is not offering de minimis benefits, talk to your HR department to determine how you can take advantage of this pro-employee benefit.

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