What is Flexible Remuneration and how does it work?
La Flexible Compensation is a remuneration system that allows employees to allocate up to% of your gross annual salary to the payment of certain products or services – Ticket Restaurant, Edenred Mobility, Edenred Nursery, training, health insurance – with full or partial exemption from income tax, regulated by Article 42 of Law 35/2006.
When paying these expenses from gross salary instead of net, The employee reduces their taxable base and pays less tax each monthThe outcome: a higher disposable income which can mean a saving of up to 15% on the amounts allocated, without the company incurring additional wage costs.
As a company, you decide which products you include in the plan and Each team member voluntarily adheres according to your needs. All of this is managed through Edenred Flex, our all-in-one flexible remuneration platform. A real benefit, with no extra bureaucracy.
Advantages of Flexible Compensation for companies
Que produits peuvent être inclus dans la Rétribution Flexible d'Edenred ?
Ticket Restaurant
Edenred Mobility
Edenred Nursery
Learning & Development
Health insurance with Flex
IRPF exemption limits for flexible remuneration products
What is the difference between Flexible Remuneration and Social Benefit?
La difference The key is in Who covers the cost:
Social Benefit: The company covers the total cost of the service (meals, transport, childcare...) as additional remuneration to salary. It is a direct benefit to the employee that does not affect their payslip.
Flexible Remuneration the employee decides to allocate part of their gross salary to these same services to benefit from the income tax exemption. The company doesn't pay any more, but the employee receives more net income.
Hybrid Model: The company subsidises part of the profit, and the employee covers the rest with their gross salary in RF. It is the most common formula for products such as health insurance or meal vouchers.
Example: a company decides to offer health insurance of €600 per year per employee. If it offers it as Social Benefit, the company covers the full cost – the employee pays nothing and sees no deduction on their payslip. If offered via Flexible Compensation, the employee deducts these €600 from their gross salary and saves the corresponding income tax (up to €500 are exempt). With Hybrid Model, the company covers, for example, €300 and the employee adds the other €300 via RF, benefiting from tax exemption on their portion.
How to start a Flexible Benefits plan with Edenred?
From the moment you contact us until your team starts saving, the process is simple and guided every step of the way:
- We design your plan with you: We analyse your team's profile and recommend the products that bring the most value to your team.
- We're setting up Edenred Flex: Your account is active for the HR team to manage everything from one place, web and app.
- Employees join voluntarily: Each person decides which products to include and how much to allocate, with complete flexibility and no pressure.
- Monthly automatic management: The platform calculates payroll deductions, monitors tax thresholds, and generates the reports you need with a single click.
If you want to know the methodology behind each phase, here we explain How to set up a flexible benefit scheme In depth.
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Frequently Asked Questions on Flexible Compensation
How does flexible compensation work?
Flexible Remuneration functions as a tax optimisation mechanism within an employee's payroll. The mechanics are supported by a tax principle established by Article 42 of Law 35/2006 of the Personal Income Tax (IRPF): certain products and services, when paid for by the company as remuneration in kind, are wholly or partially exempt from IRPF taxation.
The operation can be summarised in three steps:
- The employee allocates a part of their gross salary to products in the plan. Up to 30% of the gross annual salary may be allocated to products such as Ticket Restaurant, Edenred Mobility, Edenred Nursery, Training or Health insurance, within the exemption limits of each product.
- These amounts are deducted from the gross salary before calculating income tax retention. As the tax base is reduced, the monthly withholding also decreases. The employee pays less tax on the same gross income.
- The employee receives the goods instead of money, but has paid less income tax on them. The net result is a higher disposable salary at the end of the month, without the company having increased payroll costs.
For the company, the process is operationally straightforward if managed through a specialised platform. Edenred Flex centralises plan configuration, employee enrolment, tax limit control, payroll software integration, and legal documentation (salary novation) in a single interface.
For the employee, the operation translates into an increase in net salary without any change to the gross salary agreed in the contract, without affecting their Social Security contribution base, and with the flexibility to choose which products to use according to their personal needs.
Does Edenred help us in the implementation of the Flexible Compensation plan?
Yes. From the initial contact until your team starts using the plan, the Edenred team supports you every step of the way: Edenred Flex platform setup, internal employee communications, training for the HR team, and ongoing operational support. You don't need prior experience in Flexible Benefits to implement the plan.
Which Flexible Remuneration platform to use for managing the various products?
La Edenred Flex platform It centralises the complete management of the Flexible Benefits plan: product configuration, employee enrolment, consumption monitoring, fiscal limit controls and payroll report generation. Both the HR team and each employee have access to their own view, available on the web and the My Edenred app. The system is designed to minimise administrative burden and automate monthly payroll processes.
How much money can be allocated to Flexible Compensation?
The general limit, established by Article 42 of Law 35/2006 of the Personal Income Tax (IRPF), is 30% of gross annual salary of the employee. Above that percentage, the amounts are taxed as ordinary employment income. Furthermore, each product has its own exemption limits (see product table). It is important to distinguish: the 30% is the limit of what can be allocated, not the savings percentage. The actual savings depend on each employee's personal income tax bracket and the products they use.
How does Flexible Remuneration work on a payslip?
Flexible Remuneration is reflected directly on the employee's monthly payslip in the following order:
- Calculation of gross salary. The payroll is based on the gross salary agreed in the contract, without alteration. This is also the amount on which the Social Security contribution base is calculated.
- Flexible Benefits Deduction. The amounts allocated to RF products (Ticket Restaurant, Nursery Vouchers, Edenred Mobility, Edenred Training, Health Insurance with Flex) are deducted from gross salary as a benefit in kind, before calculating income tax retention.
- Calculation of the taxable base for income tax. The base to which IRPF withholding is applied is reduced by the total amount allocated to RF-exempt products. As a consequence, the employee's monthly withholding decreases.
- Net salary calculation. The employee receives their gross salary in their account, minus National Insurance contributions, minus reduced Personal Income Tax withholding, minus amounts allocated to RF products (which they already receive in the form of a service, card, or voucher).
Key operational point: The contribution base for Social Security is not affected by joining the plan. The employee continues to contribute based on their full gross salary, so their future rights (unemployment benefits, contributory pension, disability benefits) are not reduced by participating in the plan.
To implement it, the payroll department must configure the corresponding remuneration concepts in their management software: one concept for each product included in the plan, with its specific tax treatment. Edenred provides the monthly files with the amounts consumed by each employee, ready to be integrated into the main payroll software on the market.
Discover an example of a payroll with flexible compensation!
Can the social security contribution base be affected?
Is Flexible Remuneration voluntary for employees?
Yes, opting in to a Flexible Benefits plan is always entirely voluntary for the employee. The company makes the products available to the team, but each individual decides whether they wish to participate, which products to use, and what amount to allocate within the established limits. For the plan to be effective, the employee signs a salary novation document that formally modifies their remuneration package and allows the amounts allocated to Flexible Benefits to be exempt from income tax.
What are the tax limits for each product?
Each Flexible Remuneration product has its own limits for income tax exemption Ticket Restaurant up to €11 per working day; Ticket Transport up to €136.36/month (€1,500/year); Ticket Nursery unlimited amount, £100% exempt; Training unlimited, exempt if the training is related to the position; Insurance Cheers up to €500 per beneficiary per year (€1,500 in case of disability, extendable to spouse and children). The total amount across all products cannot exceed 30% of gross annual salary.
What is salary novation?
Salary novation is the legal document by which the company and employee agree to modify the composition of salary: one part will continue to be received in cash and another part will be received in the form of Flexible Benefit products or services. This agreement is essential for amounts allocated to Flexible Benefits to be exempt from income tax. Without novation, the amounts are taxed as ordinary salary, and the employee loses the tax advantages. With Edenred Flex, the documentary management of novation is integrated into the platform.
What is the difference between Flexible Benefits and Benefits in Kind?
Benefits in Kind is the broad fiscal concept, and Flexible Benefits is a specific type within that framework. They are not synonymous, although they are often used as such.
Benefits in Kind It is defined by Article 42.1 of Law 35/2006 on Personal Income Tax as «The use, consumption or obtaining, for private purposes, of goods, rights or services free of charge or at a price below the normal market price, even if they do not entail an actual expenditure for the grantor.». In other words, everything that the company provides to the employee in the form of goods or services instead of money. Some benefits in kind are exempt from personal income tax (in whole or in part), and others are taxed as employment income.
Flexible Compensation It is a specific form of remuneration in kind in which it is the employee an individual who voluntarily chooses to allocate part of their gross salary to benefits in kind, with the aim of taking advantage of the applicable tax exemptions. This is formalised through a salary novation agreement between the employer and the employee, and is subject to a limit of 30% of the annual gross salary.
Difference with Social Benefits Social benefits are also considered payment in kind, but unlike Flexible Remuneration, they are funded entirely by the company as additional remuneration to the agreed salary. The employee does not commit part of their gross salary: they receive the benefit as a supplement.
Comparative summary
- Benefits in kind A broad concept covering any non-monetary delivery.
- Social Benefit: Company-funded benefit in kind, in addition to salary.
- Flexible Remuneration Benefit in kind funded by the employee from their gross salary, with tax advantage.
- Hybrid Model: combination of the two previous ones, where one part is assumed by the company and the other by the employee.
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