25th March 2026

Difference between Social Benefits and Flexible Compensation

The social benefits son beneficios en especie que the company pays above the agreed salary, while the flexible compensation is a modality in which the employee allocates voluntarily part of their gross salary (up to 30%) to the payment of products exempt from income tax, formalising this decision through a salary novation.

Both rely on Article 42 of Personal Income Tax Law 35/2006 and can offer exactly the same products. What changes is who bears the cost, which legal limits apply and the degree of personalisation each one allows.

In this comparison we see the differences in detail, the limits and disadvantages of each formula, and when it is best to use one, the other or a combination of them in a mixed model.

What is each formula?

The essential difference lies in the origin of the money. With employee benefits, the company provides it; with flexible remuneration, the employee themselves, by redirecting a portion of their gross salary. Everything else – taxation, formalisation, personalisation – stems from that.

Social benefits

Benefits in kind provided by the company above the agreed salary, at no cost to the employee. They are not subject to the 30% limit, and each product has its own exemption limit. They are usually applied collectively, to the entire workforce or to specific groups.

What types exist, examples and how to design a plan, in our guide on social benefits for employees.

Flexible remuneration

Arrangement regulated by article 42 of Law 35/2006 which allows the employee to voluntarily allocate up to% of your gross annual salary to products wholly or partially exempt from personal income tax. By reducing the tax base, it increases your net salary without the company increasing its wage costs. It requires a salary novation.

Operation, legal limits and calculation of savings, in Flexible Remuneration: a comprehensive guide.

Social benefits vs flexible remuneration: key differences

Although both concepts aim to improve employee welfare and increase purchasing power, there are fundamental differences between them:

Dimension	Flexible remuneration	Social Benefits
Who is financing	The employee, redirecting part of their gross salary	The company, as additional remuneration to salary
Decision	Employee volunteer	From the company (standard for all staff or by group)
Formalisation	Requires a signed salary novation by the employee	No novation required; included in remuneration policy
Customisation	Each employee chooses products and amounts according to their needs	Generally standard for all employees or by groups
IRPF Tax treatment (employee)	Products exempt in whole or in part according to the limits of Article 42 of Law 35/2006	Products exempt totally or partially according to the same limits
National Insurance contribution	Some products are exempt, others are not (it depends on the product).	Some products are exempt, others are not (it depends on the product).
Legal limit	30% of the employee’s gross annual salary	No 30% limit; each product has its own exemption limit
Tax treatment (company)	Deductible for Corporation Tax as staff costs	Deductible for Corporation Tax as staff costs
Impact on wage costs	No additional cost to the company	The company covers the cost of profit.

What limits and disadvantages does each formula have?

Neither of them works in all cases. Flexible remuneration loses effectiveness on low salaries and adds administrative burden; social benefits entail a real cost for the company and offer less personalisation, with the risk of implementing benefits that the workforce does not use.

Limits of flexible remuneration

The 30% cap on gross annual salary. Any amount in excess of this is taxed as ordinary employment income.
You cannot reduce the cash salary below the minimum wage, which leaves it out of reach for the lowest salary brackets.
Savings depend on the marginal rate. The lower the salary, the lower the tax saving, to the point that it may not be worth the trouble.
It requires individual salary novation and its management, in addition to an employee commitment period.
This may affect the contribution base for certain products, with an impact on future benefits.

Limits of social benefits

They represent a real additional cost for the company, unlike flexible remuneration.
Lower personalisation: being standard, there are employees to whom a specific benefit brings no value at all.
Risk of low uptake. An underutilised benefit is a cost with no perceived return.
Each product has its own exemption limit, and exceeding it creates a tax liability for the employee.

In practice, most companies don't choose: they combine both. Which benefits are valued most before deciding, in Employee benefits: which ones are most highly valued?.

What products can be offered with both formulas?

The same five products work in both models: restaurant voucher, transport, childcare, health insurance and training. The formula does not determine the catalogue, only who pays for it and under what conditions.

Ticket Restaurant – daily food
Transport Ticket – journeys by public transport
Nursery Ticket – early childhood education from 0 to 3 years
Health insurance – private healthcare
Training linked to the job role

Can they be combined? The mixed model

Yes, and it is the fastest growing formula in Spain. The mixed model It consists of offering a base of social benefits that is the same for the entire workforce – funded by the company – and, on top of that, a flexible remuneration catalogue that each employee customises using their salary.

The advantage is that covers both limitations at oncethe company controls the cost because it decides the size of the base, and the employee retains freedom of choice above it.

How it works and how it is implemented, in how does the mixed model work.

Which one suits your business?

It depends on three factors: the available budget, the workforce salary structure and management capacity from the HR department.

Flexible remuneration if the budget is tight and the workforce is on middle or high salaries: zero cost for the company and real savings for the employee.
Social benefits if there is budget and the objective is a collective value proposition message, or if a large part of the workforce has salaries where flexible remuneration is not worthwhile.
Mixed Model in the majority of cases with heterogeneous templates.

You can get to know our employee benefits solution and ours Flexible remuneration plan, o Contact us to assess which one fits best.

Conclusion

The difference between employee benefits and flexible remuneration boils down to who pays and what limits apply. The former are funded by the company, with no 30% limit and less scope for personalisation; the latter are funded by the employee, subject to the 30% limit and offering maximum choice.

Both are tax-deductible for the company and both rely on the same tax framework. And in most workforces, the answer is not to choose one, but to combine them.

Fernando Palacios

My professional career has been developed in areas such as training, consulting, and transformation within companies of different sizes and sectors, both within and outside of Spain. I am currently responsible for the Corporate Sales team at Edenred Spain, helping organisations to strengthen their value proposition through compensation and benefits strategies that generate value for both people and the business.

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