What is a flexible payroll?
A flexible payroll is a compensation model that allows employees earmarking part of their gross salary for certain tax-advantaged items, without increasing costs for the company.
This system of Flexible remuneration is based on taking advantage of benefits provided for by the regulations which are exempt in whole or in part from personal income tax, allowing the worker to increase their purchasing power and the company to offer a more attractive value proposition.
How does flexible remuneration work on a payslip? (real example)
Let's look at a practical example to understand the economic impact of implementing flexible remuneration:
Initial conditions:
- Gross annual salary: 24,000 euros
- Younger children under 25: 2 (one under 3 years old)
- Monthly expenses (for 11 months of the year):
- Restaurant: €160/month
- Daycare: €200/month
- Mobility: €130/month
The income tax withholding rates applied in this example (9.971% per quarter without a tax return and 6.081% per quarter with a tax return) have been calculated based on the employee’s family circumstances – two children, one under the age of three – in accordance with the official income tax withholding table in force in 2026.
Example payslip without flexible benefits:
- IRPF of 9.97%→ €2,393.30
- Net annual salary: €21,606.70
- Expenses: €1,760 (restaurants) + €2,200 (nursery) + €1,430 (transport)
Available funds: €16,216.70
Example payslip with flexible benefits:
- Restaurant Ticket: 1.760 €.
Edenred Guardería: 2.200 €
Edenred Mobility: €1,430 - Remaining gross import: €18,610
- Income tax from 6.08%% → €1,131.37
Available funds: €17,478.63
Annual savings: 1,261.93 €
I.e. an extra monthly allowance or a paid holiday.
If you want to better understand how income tax (IRPF) is calculated on your payslip and the factors that determine it (tax brackets, family situation, autonomous community), consult our article on Flexible remuneration affects income tax (IRPF) on payslips in Spain in a number of ways.
**What is Flexible Remuneration?**
Flexible remuneration, also known as "salario flexible" or "salario a la carta", is a system where employees can choose how they receive a portion of their salary. Instead of receiving their entire salary in cash, they can opt for benefits or services that may have tax advantages.
**How it Affects IRPF:**
The core principle is that **certain benefits provided under a flexible remuneration scheme can be exempt from IRPF**, up to legally established limits. This means that instead of paying tax on the full cash value of that portion of their salary, the employee pays tax on a reduced cash amount.
Here's a breakdown of how it generally works:
* **Exempt Benefits:** Spanish tax law (Ley del IRPF) outlines specific benefits that can be considered exempt from IRPF when provided through a flexible remuneration plan. Common examples include:
* **Restaurant Vouchers/Meal Vouchers:** There are limits on the daily value of these vouchers that are tax-free.
* **Transportation Vouchers:** Similar to meal vouchers, there are limits on the tax-exempt value.
* **Health Insurance:** Premiums paid by the employer for the employee's health insurance can be tax-exempt up to a certain annual amount.
* **Childcare Vouchers/Services:** Costs for childcare for children under three years old can be tax-exempt.
* **Training/Education:** Certain training expenses related to the employee's job might be exempt.
* **Taxable Portion:** Any part of the remuneration that is not taken as an exempt benefit will be paid in cash and will be subject to the normal IRPF deductions based on the employee's tax bracket.
* **Social Security Contributions:** It's important to note that the treatment of flexible remuneration for social security contributions can differ from its tax treatment. While some benefits might be exempt from IRPF, they might still be subject to social security contributions. Each type of benefit has its own specific rules.
* **Employer's Perspective:** For the employer, offering flexible remuneration can be a way to attract and retain talent by providing tax-efficient benefits. It also allows them to tailor their compensation packages to individual employee needs.
**Example:**
Let's say an employee has a gross salary of €30,000. They decide to opt for a flexible remuneration plan where they allocate €2,000 of their salary to a private health insurance premium.
* **Without flexible remuneration:** The employee would pay IRPF on the full €30,000.
* **With flexible remuneration:**
* The €2,000 allocated to health insurance (assuming it falls within the tax-exempt limits) would not be subject to IRPF.
* The employee would only pay IRPF on the remaining €28,000.
* The cash salary received by the employee would be €28,000 + any other cash components of their salary.
**Key Considerations:**
* **Limits and Regulations:** The tax benefits are subject to strict limits and regulations set by the Spanish tax authorities. Exceeding these limits will result in the excess being taxed.
* **Individual Choice:** Employees must actively choose to participate in a flexible remuneration plan and select their preferred benefits.
* **Contractual Agreement:** The terms and conditions of the flexible remuneration plan should be clearly outlined in the employment contract or a separate agreement.
* **Professional Advice:** It is always advisable for both employers and employees to seek advice from a tax professional or payroll specialist to understand the specific implications of flexible remuneration in their individual circumstances.
In summary, flexible remuneration can reduce an employee's taxable income by allowing them to receive certain benefits tax-free up to specified limits, thereby lowering their IRPF liability on their payslip..
How is flexible remuneration reflected on a payslip?
Flexible remuneration is shown on the payroll as specific concepts exempt from income tax, which indicate what portion of gross salary is allocated to tax-advantaged benefits.
As these amounts are excluded from the tax base, these amounts reduce taxes payable and increase net disposable income of the employee, at no additional cost to the company.
Calculate your savings with flexible remuneration
You can easily estimate your own savings with the Edenred flexible benefits calculator.
Enter your details and discover how much you could increase your purchasing power without changing your gross salary.
And what about flexible remuneration in the Income Tax return?
The amounts designated via flexible remuneration are already considered on the payslip as exempt or partially exempt from personal income tax (IRPF), so when it is time to file the tax return it is not necessary to adjust them manuallyare already excluded from the taxable base of employment income.
For more details on how they are reflected and what limits apply, please see this article: «Flexible remuneration in income tax returns«.
What are the advantages of flexible remuneration?
- Cost savings for the company: La Payroll with flexible remuneration reduce costs compared to other employee benefits. Furthermore, Edenred's digital solutions simplify management, saving time and administrative resources.
- Increased purchasing power for the employee: The employee pays less tax and enjoy value-added services – meals, childcare or transport – without your gross salary changing. This translates to more money available at the end of the month.
- Talent satisfaction and retention Flexible benefits, by improving quality of life and offering flexibility. increase motivation and the fidelity team, reinforcing the employer brand.
How to implement a flexible payroll with Edenred?
At Edenred we offer you personalised advice on the options that best suit you and your employees' needs. With our experience and technology platform, we can help you implement a flexible payroll that benefits both parties.
If you need more information to define your company's compensation strategy, We can collaborate with you to design a bespoke benefits package. that promotes job satisfaction and talent retention in your organisation.
Discover our comprehensive guide to Flexible Remuneration!
