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Introduction
Employers who offer bonuses, paid time off, wellness initiatives, employee discounts, and tuition reimbursement to their staff are said to be providing discretionary benefits. Employers provide these incentives even though they are not necessitated by law in order to recruit and retain talent, raise morale, and increase output. Understanding what advantages and disadvantages discretionary benefits have is essential in ascertaining how they should be used.
Discussion
On the one hand, discretionary benefits can boost staff wellbeing by increasing job satisfaction and fostering a sense of stability. Increased productivity, engagement, and loyalty among staff members who feel valued by their employers are all factors that contribute to higher retention rates. Employee incentives can help a company stand out from the competition on the job market and boost worker satisfaction, output, and revenue.
On the other hand, the provision of discretionary benefits also comes with costs. They could be expensive, especially for startups and small firms with limited funding and large expenses that stem from discretionary costs (What are discretionary costs?, n. d.). It can be difficult and time-consuming for HR departments to administer and manage discretionary benefits. Also, there is a chance that employees wont make the most of the advantages, resulting in wasted money. As a result, discretionary benefits may become a workplace characteristic that is expected but is not really desired by employers or employees.
Discretionary treaty benefits are one particular category that can explain the ambivalent nature of this phenomenon. In essence, they are treaty provisions that permit a taxpayer to obtain a tax benefit that is not specifically mentioned in the treaty but is still given at the partner countrys discretion. The primary purpose test (PPT), which determines whether a taxpayer is eligible for a treaty benefit, was introduced to stop taxpayers from utilizing treaty benefits for tax avoidance (Miller, 2019, p. 43). According to the PPT rule, a treaty benefit can only be awarded if the taxpayer can show that it is not the primary goal of the transaction or arrangement. However, Miller (2019) argues that this rule is not sensible and suggests that discretionary treaty benefits should be granted based on clear and objective criteria rather than subjective determinations of the taxpayers intent. The unclear nature of how discretionary benefits should be distributed is another disadvantage employers have to deal with.
My personal opinion is that the goals and resources of the company ultimately determine who should receive discretionary benefits. To increase morale and productivity, some employers may provide these advantages to all employees. Nevertheless, some employers might reserve these benefits for a select group of workers, such as those who have excelled in their positions or have worked for the company for a specific amount of time. I believe that all employees should be eligible for discretionary benefits, while their exact nature may differ depending on each employees performance or other considerations. With this strategy, employers may recognize and promote great performance while still making sure that all of their employees feel valued and appreciated.
Conclusion
In conclusion, offering discretionary benefits can boost staff morale, reduce attrition, and boost output, but they also have substantial disadvantages. Businesses should choose a benefits policy that is consistent with their overall objectives and core values. It is crucial to carefully manage discretionary rewards and establish transparent, unbiased criteria for allocating them. To ensure that all employees feel valued and appreciated, discretionary benefits should ultimately be offered to them, however the precise perks offered may vary depending on their performance or other variables.
References
What are discretionary costs? (n. d.). Simple Studies. Web.
Miller, M. J. (2018). Discretionary treaty benefits and the unbearable absurdity of the PPT. International Tax Journal, 16, 48-43.
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