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Why should you as an employer offer a wellness allowance? What rules apply, and what counts as a wellness activity? Does your policy comply with the rules, or does it need to be adjusted? These are some of the questions regarding the wellness allowance that we answer in this article.
The benefits of offering a wellness allowance
As an employer, you are not required to offer wellness benefits to your employees; it is entirely voluntary. However, offering a wellness program provides several benefits for both you as an employer and your employees. Offering a wellness allowance or activity promotes health and shows that you are committed to helping your employees engage in health-promoting activities. Wellness can be an essential part of your long-term sustainability efforts. A wellness program can contribute to:
- A healthy life in the long term
- Increased attendance
- Prevention of work-related injuries
- Higher employee satisfaction
What are the rules for the wellness allowance?
According to the Swedish Tax Agency, the wellness allowance is considered a fringe benefit and is tax-free for employees. For the benefit to be considered tax-free, it must be of small value and offered on equal terms to all employees, regardless of employment type.
In October 2022, the Swedish Tax Agency issued a new statement allowing employers to offer all employees the same wellness allowance, regardless of working hours or employment type, but it may also be prorated.
Employers can prorate the wellness allowance based on working hours and employment level. For example, if full-time employees receive a wellness allowance of SEK 3,000, employers can give those working six months a SEK 1,500 wellness allowance. Similarly, part-time employees can receive a prorated allowance based on their working hours. This also applies to hourly and project employees. When calculating working hours, all hours worked should be included, even work done from home. Employees on sick leave or parental leave are still part of the staff and should be assessed based on their normal working hours for wellness allowance eligibility.
Handling wellness at the turn of the year 2024/2025
There are some new rules to consider when paying out wellness allowances at the turn of the year 2024/2025.
- Only expenses incurred during the employment period can be reimbursed tax-free. The receipt submitted by the employee must be dated in 2024.
- The employee can only claim the same receipt for exercise or wellness once, and it must be for the tax year in which it was paid. Exceptions can be made at the year-end when employers often close payrolls in early December. In such cases, payments made by employees in November and December of Year 1 can be reimbursed in Year 2. The allowance will then count towards the SEK 5,000 limit for Year 2 (exceeding this amount makes the entire sum taxable) or the employer’s own maximum amount.
- A wellness allowance paid by the employee in 2024 and reimbursed in January 2025 cannot be counted towards the tax-free allowance for 2024.
- A wellness allowance not used in one year cannot be carried over to the following year.
Wellness allowance amounts
As mentioned, the wellness activity must be of small value to be tax-free, which in practice means the wellness allowance must not exceed SEK 5,000. If the threshold is exceeded, the entire amount becomes taxable.
For activities without exercise, such as massages, the activity may cost a maximum of SEK 1,000 per session to be considered of small value and tax-free.
The tax exemption only applies to the cost of the activity itself. This means that purchases or rental of equipment for wellness activities are not considered tax-free benefits. However, if equipment rental is mandatory for the activity, such as renting shoes and balls for bowling, this is included in the tax-free benefit.
What counts as wellness?
The wellness allowance covers most common physical and wellness activities. The allowance can be used for simple activities that include exercise or for treatments that reduce stress or relieve soreness and stiffness. It can also be used for nutrition counseling and advice on quitting smoking.
Previously, the Swedish Tax Agency had a list of the most common wellness activities that were included. That extensive list has now been removed, as it was interpreted as meaning activities not on the list were not approved.
The employer’s approach is crucial
Just as it is voluntary for employers to offer a wellness allowance, it is also entirely voluntary for employees to use the offer. To bring about a healthier lifestyle, more effort from the employer is required than just offering a monetary allowance. The management’s attitude plays a significant role in how employees utilize the offer. Managers must be part of the wellness initiative by showing and communicating its importance.
To reach those who find it difficult to get started, extra support and encouragement may be needed through group activities or workplace ambassadors who can inspire others. The greatest benefit is to get employees who don’t engage in wellness to start exercising and building up their health. Focusing on those who are already active may yield less return on the wellness initiative but still contributes to the company’s long-term sustainability.
More ways to motivate
Wellness initiatives such as wellness allowances are one way to help employees develop and maintain their health. However, there are, of course, other opportunities to promote a healthier life. Activities such as lectures on exercise, weight management courses, smoking cessation programs, health checkups, and more can also inspire your employees.
Consulting about wellness benefits
Azets experts have extensive experience in payroll administration and advising companies. In wellness, we can assist both with the establishment of wellness compensation and with changes to existing offerings, policy writing, administration, and more. Don’t hesitate to contact us for more information on how we can help your company.
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