Fringe benefits: every euro spent on welfare has an impact on the economy four times greater than a cut in personal income tax

Corporate welfare has an effect on GDP four times greater than that of an equivalent personal income tax cut, thanks to the measure’s multiplier effect and its direct impact on demand. A 1 per cent tax cut normally generates an increase in GDP of just 0.11 per cent, translating mainly into private savings, fringe benefits, on the other hand, require the sum to be spent effectively within a short timeframe, with a direct effect on GDP and, consequently, on tax revenue for public administrations. These are the conclusions reached by the research carried out by Professors Carlo Cottarelli and Giampaolo Galli of the Italian Public Accounts Observatory, presented at an event on fringe benefits and corporate welfare organised by Satispay in Rome.

Assuming additional expenditure on workplace welfare of 1 billion euros, and using the expenditure multipliers derived from the Bank of Italia’s econometric model, GDP would grow by 800 million in the first year and by 1.25 billion in the third, with a recovery in tax revenue of approximately 280 million in the first year and 480 million in the third. The actual net cost of the scheme would amount to around 648 million euros per year in the initial period, in line with the amount already allocated for the three-year period 2025–2027. “Our analysis shows that the temporary nature of the tax benefits is one of the factors holding back businesses’ structural investment in workplace welfare schemes. Making the current scheme permanent could encourage a more widespread adoption of the measure, with costs to the state remaining contained and in line with estimates in the early years. Compared with other support measures, the stabilisation of corporate welfare also offers a clear macroeconomic advantage: by directly incentivising household spending, it supports domestic demand and generates a positive impact on GDP up to four times greater than that of generalised tax cuts,” warn Cottarelli and Galli.

As regards businesses and workers, the study by the Politecnico di Milano paints a picture of corporate welfare schemes that are already widely adopted. The research highlights that 77 per cent of companies with more than 10 employees already provide at least one form of benefit, but are structurally exposed to regulatory uncertainty. Twenty-two per cent of employers cite this uncertainty as the main obstacle to introducing or expanding fringe benefits.

The consequences of failing to extend the scheme would be immediate: 20 per cent of the companies surveyed state openly that they would cut their welfare budget, 16 per cent would reduce the amount down to the new exemption threshold, whilst 40 per cent are unsure how they would react. It is the workers who would bear the brunt of this: 53 per cent use fringe benefits to purchase essential goods, and 93 per cent of the funds allocated to vouchers are actually spent, compared with 64–67 per cent for more restricted forms of flexible benefits. Without fringe benefits, 47 per cent of purchases for personal care and 26 per cent of those for culture, entertainment and home furnishings would simply not be made. “Fringe benefits are currently the welfare tool with the highest utilisation rate and the most direct impact on workers’ real purchasing power. Our data clearly show that regulatory uncertainty is not a theoretical problem: it translates into concrete decisions by companies, which refrain from investing in welfare when they cannot plan over multi-year horizons. Stabilising the thresholds means unlocking a potential that remains largely untapped,” comments Martina Mauri, Director of the HR Innovation Observatory at the Politecnico di Milano.

“Corporate welfare has taken on a fundamental role in the lives of Italian businesses and workers,” commented Alberto Dalmasso, CEO and co-founder of Satispay, “ for Satispay, supporting its development is not only a business opportunity but also a responsibility: in three years, the number of employees using our welfare scheme has risen to over 430,000, because companies have realised that welfare is not merely an ancillary service, but a fundamental tool for people’s wellbeing. Yet uncertainty over tax-exemption thresholds still limits its potential. The figures speak for themselves: making this measure permanent is a sustainable choice for the State, beneficial for companies and, above all, a major source of support for workers, even more so in a context where inflation is holding back wage growth and eroding purchasing power.”