Allowances vs. Perquisites: What's the Difference?
Edited by Aimie Carlson || By Janet White || Published on February 1, 2024
Allowances are fixed monetary benefits added to a salary; perquisites are non-monetary benefits or privileges provided by an employer.
Key Differences
Allowances are typically monetary additions to an employee's basic salary, like travel or housing allowances. They are quantifiable and regularly received. Perquisites, often termed as 'perks', are non-monetary benefits or privileges, such as company cars or club memberships, provided to employees.
Allowances are designed to cover specific expenses incurred by an employee, like a meal allowance for work-related travel. They are compensatory in nature. Perquisites, on the other hand, are often provided as incentives or rewards, enhancing job satisfaction and loyalty, such as free gym memberships.
Most allowances are taxable and form part of an employee's taxable income. Their value is clearly defined for tax purposes. Perquisites may have varying tax implications, sometimes taxable and sometimes not, depending on their nature and the country's tax laws.
Allowances are usually standard across a company or specific job roles, like a uniform allowance for staff members. Perquisites are often more discretionary and can vary greatly, often provided to higher-level employees or as part of a negotiation package.
Allowances directly increase an employee’s financial compensation, reflected in their salary package. Perquisites enhance the overall value of employment but do not always translate into direct monetary gain, often seen as lifestyle or convenience enhancements.
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Comparison Chart
Nature
Monetary benefits added to salary.
Non-monetary benefits or privileges.
Purpose
To cover specific expenses incurred by the employee.
To provide incentives or enhance job satisfaction.
Tax Status
Generally taxable and part of taxable income.
Tax implications vary; sometimes taxable, sometimes not.
Eligibility
Standard across certain job roles or company-wide.
Often discretionary and provided to specific employees.
Direct Financial Impact
Directly increase financial compensation.
Enhance overall employment value without direct monetary gain.
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Allowances and Perquisites Definitions
Allowances
Allowances are fixed monetary benefits added to a salary.
Her travel allowance covers the cost of commuting to different work sites.
Perquisites
Perquisites are non-monetary benefits provided by an employer.
A company car is one of the perquisites of his job.
Allowances
Allowances form a part of an employee's total salary.
Her health insurance allowance is included in her monthly salary.
Perquisites
Perquisites offer additional privileges or conveniences.
Having a personal assistant is a perquisite of his executive position.
Allowances
Allowances are regular additions to an employee's pay.
The monthly housing allowance is part of her compensation package.
Perquisites
Perquisites provide benefits that are not part of cash salary.
He enjoys the perquisite of flexible work hours.
Allowances
Allowances compensate for expenses or conditions of employment.
As a field worker, he gets a special location allowance.
Perquisites
Perquisites serve as incentives or rewards for employees.
Free gym membership is a perquisite at her workplace.
Allowances
Allowances are given to cover specific work-related expenses.
He receives a meal allowance during business trips.
Perquisites
Perquisites enhance the lifestyle or convenience of employees.
Access to the executive lounge is a perquisite of her role.
Allowances
The act of allowing.
Perquisites
A payment, profit, or benefit received in addition to a regular wage or salary, especially when due or expected.
Allowances
An amount that is allowed or granted
Consumed my weekly allowance of two eggs.
Perquisites
Something regarded or claimed as an exclusive right by virtue of one's social position or rank
"The family had the perquisites of the upper-middle class, employing a maid, a chauffeur-gardener, and an Irish Catholic nanny" (Ira Bruce Nadel).
Allowances
Something, such as money, given at regular intervals or for a specific purpose
A travel allowance that covers hotel bills.
Perquisites
A gratuity; a tip.
Allowances
A small amount of money regularly given to a child, often as payment for household chores.
Perquisites
Plural of perquisite
Allowances
A price reduction, especially one granted in exchange for used merchandise
The dealer gave us an allowance on our old car.
Allowances
To put on a fixed allowance
Cut expenses by strictly allowancing the sales representatives.
Allowances
To dispense in fixed quantities; ration.
Allowances
Plural of allowance
FAQs
What are allowances?
Allowances are fixed monetary benefits added to an employee's salary to cover specific expenses.
Do perquisites include cash benefits?
Typically, no. Perquisites are usually non-cash benefits.
What defines perquisites?
Perquisites are non-monetary benefits or privileges provided by an employer.
Are allowances part of the basic salary?
No, they are additions to the basic salary to cover specific costs.
How are allowances taxed?
Most allowances are taxable and form part of an employee's taxable income.
What are the tax implications for perquisites?
Tax implications for perquisites vary; some are taxable, others are not.
Can allowances vary from employee to employee?
They are usually standard but may vary based on job role or location.
Are perquisites offered to all employees?
They are often discretionary and more common for higher-level positions.
Is a company car an allowance or a perquisite?
It's a perquisite, providing a non-monetary benefit.
Are perquisites always a part of the job offer?
Not always; they are often provided based on the role or negotiation.
Can perquisites be converted into cash?
Generally, no, as they are non-monetary benefits.
Is a travel allowance taxable?
Yes, in most cases, it's part of taxable income.
Are allowances considered for pension calculations?
This depends on company policy and local laws.
Can an employee opt-out of certain perquisites?
Yes, depending on the nature of the perk and company policy.
Is a housing allowance an allowance or a perquisite?
It's an allowance designed to cover housing expenses.
Do allowances change with the cost of living?
They may be adjusted to reflect changes in the cost of living.
Do perquisites increase the basic salary?
No, they enhance the value of employment without increasing the basic salary.
Can allowances be negotiated?
Yes, they can sometimes be negotiated as part of a salary package.
Are allowances affected by an employee’s performance?
Typically, no. They are based on expenses or conditions of employment.
Do perquisites include healthcare benefits?
Yes, healthcare benefits can be considered perquisites.
About Author
Written by
Janet WhiteJanet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.
Edited by
Aimie CarlsonAimie Carlson, holding a master's degree in English literature, is a fervent English language enthusiast. She lends her writing talents to Difference Wiki, a prominent website that specializes in comparisons, offering readers insightful analyses that both captivate and inform.
