Catered meals? An on-premise gym? Or how about an employer-provided phone? The IRS may call them fringe benefits but we know them as perks. In Silicon Valley, the race for talent is fierce which is one reason why you see such amazing office cribs on TechCrunch. These little perks are what separates companies from each other, and demonstrates an appreciation for their employees.

But fringe benefits aren’t just a fun perk for recruiting and retention. They may also have important tax-free implications and may lead to increases in productivity. Free meals, in particular, has a surprisingly high ROI.

Providing meals are a great value to your employee without increasing taxable income. According to the IRS, you can exclude the value of meals to an employee’s income if 1) they are furnished on your business premises and 2) they are furnished for your convenience. In certain circumstances, you can also provide occasional meals and snacks to your employees as they fall under the De Minimis Meals clause. But there is actually a non-tax return on investment to a free meal.

Productivity software provider Highfive posted a great post earlier this year about the value of a free lunch.

free lunch graphic

In their example, an employer saves on average $3.50 per employee by providing a free catered lunch. The ROI even applies to your office espresso machine, according to this example from Okta founder Frederic Kerrest.

Beyond cost savings, free meals have the additional collaboration benefit of sharing a meal with your colleague. According to Kevin Kuske, a workplace anthropologist and the general manager of Turnstone, developers can take 32 percent longer to complete code without proper communication.

If you can’t afford to cater meals, try offering free pizza on Friday for lunch to start. A team of five people can split two large pizzas for about $25. If we assume a savings of 30 minutes for lunch and $10/hour per employee, you can break even and gain the extra benefit of bringing your team together.

Read more on how benefits can help attract, retain, and delight your employees.

David Cheng
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