Providing Employees with Housing: Legal Aspects

Author: Viktoriia Staryk, lawyer at F&P

Providing employees with housing is one of the important social and domestic benefits that enterprises can implement. Within their authority and at their own expense, employers have the right to establish additional benefits compared to those provided by law. The list of such benefits is usually determined by the labor or collective agreement. One of the effective ways to support employees is to provide housing. This can be done in various ways, including: offering the possibility of free accommodation in property owned by the company, providing rental housing, or compensating the cost of independently rented housing. Such measures contribute to increasing employee motivation and productivity, as well as forming a positive image of the employer.

1. Free provision of housing to employees.

Paragraph 16 of Part 1 of Article 247 of the Labor Code of Ukraine stipulates that the elected body of the primary trade union organization at the enterprise, institution, organization, together with the employer, determines the amount of funds to be allocated for the construction, reconstruction, and maintenance of housing in accordance with the collective agreement, keeps records of citizens in need of improved housing conditions, distributes residential space in buildings constructed with the funds or with the participation of the enterprise, institution, organization, as well as residential space provided to the employer in other buildings, and exercises control over the housing and communal services provided to employees. In the absence of a trade union organization to determine which employees may be provided with housing, we recommend developing an appropriate regulation at the enterprise that will govern the requirements, procedures, and other mandatory conditions for providing employees with housing, which should be approved by an order from the enterprise’s manager. Significant attention should be paid to taxation issues. According to the Tax Code of Ukraine, the total monthly (annual) taxable income of a taxpayer includes income received by the taxpayer as a fringe benefit. One type of fringe benefit is the value of housing owned by the employer, provided to the taxpayer for free use, or compensation for the value of such use, except in cases where such provision is due to the performance of the taxpayer’s work function in accordance with an employment contract or is provided for by the norms of a collective agreement or in accordance with the law within the established limits. Thus, the employer, as a tax agent, when accruing (paying) income to employees in the form of additional benefits, in particular when providing free housing that belongs to the employer by ownership, is not required to accrue, withhold, and pay to the budget tax on the amount of the value of using the housing if the latter is provided by the employer for temporary use by the employee in connection with the performance of the employee’s work function in accordance with the employment contract, collective agreement norms, or law within the limits established by them.

2. Providing housing for rent.

According to the Civil Code of Ukraine, under a lease (rental) agreement for housing, one party—the owner of the housing (lessor)—transfers or undertakes to transfer the housing to the other party (lessee) for living in it for a certain period for a fee. The subject of the housing lease agreement can be premises, including an apartment or its part, a residential building or its part. The premises must be suitable for permanent residence. The amount of the fee for using the housing is determined in the housing lease agreement. Thus, in the case of providing housing to employees for a fee, the employer can conclude a rental agreement with them, under which the employees will make the corresponding payments on a monthly basis. In the event of a decision to provide employees with housing free of charge, the employer may enter into an agreement with the employees for the reimbursement of operational and other expenses, under which the employees will be required to pay only for the consumed utility and operational services. In both cases considered, the employer can decide to independently conclude contracts with utility service providers for the supply of water, electricity, heating, and other services. Or they can require employees to conclude such contracts directly. This can be either a collective agreement on behalf of the enterprise (for official housing) or individual contracts for employees if the housing is transferred to ownership.

3. Compensation for the cost of self-rented housing.

If an employee rents housing independently, they can submit a request to the employer for rental cost compensation. This option is possible if the collective or labor agreement provides for the possibility of rental cost compensation. As a result, the parties may agree on partial or full compensation for the cost of rented housing, however, the compensation received by the employee will be considered an additional benefit and will be subject to taxation.

Conclusions.

In the context of a full-scale invasion, more and more enterprises are realizing the importance of creating proper conditions to provide housing for their employees. Such an approach not only enhances the social responsibility of employers but also contributes to strengthening trust, loyalty, and productivity among staff. The specialists at FEDORYSHYN&PARTNERS will help you choose the optimal option for providing housing for your employees, taking into account the provisions of current legislation.