Allowances vs. Perquisites: Know the Difference
By Shumaila Saeed || Published on January 18, 2024
Allowances are fixed monetary compensations over basic salary for specific purposes, while perquisites are extra benefits or privileges provided by an employer.
Key Differences
Allowances are typically predefined monetary amounts given to employees over and above their basic salary. They are intended to cover specific expenses like travel, housing, or medical costs. Perquisites, often referred to as "perks," are non-monetary benefits provided to employees. These can include company cars, club memberships, stock options, or free meals.
Shumaila Saeed
Jan 18, 2024
Allowances are often standardized across a company and are usually part of an employee's compensation package. They are generally subject to tax, depending on their type and the regulations of the jurisdiction. Perquisites, on the other hand, are often customized to the position or the individual, and can be seen as a form of reward or incentive. The taxation of perquisites varies, with some being taxable as fringe benefits.
Shumaila Saeed
Jan 18, 2024
The purpose of allowances is to help employees cover specific costs related to their job or living circumstances. For instance, a travel allowance compensates for expenses incurred while traveling for work. Perquisites serve to enhance an employee's job satisfaction and loyalty. They can be seen as a way to improve work-life balance, attract top talent, or acknowledge an employee's value to the company.
Shumaila Saeed
Jan 18, 2024
Allowances are usually included in an employee’s salary package and are often expected as part of the compensation for a job. Perquisites, however, are seen as additional bonuses or privileges and are not typically expected as part of standard compensation. They often come with higher-level or specialized positions.
Shumaila Saeed
Jan 18, 2024
In summary, allowances are more about financial compensation for specific purposes, are more standardized, and are generally taxed. Perquisites, conversely, are non-monetary extras designed to make a position more attractive or rewarding, and their taxability can vary.
Shumaila Saeed
Jan 18, 2024
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Comparison Chart
Expectation in Job
Commonly included in compensation
Considered bonuses or privileges
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Jan 18, 2024
Typical Recipients
Standard for most employees
Often for higher-level or specialized positions
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Jan 18, 2024
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Allowances and Perquisites Definitions
Allowances
Allowances are financial benefits provided to meet particular expenses.
A health allowance is provided to cover medical insurance costs.
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Jan 08, 2024
Perquisites
Perquisites are benefits provided by an employer in addition to regular salary.
He enjoyed the perquisite of a company car.
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Jan 08, 2024
Allowances
Allowances are fixed amounts of money given to employees in addition to their salary.
His job provided a generous housing allowance to cover rent expenses.
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Jan 08, 2024
Perquisites
Perquisites are privileges or fringe benefits given to employees.
Free gym membership is one of the perquisites of her job.
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Jan 08, 2024
Allowances
Allowances are regular payments made for specific purposes.
Employees receive a monthly transport allowance.
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Jan 08, 2024
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Perquisites
Perquisites are non-monetary extras offered by employers.
A corner office is considered a perquisite for senior executives.
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Jan 08, 2024
Allowances
Allowances are sums paid to cover specific work-related expenses.
The company gives a travel allowance for business trips.
Shumaila Saeed
Jan 08, 2024
Perquisites
Perquisites are special advantages or amenities provided to employees.
Access to the executive dining room is a perquisite at her company.
Shumaila Saeed
Jan 08, 2024
Perquisites
Perquisites are additional, often luxurious, benefits in a job.
Personal use of the company jet is a significant perquisite for top executives.
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Jan 08, 2024
Allowances
An amount that is allowed or granted
Consumed my weekly allowance of two eggs.
Shumaila Saeed
Jan 06, 2024
Perquisites
A payment, profit, or benefit received in addition to a regular wage or salary, especially when due or expected.
Shumaila Saeed
Jan 06, 2024
Allowances
Something, such as money, given at regular intervals or for a specific purpose
A travel allowance that covers hotel bills.
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Jan 06, 2024
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).
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Jan 06, 2024
Allowances
A small amount of money regularly given to a child, often as payment for household chores.
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Jan 06, 2024
Allowances
A price reduction, especially one granted in exchange for used merchandise
The dealer gave us an allowance on our old car.
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Jan 06, 2024
Allowances
To put on a fixed allowance
Cut expenses by strictly allowancing the sales representatives.
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Jan 06, 2024
Allowances
Allowances are predefined monetary compensations for certain needs.
Her salary package included an education allowance for her children.
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Jan 08, 2024
Repeatedly Asked Queries
Is a housing allowance taxable?
Housing allowances are often taxable, depending on local tax laws.
Shumaila Saeed
Jan 18, 2024
What are allowances in a salary package?
Allowances are fixed monetary amounts added to basic salary to cover specific expenses.
Shumaila Saeed
Jan 18, 2024
Can perquisites be customized for individual employees?
Yes, perquisites can be tailored to individual employees, especially in senior or specialized roles.
Shumaila Saeed
Jan 18, 2024
Are perquisites always non-monetary?
Perquisites are typically non-monetary but can include monetary benefits like stock options.
Shumaila Saeed
Jan 18, 2024
Can perquisites be considered part of a compensation package?
Yes, perquisites are often included in compensation packages, especially for high-level positions.
Shumaila Saeed
Jan 18, 2024
Are all employees entitled to perquisites?
Not all employees are entitled to perquisites, as they are often reserved for specific roles or levels.
Shumaila Saeed
Jan 18, 2024
Do allowances vary by job role?
Allowances can vary based on job role, particularly in relation to job-specific expenses.
Shumaila Saeed
Jan 18, 2024
How do allowances benefit employees?
Allowances benefit employees by providing additional financial support for specific expenses.
Shumaila Saeed
Jan 18, 2024
Are allowances usually part of the negotiated salary?
Allowances are typically part of the overall salary package and may be negotiated.
Shumaila Saeed
Jan 18, 2024
What makes perquisites attractive to employees?
Perquisites are attractive due to their ability to enhance lifestyle and work satisfaction.
Shumaila Saeed
Jan 18, 2024
Can allowances change over time?
Allowances can change, often in response to inflation, cost of living adjustments, or changes in job responsibilities.
Shumaila Saeed
Jan 18, 2024
Is a travel allowance taxable?
Travel allowances are often taxable, but this can vary based on jurisdiction and usage.
Shumaila Saeed
Jan 18, 2024
How are allowances processed in payroll?
Allowances are usually processed through payroll and are reflected in the employee's paycheck.
Shumaila Saeed
Jan 18, 2024
Is a car allowance a common benefit?
A car allowance is a common benefit, particularly for roles requiring extensive travel.
Shumaila Saeed
Jan 18, 2024
What's an example of a unique perquisite?
A unique perquisite could be a membership to an exclusive club or access to a luxury retreat.
Shumaila Saeed
Jan 18, 2024
Are perquisites always permanent?
Perquisites are not always permanent and can be revised or withdrawn by the employer.
Shumaila Saeed
Jan 18, 2024
How do perquisites affect employee loyalty?
Perquisites can significantly boost employee loyalty and job satisfaction.
Shumaila Saeed
Jan 18, 2024
Do perquisites have monetary value?
While non-monetary, perquisites often have significant monetary value or savings for the employee.
Shumaila Saeed
Jan 18, 2024
Can allowances be given in lieu of salary increases?
Sometimes, allowances may be offered as alternatives to direct salary increases.
Shumaila Saeed
Jan 18, 2024
Do perquisites impact company culture?
Yes, perquisites can have a significant impact on company culture, often reflecting company values and priorities.
Shumaila Saeed
Jan 18, 2024
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About Author
Written by
Shumaila SaeedShumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.
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