It's better for the company - they can pay less and the employee gets the same equivalent amount in their pocket. E.g. if the company were going to pay $2k ext

It's better for the company - they can pay less and the employee gets the same equivalent amount in their pocket. E.g. if the company were going to pay $2k extra but it would be taxed $1k, they would have to pay $3k to get the equivalent "happiness" boost. The employee gets $2k / year either way. $2k tax free -> $2k in your pocket $3k + $1k tax -> $2k in your pocket