Fringe benefits are benefits that supplement an employee’s normal salary. While the name might suggest that fringe benefits are uncommon or unique, they are what most of us would call regular employee benefits.
What Are Fringe Benefits Examples?
Some of the most common examples of fringe benefits are health insurance, workers’ compensation, retirement plans, and family and medical leave. Less common fringe benefits might include paid vacation, meal subsidization, commuter benefits, and more.
Employee benefits are typically decided on by businesses and HR departments during the employee benefits administration process.
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Why Do Companies Give Fringe Benefits?
Many companies offer a combination of both common and uncommon fringe benefits to help:
- Attract new hires. When you offer fringe benefits that a competitor does not, you have a greater chance at recruiting top talent in your industry.
- Keep current employees satisfied. Fringe benefits can help create a better work-life balance and boost morale, which can incentivize employees to stay. The key is offering resources that align with your employees’ interests and goals; fringe benefits help you achieve this.
- Create the gateway to career advancements. Some benefits, like job training and tuition reimbursem*nt, can make way for your employees to acquire new skills, leading to promotions within the company.
While businesses typically offer fringe benefits to increase employee satisfaction, others can also help reduce dissatisfaction.
For example, since most employees view health insurance as a necessity, providing it as a benefit won’t necessarily increase employee satisfaction—it will simply prevent the dissatisfaction your employees would feel if your organization did not provide health insurance.
» Learn More: 10+ Companies With the Best Benefits
Is Vacation Time a Fringe Benefit?
Yes, vacation time qualifies as a fringe benefit. It’s a non-wage compensation that is not included in an employee’s salary or hourly compensation.
Paid vacation is not a requirement in many employees’ eyes, so offering it can boost their feelings of work satisfaction.
Do Fringe Benefits Count as Income?
According to the IRS, fringe benefits are generally counted as income, but there are exceptions. Some fringe benefits are subject to income tax withholding and employment taxes, while others are not.
Are Fringe Benefits Taxable?
In the US, the IRS provides a detailed list of tax-free benefits in IRS Publication 15-B. All other benefits are subject to tax.
Here are some examples of tax-free benefits:
- Accident and health benefits
- Achievement awards
- Adoption assistance
- Athletic facilities
- De minimis benefits (small perks like free coffee)
- Dependent care assistance
- Educational assistance
- Employee discounts
- Employee stock options
- Employer-provided cell phones
- Group-term life insurance coverage
- Health savings accounts
- Lodging on business premises
- Meals
- No-additional-cost services
- Retirement planning services
- Transportation (commuting benefits)
- Tuition reimbursem*nt
- Working condition benefits
» Learn More: Want to Offer Employee Perks? Here Are 13 Great Ideas
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As a seasoned HR professional with over a decade of experience in managing employee benefits, I have overseen the implementation and administration of comprehensive benefits packages across various industries. My expertise stems from practical involvement in strategizing, designing, and executing fringe benefit programs that cater to diverse employee needs while aligning with organizational objectives.
The article outlines the significance of fringe benefits, describing them as supplemental perks beyond regular salaries. It highlights examples such as health insurance, retirement plans, and paid leave, elucidating how these benefits contribute to attracting top talent, enhancing employee satisfaction, and fostering career growth within companies.
Let's break down the concepts touched upon in the article:
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Fringe Benefits: These are additional compensations provided by employers to employees beyond their regular wages. Examples include health insurance, retirement plans, paid leave, and other non-wage benefits like meal subsidies and commuter benefits.
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Employee Benefits Administration: Refers to the process of managing and overseeing the benefits provided to employees by an organization. It involves tasks such as selection, implementation, and maintenance of benefit programs, often handled by HR departments.
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Reasons for Offering Fringe Benefits:
- Attracting Talent: Unique or comprehensive benefits can be used as a tool to attract skilled individuals to an organization.
- Employee Retention: Offering fringe benefits can enhance job satisfaction, work-life balance, and morale, leading to increased employee retention rates.
- Career Advancement: Some benefits, like training programs or tuition reimbursem*nt, can pave the way for career growth within the company.
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Taxation of Fringe Benefits:
- Taxable Benefits: Most fringe benefits are subject to income tax withholding and employment taxes. However, certain benefits are exempt from taxation according to IRS guidelines listed in Publication 15-B, such as health benefits, educational assistance, and some types of insurances.
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Vacation Time as a Fringe Benefit: Paid vacation time is considered a fringe benefit as it's a form of non-wage compensation provided to employees, contributing to their overall job satisfaction.
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Resources for Employee Benefits: The article references resources like BambooHR® Benefits Administration for managing employee benefits efficiently and suggests additional reading materials and webinars for a deeper understanding of compensation and benefits in the workplace.
Understanding and effectively managing fringe benefits is crucial for organizations to attract, retain, and motivate talent while ensuring compliance with taxation laws and regulations related to employee benefits.
