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fringe benefit

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Definition
Compensation in addition to direct wages or salaries, such
as company car, house allowance, medical insurance, paidholidays, pension
schemes, subsidized meals. Some fringe benefits are regarded part of a taxable
income.

Compensation in addition to direct wages or salaries, such as company car, house


allowance, medical insurance, paid holidays, pension schemes, subsidized meals. Some
fringe benefits are regarded part of a taxable income.

Employee benefits and (especially in British English) benefits in kind (also called fringe
benefits, perquisites, perqs or perks) are various non-wage compensations provided to
employees in addition to their normal wages or salaries.[1] Where an employee
exchanges (cash) wages for some other form of benefit, this is generally referred to as a
'salary sacrifice' arrangement. In most countries, most kinds of employee benefits are
taxable to at least some degree.
Some of these benefits are: housing (employer-provided or employer-paid), group
insurance (health, dental, life etc.), disability income protection, retirement benefits,
daycare, tuition reimbursement, sick leave, vacation (paid and non-paid), social security,
profit sharing, funding of education, and other specialized benefits.
The purpose of the benefits is to increase the economic security of employees.
The term perqs or perks is often used colloquially to refer to those benefits of a more
discretionary nature. Often, perks are given to employees who are doing notably well
and/or have seniority. Common perks are take-home vehicles, hotel stays, free
refreshments, leisure activities on work time (golf, etc.), stationery, allowances for lunch,
and—when multiple choices exist—first choice of such things as job assignments and
vacation scheduling. They may also be given first chance at job promotions when
vacancies exist.

Fringe Benefits Tax

In a number of countries (e.g., Australia, New Zealand, Pakistan and India) the 'fringe
benefits' are subject to the Fringe Benefits Tax (FBT), which applies to most, although
not all, fringe benefits.
In the United States, employer-sponsored health insurance was considered taxable
income until 1954.[7]
Fringe Benefits

What Does Fringe Benefits Mean?


A collection of various benefits provided by an employer, which are exempt from
taxation as long as certain conditions are met. Any employee who receives taxable fringe
benefits will have to include the fair market value of the benefit in their taxable income
for the year, which will be subject to tax withholdings, and social security benefits
payments.
Investopedia explains Fringe Benefits
Fringe benefits commonly include health insurance, group term life coverage, education
reimbursement, childcare and assistance reimbursement, cafeteria plans, employee
discounts, personal use of a company owned vehicle and other similar benefits.

TYPES OF FRINGE BENEFITS

Organizations provide a variety of fringe benefits. The fringe benefits are classified under
four heads as given here under:
1.For Employment Security :
Benefits under this head include unemployment, insurance, technological adjustment pay,
leave travel pay, overtime pay, level for negotiation, leave for maternity, leave for
grievances, holidays, cost of living bonus, call-back pay, lay-off, retiring rooms, jobs to
the sons/daughters of the employees and the like.
2.For Health Protection:
Benefits under this head include accident insurance, disability insurance, health
insurance, hospitalization, life insurance, medical care, sick benefits, sick leave, etc.
3.For Old Age and Retirement:
Benefits under this category include: deferred income plans, pension, gratuity, provident
fund, old age assistance, old age counseling , medical benefits for retired employees,
traveling concession to retired employees, jobs to sons/daughters of the deceased
employee and the like.
4.For Personnel Identification, Participation and Stimulation:
This category covers the following benefits: anniversary awards, attendance bonus,
canteen, cooperative credit societies, educational facilities, beauty parlor services,
housing, income tax aid, counseling, quality bonus, recreational programs, stress
counseling, safety measures etc.

The fringe benefits are categorized as follows:


a)Payment for Time Not worked: Benefits under this category include: sick leave with
pay, vacation pay, paid rest and relief time, paid lunch periods, grievance time,
bargaining time, travel time etc.
b)Extra Pay for time Worked: This category covers the benefits such as: premium pay,
incentive bonus, shift premium, old age insurance, profit sharing, unemployment
compensation, Christmas bonus, Deewali or Pooja bonus, food cost subsidy, housing
subsidy, recreation.

Employee Security
Physical and job security to the employee should also be provided with a view to
promoting security to the employee and his family members. The benefit of confirmation
of the employee on the job creates a sense of job security. Further a minimum and
continuous wage or salary gives a sense of security to the life.

Retrenchment Compensation:
The Industrial Disputes Act, 1947 provides for the payment of compensation in case of
lay-off and retrenchment. The non-seasonal industrial establishments employing 50 or
more workers have to give one month’s notice or one month’s wages to all the workers
who are retrenched after one year’s continuous service. The compensation is paid at the
rate of 15 days wage for every completed year of service with a maximum of 45 days
wage in a year. Workers are eligible for compensation as stated above even in case of
closing down of undertakings.

Lay-off Compensation:
In case of lay-off, employees are entitled to lay-off compensation at the rate to 50% of
the total of the basic wage and dearness allowance for the period of their lay-off except
for weekly holidays. Lay-off compensation can normally be paid up to 45 days in a year.

Safety and Health


Employee’s safety and health should be taken care of in order to protect the employee
against accidents, unhealthy working conditions and to protect worker’s capacity. In
India, the Factories Act, 1948, stipulated certain requirements regarding working
conditions with a view to provide safe working environment. These provisions relate to
cleanliness, disposal of waste and effluents, ventilation and temperature, dust and fume,
artificial humidification, over-crowding, lighting, drinking water, latrine urinals, and
spittoons. Provisions relating to safety measures include fencing of machinery, work on
or near machinery in motion, employment of young persons on dangerous machines,
striking gear and devices for cutting off power, self-acting machines, easing of new
machinery, probation of employment of women and children near cotton openers, hoists
and lifts, lifting machines, chains ropes and lifting tackles, revolving machinery, pressure
plant, floors, excessive weights, protection of eyes, precautions against dangerous fumes,
explosive or inflammable dust, gas etc. Precautions in case of fire, power to require
specifications of defective parts of test of stability, safety of buildings and machinery etc.
OBJECTIVES OF FRINGE BENEFITS

The view point of employers is that fringe benefits form an important part of employee
incentives to obtain their loyalty and retaining them. The important objectives of fringe
benefits are:
1.To create and improve sound industrial relations
2.To boost up employee morale.
3.To motivate the employees by identifying and satisfying their unsatisfied needs.
4.To provide qualitative work environment and work life.
5.To provide security to the employees against social risks like old age benefits and
maternity benefits.
6.To protect the health of the employees and to provide safety to the employees against
accidents.
7.To promote employee’s welfare by providing welfare measures like recreation
facilities.
8.To create a sense of belongingness among employees and to retain them. Hence, fringe
benefits are called golden hand-cuffs.
9.To meet requirements of various legislations relating to fringe benefits.

Need for Extending Benefits to Employees


(i)Rising prices and cost of living has brought about incessant demand for provision of
extra benefit to the employees.
(ii)Employers too have found that fringe benefits present attractive areas of negotiation
when large wage and salary increases are not feasible.
(iii)As organizations have developed ore elaborate fringe benefits programs for their
employees, greater pressure has been placed upon competing organizations to match
these benefits in order to attract and keep employees.
(iv)Recognition that fringe benefits are non-taxable rewards has been major stimulus to
their expansion.
(v)Rapid industrialization, increasingly heavy urbanization and the growth of a
capitalistic economy have made it difficult for most employees to protect themselves
against the adverse impact of these developments. Since it was workers who are
responsible for production, it was held that employers should accept responsibility for
meeting some of the needs of their employees. As a result, some benefits-and-services
programs were adopted by employers
(vi)The growing volume of labor legislation, particularly social security legislation, made
it imperative for employers to share equally with their employees the cost of old age,
survivor and disability benefits.
(vii)The growth and strength of trade unions has substantially influenced the growth of
company benefits and services.
(viii)Labor scarcity and competition for qualified personnel has led to the initiation,
evolution and implementation of a number of compensation plans.
(ix)The management has increasingly realized its responsibility towards its employees
and has come to the conclusion that the benefits of increase in productivity resulting from
increasing industrialization should go, at least partly, to the employees who are
responsible for it, so that they may be protected against the insecurity arising from
unemployment, sickness, injury and old age. Company benefits-and-services programs
are among some of the mechanisms which managers use to supply this security.

Fringe Benefit Plans, Inc. provides Employee Benefits, Consulting and Administrative
Services to over 100 companies throughout Florida and the US. Whatever your needs
are, we can help. We offer:
Traditional Insurance Services *
COBRA Administration
Cafeteria Plan Administration
Consolidated Billing
Online Enrollment
Salary Continuation Plans
Comprehensive Disability Income Plans
401k Retirement Plans *
Our services for individuals include:
Life insurance *
Disability insurance
Long term care insurance
Fringe Benefit Plans, Inc. has been servicing both large and small businesses in the
greater Orlando area since 1969.

* Securities offered through Registered Representatives of NFP Securities, Inc., a


Broker/Dealer and Member FINRA/SIPC NFP Securities, Inc. is not affiliated with
Fringe Benefit Plans, Inc. Not all members of Fringe Benefit Plans are licensed to offer
securities. Neither NFPSI nor Fringe Benefit Plans, Inc. offer tax or legal advice.

This site is published for residents of the United States only. Registered representatives
and investment advisor representatives of NFP Securities, Inc. may only conduct business
with residents of the states and jurisdictions in which they are properly registered.
Therefore, a response to a request for information may be delayed. Not all of the products
and services referenced on this site are available in every state and through every
representative or advisor listed. For additional information, please contact the NFP
Securities, Inc. Compliance Department at 512-697-6000

What Are Fringe benefits?

Generally, fringe benefits are some type of non-cash or extra remuneration that an
employer offers an employee over and above the cash payment earmarked as salary for
the job. Fringe benefits, perquisites or benefits (as these are commonly known) could be
anything that would make the life of the employee a little easier.

Contrary to common belief, fringe benefits are not offered only to those who have low
remunerative packages. Sometimes this is the case; however, most often it is a ruse to
attract the best talent and to hold on to this best talent in an industry. Fringe benefits are
hence, offered to employees who have low remuneration (as extra compensation) as well
as those are highly paid but in demand for their qualities and capabilities.

Some of these are briefly described below:

Free education for children - considering the rising expenses of education, some
companies offer free education where the same is required. This could be in the form of
cash, free books, tuition fees, allowance, etc.

Free transport to-and-fro the office - Commuting has been a great inconvenience in terms
of both expenses and time. Some companies run their own buses so their employees do
not have to worry about traveling to-n-fro the office. Others, offer passes for metros,
busses or any other mass/ public transport to ease the financial burden of the employee.

Reimbursement of fuel charges - For executives who use their own vehicle many
companies offer to reimburse the fuel expenses for commuting to-n-fro office.

Company car - A company car is normally offered to the elite group of employees in a
company. Sometimes this would include driver (chauffeur driven) who would also be
paid by the company, and sometimes this would be left as per the choice of the employee.
When the company car is offered, its maintenance, fuel cost and insurance would be
taken care of by the company as well.

Accommodation or reimbursement of rental charges - this is one of the most commonly


available fringe benefits. Sometimes this accommodation is rented on behalf of the
company in posh areas; sometimes these are company-constructed townships where other
facilities are part of the deal such as parks for the children, schools, medical facilities,
crche, gym, jogging grounds, swimming pool, etc.

Medical bills reimbursement or free medical care for employee (sometimes extending for
the family as well and/ or children) - keeping in view that medical expenses have been
escalating at an alarming rate, this particular fringe benefit is a favorite of all employees.
Some companies extend the benefit (within a fixed lumpsum amount) to the spouse and
children of the employee as well.

Medical insurance cover - Many companies pay part of full of the medical insurance of
the employee saving them a neat amount every year. This provides a great deal of relief
for those who have a low remuneration.
Lower interest or interest free loans - one among the more beneficial perquisites are
interest free loans (or lower than the market loans) for employees for different needs such
as consumer items, car, house, college expenses for children, wedding of children, etc.

Discounted meals - this fringe benefit is another very common offer, almost taken for
granted in some places. Employees are usually given discounted meal coupons at the
office cafeteria or given a fixed allowance for meals of their choice

Free meals - it is often that the company offers meals to all its employees (sometimes in
different grades according to the designation of the employee) in the office mess.

All expenses paid vacations - this is one of the most sought after and rare fringe benefits.
Some companies especially in the hospitality industry offer all expenses paid vacations to
their employees. The vacation includes the family of the employee.

Vacation travel reimbursement (free airline tickets/ discounted airline tickets; same for
railways and busses) - sometimes the fringe benefit covers the to-n-fro travel cost, while
in some other cases there is a fixed amount calculated as a percentage of the
remuneration (salary) offered to the employee annually.

Cell phones - the majority of companies that need to be in constant contact with their
employees - particularly marketing, sales, promotions - offer this perquisite.

Reimbursement of cell phone expenses - those companies, which do not offer cell
phones, usually reimburse the bills of employees cell phones if and when they have to
interact with clients on behalf of the company over the mobile phone.

Clubs memberships/ gym facilities - many companies require that their executives are
part of the exclusive clubs of locality they belong to since the who-is-who of the society
would frequent these places and the social mingling would benefit the company's image.

In-house gym facilities - very often companies establish their own gym facilities, which
are made available to all the employees, or a particular group of employees.

Child care - it has been found that often people find it difficult to leave young children at
home in the care of baby sitters, who are in the first place very expensive and secondly
unreliable. Hence, many employers either pay for child care or have a crche on the
premises, which takes care of this problem.

Transfer allowance when transferred from one city to another - most often the costs
incurred for a shift of residence is borne by the company. However, there are cases where
it is the employee's responsibility to join the new place of work and the company has
nothing to do with it. Hence, this is counted as a fringe benefit.

Gifts in cash or kind during festivals - in order to bond with the employees and win their
goodwill, many large companies offer gifts during Christmas, Easter and other non-
Christian festivals (as the cases may be). These gifts are personal and either in the form
of cash or kind.

Concert/ events passes/ tickets/ hampers - depending on what type of company it is, many
share with their employee entertainment perquisites. Suppose it is a chocolate factory, it
offers chocolate gift hampers occasionally, suppose it is an airline, it offers all year
discounts, etc.

Higher study leave with pay - there is a lot of stress on adequate educational
qualifications and many companies encourage their employees to pursue higher studies
and specialization training courses whenever possible. For this purpose, they permit the
employee to take leave with pay so they could pursue their studies without any financial
constraint.

Higher studies/ training tuition fee payment - some companies even offer to pay the
tuition fee for such studies, provided these are beneficial to the position the employee
occupies and/ or the company would benefit out of a thus-qualified employee.

Life insurance - just as the medical benefit, this too is a fringe benefit that would assure
the employee that his/her family would be taken care of in case of any unforeseen
accident. This may also includes accidental death and death insurance.

Flexi hours - this is a great boon for working mothers who have small babies to take care
of and need to nurse the infants. It is also great for people who live far away from the
office premises.

Special leave with pay (maternal, paternal, medical, bereavement, etc) - this is a benefit
that can be availed only under certain circumstances. Nonetheless, the employee feels
gratified that the option is available if the need ever arises.

This is by no means an exhaustive list. In fact, the beauty with the fringe benefits is that
often these are at the discretion of the employers. They could come up with anything
under the sky if they wanted to. The law usually imposes the minimum wages - anything
extra is up to the negotiation power of the candidate and the disbursal will of the
employer.