Some jobs come with a few perks or freebies that are unrelated to employee salary. These perks or bonuses other than employee salary are known as fringe benefits. This is great when you need more commitment from your employees, seek ways to keep the best talent in your service or simply to make your business more attractive to potential employees. Here is everything you need to know about fringe benefits.
What are fringe benefits?
They are extra compensations that are not monetary, which an employer provides to employees. Salaries, bonuses, and all other forms of cash compensations are not included. Fringe benefits save employees a couple of expenses and make the job more comfortable for them. Furthermore, they are not included in the employee’s taxable income which is why they are called perks. There are, however, those benefits that are a legal requirement and those that are optional. The whole idea about offering fringe benefits is to increase overall job satisfaction, motivate and engage workers.
The Importance of Fringe Benefits
In terms of fringe benefits, businesses may and ought to be inventive. After all, they can begin to actually compete in order to establish themselves as a desirable employer when they pay attention to their employees’ needs and provide them with benefits that are important to them. Because these benefits are optional, employees (and potential hires) take attention.
Consider fringe benefits to be significant instruments that firms can use to attract and retain the best personnel.
Are supplemental benefits becoming more popular?
Employers understand the true worth of talent in today’s environment, whether we are in the midst of or after the “Great Resignation.” Top performers, leaders, and employees have never been more vital.
Furthermore, it has never been more difficult to recruit and retain them, which is why fringe benefits are so vital. They are important because top talent seeks more than an interesting role and a good salary. Professionals today expect benefits to support “the full person.”
This became very apparent throughout the Covid-19 epidemic. According to a recent survey of hundreds of UK business leaders, nearly half (46%) claim their businesses have added additional perks as a result of the crisis.
According to this survey, the most popular fringe benefits are:
- Work-from-home options
- Wellness assistance
- Plan de pension/retraite
Employee surveys conducted previous to 2020 revealed the importance of fringe benefits. According to a 2019 UK survey, 66% of employees considered these benefits as significant as or more important than their pay. Furthermore, 14% of respondents said they would take extra perks over a pay boost.
Employee engagement is also influenced by the perceived worth of workplace benefits. According to one large-scale employee happiness research, nearly all respondents (92%) thought that fringe benefits were significant to their job satisfaction.
In the same survey, a large number of employees who were extremely satisfied with their benefits also showed high levels of self-reported engagement. This comes as no surprise. Benefits show how much a firm values its people, and that value is reflected in loyalty and engagement.
How fringe benefits work?
In today’s competitive business space, it can be incredibly difficult to retain top employees with basic salaries. That’s where fringe benefits become relevant. Even though they are designed to make workers more comfortable on the job, they also serve a company’s reputation. They help companies stand out for providing the most perks for their employees. It increases a company’s chance of attracting highly skilled and talented workers from competing businesses.
The types of fringe benefits provided to workers differ from one employer to the other as employers are at liberty to choose what types of benefits to offer. Likewise, in some companies, the employee gets to choose his/her preferred benefit from available options. Options like a free gym membership, free yoga class, a company car, tuition reimbursement, child care, company cafeteria, etc.
Types of fringe benefits
Two major classes of fringe benefits exist. Some perks are a legal requirement while others are optional.
1. Fringe benefits that are legally required
Employers must provide health care, cushion economic hardships, and provide retirement sustenance. Examples of compulsory fringe benefits include the following:
Medical insurance is covered by the Patient Protection and Affordable Care Act. It states that companies with more than fifty people should provide healthcare plans. And workers should have health insurance coverage. The healthcare insurance plans cover access to primary care physicians, emergency care, and so on.
A business that employs over fifty people is legally required to provide medical leave to workers who are over a year with the company. This medical leave is not a paid one and can last for about twelve weeks.
2. Fringe benefits not legally required
These perks are left at the discretion of the employer. Some of them are taxable for the employer while some are not.
Examples of optional benefits may include:
- Retirement benefits
- Achievement awards
- Fitness and exercise facilities
- Employee discounts
- Elder and child care benefits
- Tuition reimbursement
- Education assistance
- Transport and commute benefits
- Paid leave or time off
- Paid vacations or holidays
Why should you provide fringe benefits?
Fringe benefits from an employer standpoint are an investment and below are a few reasons why.
The mandated fringe benefits are meant to offer employees with medical care, to protect them from economic hardship if they lose their jobs, and to provide them with retirement income to help them live comfortably in retirement. The following are some of the mandatory fringe benefits that employers must provide:
With so many businesses out there and the fierce competition, it makes great sense to invest in fringe benefits. Those businesses that give extra benefits besides desired salary often stand out among their competitors. They tend to enjoy more customer patronage and increased application from potential employees. In the public eye, such a company is perceived as one that provides a safe work environment for its employees. This will attract more customers and employees for treating their workers with value.
Employee health and wellness
When workers are in poor health, they spend valuable time for quality work in fixing their health. Work-related injuries and illnesses known as occupational hazards are a real possibility. A safe work environment created through fringe benefits like health insurance and gym membership not only improves employee health but will reduce sick leaves. A business is only as healthy as its workers.
Businesses with more than 50 employees are obligated by law to provide family and medical leave to employees who have been with the business for more than a year. Medical leave is unpaid, but it is protected, and it can last up to 12 weeks.
Fringe benefits provide some sort of reward which impacts greatly employee work experience. By making your workers feel that their effort is being recognized, you earn their loyalty. Increased employee loyalty translates to increased productivity because worker’s self-esteem is protected. Most workers will appreciate working in an environment where they feel like they are gaining more than just their paycheck.
Compensation for workers
The Department of Labor administers the worker’s compensation benefit to federal employees who are injured on the job or contract an occupational disease. Compensation requirements differ by state, therefore injured workers should contact their state’s worker’s compensation board.
How to use fringe benefits to motivate employees
Employees have been known to complain about being taken for granted. When things like these happen, morals are low and the quality of work goes down. This is where employee motivation and benefits come into action. This is an indirect way of telling your employees “we care for you”. Imagine providing tuition reimbursement programs for your staff, or health care benefits that they actually need. This will not only motivate your employees to work better but make your company a choice destination for highly skilled prospects. However, you want to be careful to provide benefits your employees actually need and will appreciate. If possible, work with employees to create benefits that they demand. This will ensure your employees aren’t part of the 76% of workers dissatisfied with the level of reward and recognition they receive. You know what they say, happy employees make thriving businesses.
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How can fringe benefits motivate employees?
Employees are motivated when they feel that their effort is recognized and valued. In other words, these perks provide the “pat on the back” that improves employee commitment. These perks are designed to provide stress relief for workers and help them derive more job satisfaction.
What are examples of fringe benefits provided by a company to its employees?
Any compensation outside salary provided to workers is considered a fringe benefit. Some examples of include but are not limited to: health insurance, tuition reimbursement, onsite child care, housing, a company car, paid vacation, meal plans/lunch, paid professional training/seminars, workers discount, and so on
What are the advantages of fringe benefits?
Those Businesses competing for the most in-demand skills usually provide the juiciest benefits. They assist businesses in employing, motivating, and engaging the best talents for their enterprise. While some benefits are not taxed, the taxable ones are done at fair market values.
What are the disadvantages of fringe benefits?
The major inconvenience with providing fringe benefits is the cost to the employer. Small business owners may not have the capacity to bear such expenses. And, oftentimes, most small businesses are kicked out of the competition for in-demand skills.