The main goal of most corporate fringe benefit schemes, base salary arrangements, is to recruit, maintain, and empower skilled, capable workers. When rival companies provide equal base salaries, an employer who offers a more appealing compensation package frequently has an edge over other employers in recruiting and retaining skilled workers.

How Do Fringe Benefits Work?

To attract, retain, and motivate employees, organizations all over the globe offer non-financial and financial rewards. Financial rewards, which represent rewards with monetary value, might take the form of direct financial rewards (e.g. fixed and variable pay) and indirect financial rewards (e.g. fringe benefits), whereas non-financial rewards encompass all forms of organizational rewards which have no easily identified monetary value but are desirable to employees, such as appreciation, job security, and promotion.

Fringe Benefits Examples: What Are Considered Fringe Benefits?

Other types of financial rewards commonly offered by organizations to attract, retain, and engage employees are fringe benefits. Benefits are specified as indirect forms of total compensation.

The term ‘benefits’ is vague, and these may take different forms, such as:

• Free gym access cards
• Support for an employee during a life crisis
• Retirement or pension plans
• Medical and dental benefits
• Tuition coverage
• Days off
• Paid holiday
• Use of corporate vehicle
• Paid time away from work, insurance and health protection, employee services, and retirement income.

Often, companies can provide these protections to employees cheaper than employees can obtain them for themselves. However, these benefits largely depend on various external factors like Government policies and regulations.

Contrasting Fringe Benefits with Traditional Compensation

Organizations give non-financial and financial benefits to employees around the world in an effort to recruit, retain, and engage them. The term "non-financial rewards" refers to all forms of organizational rewards that have no readily identifiable monetary value but are desired by employees, such as appreciation, job security, and promotion. Financial rewards, which are rewards with monetary value, can take the form of direct financial rewards (for example, fixed and variable pay) and indirect financial rewards (for example, fringe benefits).

Any fringe benefits are included with gross earnings. In addition to base or incentive compensation, fringe benefits are part of the overall incentive plan given to workers. Employees' quality of life is maintained (or improved) by fringe benefits, which provide protection and financial support for jobs and their families.

Importance of Fringe Benefits

Employee fringe benefits are some of the motivating factors that can ensure the optimum utilization of employees’ expertise. Employee satisfaction largely depends on fringe benefits, which should not be ignored for the sake of organizational development.

Employee benefits for the time they are away from work are payments for time not worked, also known as supplemental pay benefits. It refers to the pay received while on leave for reasons such as maternity, paternity, illness, civic duty, lunch break, personal leave, etc.

Impact on Employee Compensation and Well-being

According to this 2023 study in the Asian Journal of Business Environment, some employees think that the fringe benefits can be a substitute for the main wages, and they are willing to receive more benefits in exchange for their basic pay. The employees surveyed also rated insurance, paid leave, and maternity leave as the most important types of fringe benefits.

In addition, payment for time not worked appears to be the most essential sort of fringe benefit when it comes to the level of employee satisfaction since it has a large positive impact on employee satisfaction.

Employees are more at ease and less likely to get sidetracked from their obligations in their work lives the more paid time off they receive. Moreover, benefits that support a balance between work and family life are the most significant for employees. According to this research, work loyalty and organizational commitment are favorably connected with maternity, bereavement, and compassionate leaves.

Additionally, another study by Tarafdar et al. (2021) found that there is a significant correlation between fringe benefits like insurance and retirement benefits, paid leaves and holidays, and employee welfare benefits and employee loyalty.

Fringe Benefits FAQs

What are fringe benefits and why are they offered by employers? 

• Fringe benefits are compensation other than direct wages or salary.

What types of benefits are considered fringe benefits?

• Company vehicle, a home allowance, medical care, compensated vacations, pension plans, or subsidized meals.

Are fringe benefits taxable?

• Most of the benefits are tax exempt and can be available and cheaper than the market.

Fringe Benefits in a Nutshell

• Fringe benefits are additional rewards, usually not related to job performance, that employees receive from their organizations for being members of the organization and for their position in the organization.
• Global HR Solutions: Utilize Playroll's global HR solutions to efficiently manage fringe benefits for employees worldwide.
• Competitive Benefits: Leverage competitive benefits offerings to enhance your organization's fringe benefits package and attract top talent.

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