Fringe Benefits
What Are Fringe Benefits?
Fringe benefits are benefits that supplement an employee’s normal salary. According to the While the name might suggest that fringe benefits are uncommon or unique, they are typically defined as regular employee benefits.
What Are Some Fringe Benefits Examples?
Some of the most common examples of fringe benefits are:
- Health insurance
- Workers’ compensation
- Unlimited paid time off
- Retirement plans
- 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.
Why Do Companies Give Fringe Benefits?
Fringe benefits can enhance employee satisfaction, retention, and overall productivity, meaning they can help attract quality talent and reduce staff turnover. As a result, a positive working culture becomes the norm. These are all essential in a long-term success strategy.
Don’t ignore employee fringe benefits. Doing so can lead to high employee dissatisfaction, increased turnover, and challenges in attracting good employees. Without competitive benefits, you risk losing employees to competitors. They also face the hidden costs of recruitment and training and lost productivity.
According to the Bureau of Labor Statistics, 29.7% of private industry employers’ compensation costs go to benefits. Why spend so much on fringe benefits? Most companies tout their benefits for the following reasons:
- Attract new hires. When you offer fringe benefits that a competitor doesn’t, you have a greater chance of 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 reimbursement, can make way for your employees to acquire new skills, leading to promotions within the company.
Is Vacation a Fringe Benefit?
Yes, vacation time qualifies as a fringe benefit. It’s a non-wage compensation that isn’t 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 aren’t.
Are Fringe Benefits Taxable?
In the US, the IRS provides a detailed list of tax-free benefits in IRS Publication 15-B. All others are taxable fringe benefits.
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 reimbursement
- Working condition benefits
What Fringe Benefits Mean For Your Organization Going Forward
Now that you’re in the know about fringe benefits, you should think about the best ways to communicate these to your employees. Consider how to measure the ROI to see how it’s impacting your organization. And it’s also important to remember to stay legally compliant.
Knowing how the competition is doing in this aspect can also help you tailor your benefits offering according to the industry you’re in. This helps you to stand out—useful for crowded marketplaces. Get on top of your benefits management with BambooHR.