Fringe Benefits Meaning, Definition & Examples

Fringe benefits are additional perks and compensation that an employer offers to their employees. These benefits are given above the stated salary. They are also called voluntary employee benefits. Some companies provide these to cover employees’ work-related expenses. In other cases, such benefits are targeted to improve overall job satisfaction and productivity and attract and retain talented employees.

Additionally, many companies offer non-monetary compensation as fringe benefits, such as flexible work routine, professional development opportunities, and wellness programs, to enhance employee satisfaction and retention.

Consequently, these benefits provide companies a chance to stand out from their competitors by improving employee engagement, promoting employee well-being, attracting top talent, and reducing turnover.

Examples of Fringe Benefits

Some of the common examples of a well-designed compensation strategy include benefits like retirement plans, health insurance, family and medical leave, besides workers’ compensation package, and unlimited paid time off. Additionally, some other less common benefits include meal subsidization, paid vacation, commuter benefits, and more.

Frequently Asked Questions

Q1.	What are fringe benefits?
Ans.	These are additional employee perks and incentives provided by employers to employees beyond their regular stated salary or wages. These benefits can be either monetary or non-monetary. Further, these are designed to attract and retain top talent and improve employee motivation and satisfaction.
Q2.	Are fringe benefits taxable?
Ans.	In general, some are considered taxable benefits and others are non-taxable benefits. These are subject to tax unless they are specifically exempted.
Q3.	How are fringe benefits calculated?
Ans.	To calculate fringe benefits, employers need to follow a few simple steps: Step 1: Prepare a list of all these benefits Step 2: Calculate the benefit of each of these individual benefits Step 3: Add the value of all the benefits to arrive at the calculated fringe benefits
Q4.	Do fringe benefits count as income?
Ans.	Yes, some of them count as income, while others are exempt from tax, depending on the type of benefit and the tax laws of a particular country.
Q5.	How do fringe benefits impact employee retention?
Ans.	Offering robust fringe benefits shows that an organization values employee well-being. As a result, workers who feel they have the support of their employees are very likely to stay longer, thus reducing turnover and also lowering recruitment costs. In this way, these benefits impact employee retention. Specifically, payroll benefits, such as paid health insurance and retirement plans, also play a crucial role in enhancing employee satisfaction and retention.
Q6.	What factors should HR consider when offering fringe benefits?
Ans.	HR should consider various factors when offering these benefits to employees for benefit administration. These include the needs and preferences of the workforce, HR budget, legal compliance, reviewing the competitors’ benefits, and overall impact on employee engagement and retention.
Q7.	Is vacation time considered a fringe benefit?
Ans.	Yes, vacation time is considered a fringe benefit because it’s counted as a perk that is provided by employers beyond an employee’s regular salary. Moreover, this is included in Paid Time Off. It may be considered both taxable and non-taxable depending on the case where employees cash out unused vacation days.
Q8.	How do fringe benefits affect employer branding?
Ans.	Fringe benefits are one of the important factors that employees consider when evaluating an employer. Thus, workplace benefits can show how much the company cares about its employees’ satisfaction, well-being, and growth. It differentiates a company from its competitors, hence affecting employer branding.