Fringe benefits definition: Fringe benefits are additional benefits employees receive alongside their salary, though they aren’t legally required. These are often non-cash perks and used to improve the total rewards package offered by companies. These types of benefits increase employee satisfaction and build loyalty among your workers.
Read on to learn more about this topic! Click on the sections below to jump right to your specific question.
- Fringe Benefits Examples
- How do Fringe Benefits Work?
- Core vs. Optional Benefits
- What is the Purpose of Fringe Benefits?
- FAQ
Fringe Benefits Examples
These benefits may include the following:
- Paid time off (PTO)
- Health care coverage
- Corporate gym memberships or fitness reimbursement
- 401(k) matching contributions
- Qualified transportation and travel allowances, like a company car and/or travel stipends
- Tuition reimbursement or education stipend (part of a broader employee stipend policy)
- Cell phone reimbursement policy
- Lifestyle Spending Account (sometimes called lifestyle benefits)
- Work from home stipends
- Day care benefits for employees
Certain employee benefits are granted equally to all employees regardless of level on the corporate ladder. However, some benefits are offered to compensate employees for specific needs, while others serve to promote employee well-being. Also, there needs to be said that there are some fringe benefits given to the higher-ups.
Overall we can all agree that having fringe benefits in place for employees of all levels is a great motivation to work harder and to keep valuable people interested in the job. This is a great tactic that not a lot of companies offer, but if you’re in one of them, that does consider yourself lucky.
Those who get fringe benefits often have better employee morale and motivation than those who don’t. For example, companies that compete for the best talent in their fields tend to offer big bonuses and perks.
Some of the most common fringe benefits include things like health insurance, life insurance, and disability insurance. However, some of these benefits are taxable, but at least at a fair market value.
How do Fringe Benefits Work?
The main idea behind fringe benefits is to make sure that employees feel valued and appreciated. It’s important to note that fringe benefits are not mandatory. Some companies will offer them, but it’s up to each individual company to decide whether or not to offer them. Types of employees who are typically not offered fringe benefits include:
- Freelance employees
- Part-time employees
- Someone who holds more than two percent of the shares of a closely held corporation.
- Highly Compensated Employees (HCEs) include officers, shareholders who own more than 5% of a company’s voting power, HCEs based on the circumstances, and spouses or dependents of any of these people (officers, shareholders, etc.)
- Someone who has been designated an officer, owns more than 10% of the company’s stock, or is one of the top 25% earners of all employees.
- An officer has annual pay of at least $185,000.
- An employee who was an officer, director, partner, managing general partner, managing member, or 5% owner at any time during the previous year, or $150,000 in compensation for the prior year.
You can check the employer’s tax guide to fringe benefits published by the IRS to learn more.
Core Benefits vs. Optional Benefits
If an employer offers fringe benefits, they typically come in two forms. There are core benefits, also known as statutory benefits, which are the minimum requirements that every employee must receive. Then there are optional benefits, which are additional perks that the employer chooses to offer.
| Core Benefits | Optional Benefits | |
| Mandate | Mandatory by federal law | Not mandatory |
| Examples | Medicare Social security Unemployment insurance | Fitness reimbursements Wellness programs Tuition reimbursement |
| Variables | Varies by state and government | Varies by company and/or industry |
Core benefits are generally mandated by federal law, so they are legally required. But this doesn’t necessarily mean that they are necessary. In fact, many companies choose to offer these benefits because they want to show appreciation to their employees.
Optional benefits are completely voluntary and depend on what the employer feels would benefit their workforce. These benefits are usually chosen based on the type of industry the business operates in.
For example, if a company sells food, then offering free lunches might be a good idea. If a company makes medical equipment, then providing healthcare benefits could be beneficial. Examples include Ben & Jerry’s, which offers ice cream to their workers, and Dogtopia, which allows you to bring your pet to work.
What is the Purpose of Fringe Benefits?
When employees know that they’ll be taken care of, they’re less likely to leave. And when they see that their coworkers are getting similar benefits, they’re more likely to stick around too. Some benefits of offering fringe benefits include:
- Increase in productivity. Employees are happier when they know that they’re getting something valuable from their jobs. That way, they’re more likely to work better and more.
- Improved morale. When employees feel appreciated, they tend to be more productive. Also, it’s a great thing to see happy faces all around the office.
- Reduced turnover rates. If employees enjoy their job, they’re less likely to quit. We as humans have the psychology in mind to find comfort in life, and when we do, it has to be something really big to change that.
- Attract better talent. Companies with good fringe benefits often have higher-quality workers. When the word gets out that a certain company is offering great benefits, people may want to join even more.
- Encourage loyalty. Employees appreciate knowing that their employer cares about them and wants them to succeed. That’s why they feel a certain level of loyalty to the company that offers these benefits.
- Keep employees happy. Happy employees are more productive; it’s simple as that. When people go happy to work, they’re more likely to solve problems quicker, work harder and perform better.
- Create a positive culture. A positive workplace encourages creativity and innovation. That’s why having happy faces for everyone and genuinely happy people is crucial for companies.
Closing Thoughts
There are many different types of fringe benefits available to employees. It’s up to employers to decide which ones they’ll use.
But whatever type of fringe benefits you decide to implement, remember that they should be designed to benefit both your employees and your business. If you’re interested in having our expert team help you craft the perfect fringe benefits for your organization, schedule a demo with our team or learn more about our reimbursements offering.
FAQ
Q: How does offering fringe benefits affect my business?
A: There are two main reasons why fringe benefits are important for businesses. First, they help employees stay motivated. Second, they help retain employees.
Q: Is 401k a fringe benefit?
A: Yes, offering a 401k is a type of fringe benefit.
Q: Is PTO considered a fringe benefit?
A: Yes, paid time off is considered a fringe benefit.
Q: Can I give my employees a discount on products or services?
A: Yes! Discounts are one of the most popular fringe benefits offered by employers. This perk helps employees save money while still receiving quality goods or services.