In the past few years, we have seen organizations going the extra mile to nurture their human resources. Also, thanks to the millennials who are asking for more benefits than just monetary compensation and medical insurance.
These additional benefits, also called the fringe benefits to boost employees’ attraction, engagement, and retention. Studies even show that employees receiving attractive benefits are more loyal to the organization and stick around in all good and bad times.
So, as a business owner are you also wondering what additional benefits or fringe benefits you can offer to you employees?
This article will inform you about some of the must-have fringe benefits to retain your employees. We’ll learn about these benefits, how do they work, why do they matter, how they can be beneficial for employers.
The meaning of fringe benefits is the additional are additional benefits provided by the employer apart from the salary. Most of these benefits are provided voluntarily by the employer while some of them are made mandatory by the law such as medical insurance.
Offering these types of perquisites to employees is not a very new thing, but the nature of benefits surely has changed over time. Earlier it was just about paying for travel expenses or offering a stipend.
But now some of the new benefits look like a wellness stipend, gym membership, paid leaves for mental health, additional vacation days, maternity or paternity leaves, etc. Even employees today are looking forward to joining organizations that provide fringe benefits.
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Fringe benefits will vary from one employer to another, it is on the employer to decide which benefits they want to offer. However, many employers let the employee choose what benefits they want to opt. In the retail industry, the benefits can be in the form of special employee discounts, gift vouchers, or no-additional-cost services.
These benefits not only motivate employees but even make them happy and comfortable at the workplace. Today the market is a competition not only for employees but for employers as well.
Being in HRM, fringe benefits make your workplace attractive for talented professionals. The fringe benefits act as additional compensation to make your organization stand out and become employee-friendly.
Attractive benefits contribute to increasing employee retention and minimizing costs incurred during hiring. Whenever an employee leaves the organization, it costs a lot of time and resources of the human resources department to fill up that vacant position. So, eventually, employers end up saving a lot of time and the cost of recruitment.
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Fringe benefits will increase your organization’s employee retention, attract new talent, and enhance employee engagement. The sole purpose is to make employees feel valued, which will eventually increase their productivity.
However, is no end to employee happiness, as an employer, you have the complete liberty to get as much as creative you want to be with fringe benefits. Offering them will not only attract new talent, but it will also help you to retain your old and loyal ones.
For example, if you have a single parent working for your organization, and you offer her flexible work timings and once a week a play area for her daughter in the organization. That employee will always choose your organization over any other because it offers her flexibility to match her lifestyle.
For an employee, these extra benefits make the work look less like a burden and help in creating an encouraging work environment. Overall, it proves to be beneficial for employers as happy employees are energetic and become productive with great efficiency.
Fringe benefits in HRM are always a win-win situation for both employee and employer. From the perspective of an employer, something as simple as just providing a gym membership can go a long way in keeping his/her employee healthy and productive. Let’s have a look at some positive outcomes that employers can derive from offering fringe benefits.
Increased Employee Retention: Offering perquisites other than compensation will increase your employee retention rate. Employees will love to stay associated with an organization that values them and cares for their overall wellbeing.
Enhances Productivity: Fringe benefits add up to employees’ happiness, which directly impacts their productivity at work. For instance, a happy employee who is working according to his/her flexibility tends to be more productive than an employee who is caught up between strict log-in hours.
Competitive Edge: When employers offer additional perks, it gives them a competitive edge in the market over other employers. This will not only attract new talented professionals but will also refrain your loyal employees from switching companies.
Employee Health & Wellness: When employees are ill and unable to work, it becomes a situation of loss for an organization as well. Offering benefits such as gym membership, health insurance, or dental care will not only keep your employees happy but also save on their sick leave.
Employee Engagement: A valued employee will always go out of his/her way to work for the organization. When employees are provided with benefits like vacation leaves, stock options, conveyance, etc., they work dedicatedly for the company.
Improves Public Image: An employee-friendly workplace enhances your goodwill in the market. Even your customers would like to buy from an organization that keeps their employees happy. Similarly, on the other hand, any negative comment made publicly against your organization can tarnish your image.
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As we have discussed the importance of fringe benefits, now let’s have a look at some of the examples that you can include in your employee benefits package.
Health Insurance: Medical benefits have been made mandatory by the law for employers to provide for their employees. This gives a sense of social security to employees and makes them feel valued.
Employee Retirement Plans: Including benefits like VRS and other retirement benefits for employees will help retain them for a longer period. You can also give retirement perks as an appreciation for the years of service they have given to your organization.
Educational and Training Support: The learning and progression of an employee and their family is a great benefit to the organization as well. This is one of the best ways to retain employees in a workplace while their learning curve is constantly growing.
Employee Stock Options: This is a tax-free fringe benefit, which motivates the employee to invest in the same organization that they are working in. This incorporates a sense of belongingness towards the organization, and employees work even harder for the organization’s success.
Fun-Friendly Workplace: Everyone wants to be happy and have fun while working. Benefits like having a nap area, reading room, pet-friendly workspace create a workplace where employees can rejuvenate and work with positive energy.
Maternity or Paternity Support: To retain your employees, you need to understand and adjust to their lifestyles as well. New parents want to work for an organization where they can give equal attention to their children as well. Employees that enjoy benefits like paternity/paternity leaves tend to work longer in an organization.
Employee Discounts: Your employees are your customers too. So, offering benefits like exclusive employee discounts will help your employees save their money and increase the consumer base of the company.
Life Insurance: This benefit is common amongst industries that require frequent travel or have a hazardous work environment. With this benefit, an employee works with a free mind and experiences a sense of relief in case of an accident or mishappening.
Mental Health Support: This benefit is apart from the health insurance package. Employers can offer extra paid leave to support the mental health of their employees or organize counseling sessions for the same.
Free Meals: No one says no to a scrumptious meal. Free meal coupons or company-organized lunches will make your employees bond over food and boost employee engagement.
Transportation Assistance: This benefit applies especially in the case of jobs that include frequent travel for fieldwork. An employer can offer this benefit in the form of reimbursements or even by offering a company-owned vehicle.
Paid Vacation: Everyone needs some time off from work with their families and friends. Offering paid vacations will give your employee an opportunity to rejuvenate and return with great energy.
Fringe benefits are not limited only to full-time employees. Organizations can extend fringe benefits to non-employees that include private contractors, freelancers, consultants, etc. Even if they are not on your permanent payroll, they still work for you. However, the types of fringe benefits that you will offer to non-employees will not be taxed. But they should be reported through Form 1065 (for partners) and Form 1099-NEC for contractors.
Different types of fringe benefits can be given to 2% of shareholders in S Corporations. However, employees holding 2% or more shares should not be treated as employees just for the sake of receiving fringe benefits. Instead, they should be treated as partners and then provided with additional fringe benefits.
Certain fringe benefits that are included in the 2% shareholder rule are:
Tax on fringe benefits was introduced in The Finance Act, 2005, which became applicable from April 1, 2005, in India.
Fringe benefits tax is a type of tax that is levied on an employer who has offered additional fringe benefits to his/her employees in the previous financial year. These additional benefits are taxed at the rate of 30% on the value of fringe benefits as stated under Section 115WC.
Some fringe benefits that are eligible to be taxed are:
Some fringe benefits are excluded from any type of tax or are partially taxed. A few common nontaxable fringe benefits are listed below:
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Conclusion
A happy and productive workplace is made by its happy employees. Fringe benefits are a wonderful way to reward your employees and make them feel valued and cared for.
There are some benefits that you must provide to your employees according to the government, but there are a lot of options that can be added. These benefits will help you in attracting new talent and retaining your current talent at the same time.
FAQs
In India, the Fringe Benefit forms a part of salary as per its monetary value. The taxation of fringe benefits depends on the slab rate of the employees.
Fringe benefits may or may not be taken out of the salary, it depends on the nature of the benefit. For example, health insurance and retirement plan benefits are deducted from the gross salary.
Fringe benefits can be majorly categorized into two categories:
1. Benefits that are required by the law, like health insurance, retirement plans.
2. Benefits that are not required by the law like, paid holidays, educational financial support.
Employers can choose from a variety of fringe benefits such as employee stock options, paid holiday, maternity or paternity support, free meals, corporate educational assistance, etc.
Fringe benefits are non-taxable for the employers, but the employees must include the reasonable value of these benefits in their taxes each year.
Yes, fringe benefits are offered in non-monetary forms outside the employee salary or compensation.
Yes, fringe benefits are included in the gross income of the employees. Gross pay is the total cost to the company-paid monthly/annually to the employees.
Yes, fringe benefits are indirect cost to company falling under staff compensation.
No, once the employee has opted for fringe benefits at the time of recruitment, they cannot be withdrawn later.
You can calculate fringe benefits by using the fringe benefits formula:
Fringe Benefit Rate= (Total Fringe Benefits/ Annual Wages) X 100
Fringe benefits definition states it as the additional benefits provided by an employer to the employees in addition to salary. Examples include travel allowance, house rent allowance, and medical benefits. While some of these benefits are offered voluntarily, others are made mandatory by law.
Yes, a performance bonus is a taxable fringe benefit under Section 115WC.
H&W fringe benefits are Health & Welfare benefits such as health and accident insurance, sick leaves, pension plans, disability insurance, etc.
The difference lies in whether a fringe benefit is entitled to a GST credit or not. This is the key difference between type 1 and type 2 fringe benefits. Type 1 fringe benefits are entitled to a GST credit whereas type 2 fringe benefits are not.
Related Categories: HR Software | Employee Payroll Management System | Online Attendance System | Applicant Tracking Software | Recruitment Management Software
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