As an employer one needs to understand what fringe benefits are. Fringe benefits are the additional compensation that companies offer to an employee, over and above the salary for doing a particular work. Some benefits are awarded to compensate employees for costs related to their work while others are geared to general job satisfaction.
The importance of fringe benefits can be explained, simply put as a great motivators. It makes employees feel more important and, at the same time, valued for their work.
Advantage of using fringe benefit is to help the employers to recruit, motivate, and keep high-quality people.
Fringe Benefits Defined
Fringe benefits are perks or extra compensation over and above regular salary. Some fringe benefits are for all the employees, whereas few are offered only to certain categories of employees, example, the amount of paid time off an employee receives is mostly directly proportional with length of employment.
Examples of Fringe Benefits
There are some fringe benefits that are almost mandatory because the employees expect them. If you don’t provide these benefits, you will find it difficult to hire and retain good employees. Some are unique fringe benefits to attract good employees.
Types of Fringe Benefits
Fringe benefits can be categorized into two categories. Some benefits are required by law and others are provided at the employer’s discretion. These are some fringe benefits you generally must provide to your employees:
Fringe benefits required by law
The essential fringe benefits are intended to provide employees with medical care, help them in the event of job loss, and provide them with retirement income to sustain them during retirement. Some of the mandatory fringe benefits that employers are required to provide:
Health insurance
The health care plans cover visits to primary care physicians, specialist doctors, and emergency care. Anything less than 50 full time employees, does not warrant mandatory provision of health insurance under the ACA. However, this is a fringe benefit that you should consider providing to all your employees because individual medical coverage can be expensive and employees expect to have this covered by their employer.
Unemployment insurance
The Federal Unemployment Tax Act (FUTA) requires employers to pay a federal and state unemployment tax to the Department of Labor, this provides wages, training, and career guidance to employees in event of job loss due to no fault of their own. Such benefits are meant to provide brief monetary assistance to unemployed citizens who meet the requirements of the act.
Medical leave
Businesses that employ over 50 employees are required to provide family and medical leave to an employee who has worked for over one year in the company. The medical leave is unpaid, protected, and can last up to 12 weeks.
Worker’s compensation
This covers lost wages, medical expenses and rehabilitation costs for employees that have fallen sick or gotten injured on the job. Employees are provided with medical treatment, wage replacement benefits, rehabilitation, and other benefits. It also includes death benefits to the next of kin of employees killed on the job. Mostly all businesses are required to have workers’ compensation insurance.
Fringe benefits not required by law
The following benefits are provided at the employer’s discretion. Most of these fringe benefits are taxable, barring few exceptions. Examples of these fringe benefits include:
- Retirement Plans
- Paid Vacation
- Gym memberships
- Meal subsidy
- Commuter Benefits
- Employee Stock Ownership Plan (ESOP)
Advantages of Offering Fringe Benefits
Employees feel valued if they are provided excellent benefits packages. These are some of the benefits of offering fringe benefits to your employees:
- Attract top talent.
- Keep employees motivated.
- Ensure good health of employees.
- Reduce employee turnover.
Though not fully exempted; many rules and regulations govern the exemption. One should take legal counsel before committing to anything.
Finally
With highly competitive industry where a skilled workforce is in high demand, offering an innovative and useful fringe benefits package can be the key to attracting strong talent.