Fringe Benefits • Definition and types
When entering a new job, most of the time we aspire to enjoy a better remuneration (salary) and benefits than we were offered at our previous jobs. On most occasions, we hope to find a job that suits our demands, that we like, and gives us beneficial compensation. Thus, one of the most frequent questions a new employee makes is what the Fringe benefits the company offers are.
The reality is that the more attractive the job, the more applicants will want to work for the company. This is something employers know and that is why fringe benefits play a critical role in employment law and business administration.
If you want to know more about this topic, in this article we have key information for you.
What Do Fringe Benefits Mean?
Fringe benefits are the additional benefits that employers offer their employees as an incentive to keep them comfortable in the workplace and retain employees with better skills and prevent them from leaving and working for the competition.
These benefits go beyond salary and although they will not increase your bank account, they will undoubtedly help you save a significant amount of money and your compensation package will be very attractive.
Remember that although these benefits are not deposited in your bank account, that is, these are not financial compensation but they can represent relief for your pocket because they include benefits such as breakfast and lunch at work, transportation, childcare, and gym membership or discounts.
These are only some of the fringe benefits. Later on, we will delve into their classification.
Although many companies offer similar fringe benefits, the truth is that these benefits vary from one company to other. Every business tries to offer a compensation package that is attractive enough so that the best talents want to work and stay with them.
Something very important that you have to know is who the subjects of law in this labor institution are. On one hand, we have the employee; although the beneficiaries of the fringe benefits may be the direct family members of the worker (for example the childcare), the worker is the current recipient of the benefits.
On the other hand, we have the employer; several times, benefits are provided by a third party but the true subject of law in the employment relationship is the employer. This is due to the fact that, even though the benefits may be granted by a third party (for example transportation or a fitness center membership), it is the employer who pays for the benefit that the employee will receive.
Now, surely you are wondering if fringe benefits influence your tax returns, the answer to this question will depend on whether you are an employer or a worker.
For those who provide these benefits (employers), fringe benefits are tax-exempt provided as long as they meet the established conditions. While workers do have an impact on their taxes, recipients of fringe benefits must estimate a fair value in their annual taxable income.
Fringe Benefits Use
As we mentioned above, each company offers its own benefits as part of an incentive to its workers and potential applicants since although there are some benefits required by law, others are at the discretion of the companies.
It also happens with employees, depending on their status in the company and their current job position; they are free to choose which benefit they want to receive. For example, if you are not interested in receiving a discount in a gym because you like to exercise outdoors, you can perfectly inform your employer that you will not take that benefit.
A very frequent question related to this issue is whether retail employees are entitled to receive fringe benefits and the answer is yes. These recipients can receive discounts, services, and discounts without having to pay anything.
Companies carry out an economic study of their finances and budgets in order to determine which the most attractive benefits are for their employees depending on their professions, economic level, number of dependents, and other circumstances that may influence the choice of benefits.
As you should know, since we’ve mentioned earlier, there are two general groups of fringe benefits. The ones required by law and those that are at the discretion of the employer.
Fringe Benefits Required by Law
Some of the fringe benefits are mandatory for employers as they deal with essential circumstances in a worker’s life such as health coverage, retirement income when the time comes, and financial aid in case they lose their jobs.
Here we explain some of the mandatory fringe benefits.
The Patient Protection and Affordable Care Act, 2010, establishes that any company that has more than 50 employees must offer its employees medical assistance through health care plans that include specialist doctors, emergency care, and primary assistance.
This fringe benefit consists of receiving compensation that includes medical treatment, rehabilitation therapies, and other assistance benefits for workers who have acquired an occupational disease or have been injured in their job. These types of benefits are regulated and administered by the Department of Labor and each state has its own regulations. For this reason, depending on the state the amount of the wage replacement varies, consequently, each worker should contact the Department of Labor of their state.
It is one of the best-known fringe benefits since each state has its own assistance program meant for people who have become unemployed through no fault of their own. Employers are required by The Federal Unemployment Tax Act (FUTA) to pay federal and state unemployment taxes to the Department of Labor.
The main objective of this benefit is providing financial assistance to people who have become unemployed due to reasons outside their fault. By enrolling in this program, assistance to find a new job is also included.
On this page, you can verify information more information about it.
READ MORE: Social Security Benefits for Divorced Spouse
These are the benefits that each company decides to offer its workers in order to keep them comfortable and happy in their jobs and to also encourage productivity.
In addition to the ones we already mentioned (child care, transportation, cafeteria services), employers generally offer:
- Adoption assistance.
- Educational assistance.
- Retirement planning services.
- Employer-provided cell phones.
- Use of company cars.
- Disability insurance.
- Paid holidays.
- Paid time off.