Fringe benefits are compensations other than basic pay, and they are also called non-wage compensations or perks that are provided to employees. The fringe benefits aim to provide employees add value and support apart from the basic pay to attract and retain top talent. This also promotes employee job satisfaction and retention.
These benefits are of two types: mandatory and discretionary. The law imposes mandatory benefits for the employees, like health insurance, social security, unemployment insurance, worker’s compensation insurance, FMLA leaves, etc. Discretionary benefits are those the employer voluntarily offers, like a below-market loan, cafeteria subsidies, employee stock options, daycare, childcare reimbursement, gym membership, educational assistance, commute benefits, etc. These benefits are beneficial for employees but they can be taxable for both employees and employers.
In this blog, we will discuss the different types of fringe benefits. Here is a list of some fringe benefits:
1. Health Insurance: This benefit provides employees with medical coverage for themselves and their dependents. This coverage can include different medical benefits like hospitalization, preventive care, doctors visit, etc. Employers with 50 or more full-time equivalent employees are required to offer health insurance that is specifically minimal to their full-time staff, as per the Affordable Care Act (ACA) or Obamacare. Failure to comply with this mandate may lead to penalties.
2. Social Security: Under US law, employers are obligated to make Social Security tax contributions on behalf of their employees like disability, retirement, unemployment, and survivor benefits to all eligible employees.
- Unemployment insurance: Companies are required to pay unemployment insurance to cover employees who lose their jobs without their fault.
- Retirement Benefits: Many employers offer retirement benefits to help their employees prepare for a secure future. These benefits may be offered in the form of 401(k) plans or pension plans.
- Disability Insurance: Employees are protected financially by this benefit if they become disabled and are unable to work. This covers expenses such as rent, mortgage payments, medical bills, etc.
3. Worker’s compensation insurance: Workers’ compensation insurance is a legal requirement enforced by the Department of Labor for employers to have to provide benefits to employees who sustain workplace injuries. This covers disability, medical care, and death for eligible dependants. This insurance is intended to protect both the employee and the employer by offering a streamlined procedure for resolving occupational illnesses and injuries. It also makes sure that injured workers receive the treatment and support they need to heal and resume working as soon as possible.
4. Family and Medical Leave Act (FMLA): Under the law, employers with 50 or more employees are required to provide up to 12 weeks of unpaid leave to eligible employees for certain family or medical reasons like birth or adoption of the child, to care for child, spouse, or parent, to care for the service member, or to take care of themselves from illness or injury.
5. Paid Time Off: This includes a range of paid time off leaves, also known as PTO. This can include vacation time, sick leave, and personal days. Paid time off policies can differ from company to company. The goal is to give employees some time away from work to recover, recharge, and maintain a good work-life balance.
6. Life Insurance: Many employers provide life insurance coverage to their employees so that their beneficiaries will have financial support in the event of the employee’s death. As part of their benefits package, employers can help their employees plan for the future and reduce their financial burdens in the event of an unexpected loss with life insurance.
7. Education Assistance: Some employers may offer tuition reimbursement, scholarships, access to training programs, or other educational benefits to employees who want to pursue additional education or training. This assistance is offered to help the employee grow professionally and personally in their life and career.
8. Employee Discounts: As an added perk, employers may offer employees discounts on products or services provided by the company or other businesses. Employers can raise morale and cultivate a sense of loyalty and appreciation among their workforce by giving them access to these discounts.
9. Commuter benefits: Employers may offer commuter benefits, such as transit passes, parking reimbursements, carpool incentives, bicycle commute expenses, flexible spending accounts, etc., reducing their transportation expenses and encouraging employees to reduce their impact on the environment.
10. Wellness programs: This is one of the most increasingly popular benefits that employers offer to promote healthy habits among employees. Employers may offer wellness programs like gym memberships, on-site health fitness classes, health coaching, mental health support, etc. This benefit ensures the health and well-being of the employees and boosts their productivity and promotes employee morale and work-life balance.
Final words
Fringe benefits can be an important factor for employees when considering job offers or evaluating their overall compensation package. However, some of these fringe benefits are taxable for both employer and employee, and some of them can be exempted from the tax up to a certain limit. If you want to learn more about the taxation of fringe benefits then check out Compliance Prime’s website.
