What Are Fringe Benefits?
Fringe benefits can make or break a company’s efforts to attract, recruit, and retain high-quality employees. Also known as voluntary benefits, they’re offered to employees as a supplement to their standard salary.
To remain competitive, fringe benefits can come in many different forms and be tailored towards individuals or teams. For example, some benefits may be offered to compensate for work costs, while others may be rewarded based on performance.
In this article, we take a look at the meaning of fringe benefits, provide examples, discuss benefits, and explain how to create an effective fringe benefits package.
What Are Fringe Benefits?
Fringe benefits are perks or additional compensation given to employees on top of their regular salary. Some fringe benefits will be awarded to all employees at a company and others may be given to specific groups or individuals.
They can come in the form of health insurance, retirement plans, meal subsidisation, commuter benefits, and much more. While most of them are taxable, some fringe benefits are nontaxable, such as life insurance.
Fringe benefits are seen as an important tool for attracting, recruiting, and retaining top industry talent. In very competitive sectors, they can often be the main point of differentiation when talented individuals are choosing what company to work for.
Therefore, knowing what fringe benefits are and how to use them is essential for any successful, forward-thinking business.
Examples of Fringe Benefits
Often determined by senior management and HR departments, the possible fringe benefits that can be offered are vast. In some cases, particular benefits are expected by an employee and offered by companies sector-wide. These are often referred to as mandatory fringe benefits.
In addition to mandatory benefits, a company is also likely to offer unique fringe benefits that help to attract employees and stand out from competitors. Here, we will provide examples of both types.
Flexitime
As workplaces continue to adapt and modernise, flexitime is now seen by many prospective employees as an essential fringe benefit. It allows staff members to create a working schedule that is flexible around their life commitments away from the office.
For example, employees may be able to choose when they start and end their day, when they take breaks, and any other considerations that impact the hours they work. The conditions of this arrangement will always need to be agreed upon by management.
This has become a hugely important fringe benefit for parents and workers with long commutes, as it means they can create a fairer work-life balance that’s also agreeable to an employer. In theory, with flexitime, everyone concerned is a winner!
Health and fitness
At a time when people are more health-conscious and keen to increase their daily exercise, health and fitness benefits are now a staple at most businesses. Whether it’s gym passes, discounted exercise classes, or cycle-to-work schemes, failure to offer fitness-related fringe benefits will see you fall short of your competitors.
This also applies to benefits that support employees with their mental health. For example, a business may choose to provide confidential therapy sessions or spa day offers to ensure employees feel valued and looked after.
Not only is this a benefit for staff members, but also for the company itself, as exercise and good health are vital for employees’ physical and mental well-being. Health and fitness fringe benefits can help to reduce illness, prevent depression, and boost overall mood and productivity.
Private medical care
Offering private medical care as a fringe benefit is now seen as essential. With health departments feeling the strain all around the world, private medical care ensures you (and often family members) have access to excellent medical care during times of need.
This becomes an even more valuable employee benefit for those with families or individuals, who without financial support wouldn’t be able to afford private care.
Services that are offered under private medical care work schemes can include:
- Consultations and treatments
- Surgery
- Dental treatment
- Counselling and psychotherapy
- Physiotherapy
Training and development
All employees want to progress and develop in their role, whether that’s to improve their professional development or look for a promotion. By offering a choice of training and development opportunities, a business is not only able to attract and retain the best talent, but also reap the rewards of having a more qualified workforce.
Whether it’s in the form of training courses, conferences, networking events, or leadership programmes, someone is more likely to work for a company if it can demonstrate that they’re able to progress while working for them.
In doing so, they’ll be able to see notable growth in a workforce’s capabilities and overall business performance.
Working from home
The COVID-19 pandemic fast-tracked what was already a fast-moving shift towards remote working, which allows employees to work from home where possible.
While some businesses have continued to facilitate their employees working from home whenever they please, many have now pivoted to hybrid models that allow them to work from home two or three days a week.
How generous a company is with this fringe benefit will often depend on business needs and the wider industry view, but many employees will completely dismiss an organisation that doesn’t offer it at all.
A lot of businesses will also offer working-from-home allowances, where employees get subsidies on equipment to support their remote working environment if they need them.
Paid overtime
A lot of employers will expect staff to work overtime without being rewarded for it, so companies that offer paid overtime as a fringe benefit will really stand out from the competition.
Offering this benefit will also incentivise employees to work harder, spend longer on complex tasks, and feel like their hard work is valued. As a business, it’s likely to lead to better workforce productivity and growth.
Rather than directly paying for overtime hours, some companies might offer additional holiday days or bonuses that equate to the amount of extra time a member of staff has worked. Either way, this benefit is seen as a real bonus when prospective employees are looking for new roles.
Childcare support
Whether it’s flexible working hours, childcare vouchers, family healthcare plans, or any other childcare support scheme, helping employees who are parents is seen as a positive way of showing a business cares about their welfare.
Juggling work and parenting can be incredibly stressful, especially for single mothers and fathers, so any workplace support can go a long way. By not offering childcare support, businesses may also find that their workforce isn’t very diverse and young talent who are starting families won’t consider them.
Social and entertainment
Life isn’t all about work, it’s also about having fun and enjoying new experiences. Fringe benefits packages that include social and entertainment perks always go down well with employees, from activity vouchers to discounts on short breaks.
It’s also important to think about organising work days out and making generous donations to social budgets, so employees feel motivated to work for the company and valued.
Get in touch with Red Letter Days Corporate to find out how we can help your organisation integrate employee experiences into your benefits offering. Whether it’s money off a three-course dinner or a trip to the West End to see a musical, you’ll find something suitable for your whole workforce.
What are the advantages of offering fringe benefits?
There are a whole host of advantages associated with offering fringe benefits. If you’re able to show that you care about employees and value the hard work they put in for the company, then you’re likely to attract and retain the very best talent. You’ll also be able to achieve a more diverse and interesting workforce.
Here are some of the advantages of fringe benefits that can positively impact your company.
Attract new hires
The working world is more competitive than ever before, so businesses are always looking for new ways of getting ahead of the competition. One way of doing this is through attractive fringe benefits.
The better your offering, the more likely you’ll be able to attract and recruit new hires, who will see real value in joining your business.
Increase employee retention
Not only will fringe benefits help to attract employees, but you’ll also be able to retain top talent already at your business. In competitive sectors, other companies are always looking to pinch your best workers with an improved benefit offering, so it’s important you stay on trend and ahead of the game.
Employee surveys and feedback forms are always good tools for informing fringe benefits packages, allowing you to find out what makes your staff tick.
Improve employee experience & engagement
Ultimately, an excellent fringe benefits package will help to improve your employees’ experience at work and lead to better engagement. The more you make them feel valued through experience and loyalty incentives, the more likely they’ll be motivated to do their best for the company.
Ensuring your employees arrive at work with a smile on their face every day is a win-win for everybody.
Is salary sacrifice a fringe benefit?
Salary sacrifice involves an employee giving up a portion of their salary to receive a fringe benefit. This is commonly seen with tax-free benefits such as childcare support or pension contributions.
Whether it’s seen as a fringe benefit depends on the individual. Some people may see it as a benefit because it shows the employer recognises the needs of its employees and is accommodating. However, others will see it as a negative and not a ‘true’ fringe benefit, as other companies may offer services like childcare support without the cost coming out of an employee’s salary.
Are fringe benefits classed as income?
As fringe benefits are a form of compensation, they are mostly taxable. Unless it’s stated in an employee’s tax guide that a benefit is explicitly exempt from taxation, an employee will need to include the price of the benefit at the fair market value in their taxable income for the corresponding year.
The fair market value can be calculated by working out the amount the employee would pay for the same benefit at retail.
Some fringe benefits that are usually exempt from taxation include:
- Accident and health benefits
- Commuting and transportation
- Educational assistance
- Employee discounts
- Health savings accounts
- Meals
- Retirement planning services
However, some of these fringe benefits aren’t fully exempt, so employees should always double-check before they commit to using one.
How to create an effective fringe benefits package
If you want to attract the brightest talent in your industry and retain your best employees, then you’ll need an effective fringe benefits package in place. In doing so, you should see an improvement in engagement levels and productivity, helping to boost the overall performance of your business.
Simply follow this advice to have the best fringe benefits package in the business.
Make sure fringe benefits have a purpose
From a business perspective, you need to ensure your company objectives and benefits are aligned, otherwise enforcing them won’t be advantageous to your organisation.
Similarly, you need to understand the needs of your employees and what makes them tick, both as a collective unit and as individuals. Surveys and questionnaires can help to determine what benefits they would value the most.
There is no point in creating a fringe benefits package that has zero purpose for either the business or employees, so it’s important to carefully consider what schemes and initiatives are best for both parties.
Offer core security benefits for all
It’s good practice to have a list of mandatory benefits that are available to all employees, such as health care schemes and enhanced pensions, as unequal access could lead to tension and inequality. Such fringe benefits will then become synonymous with your business and help raise the company’s profile.
Topping up the mandatory benefits with additional unique fringe benefits is also advised, using factors such as seniority, length of service, or performance to tailor benefits to individuals and different teams. This is where flexible benefits come in useful.
Effectively communicate fringe benefits with employees
Finally, it’s important to communicate available benefits to new and existing employees, so they’re able to maximise the impact of the benefits offered. It’s a waste of business time and resources if staff are unaware of what’s on offer and can also be frustrating from an employee perspective if they’re kept in the dark.
Newsletters, email reminders, and posters can all help to spread the word. You should always ramp up your communication techniques when a new fringe benefit is announced.
Learn how we can help you design an attractive fringe benefits package
Rewarding good work and behaviour encourages a culture where employees feel valued for their contributions. It also builds loyalty and a desire to drive positive change in an organisation.
If you need expert help to develop a best-in-business fringe benefits package, then get in touch with a member of our team.
With our support, you can improve your brand’s reputation, while attracting prospective job candidates and retaining existing talented employees. Find out more about employee recognition, rewards, and incentives today.