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Purpose of Fringe Benefits

26 Jul 2021

A man holding a cell smart phone next to his ear, looking out into a window

If you are like many people, you probably have never heard of fringe benefits. These are some perks that companies can offer to their employees in addition to a traditional salary or wage.

Companies might provide these for various reasons, but they often want to attract top talent and reward hard work. This blog post will discuss:

  • Why companies might offer fringe benefits
  • How they may benefit your employer and yourself!
  • Which fringe benefits a company should consider

What Is a Fringe Benefit?

A fringe benefit is a work-related perk that is not in an employee's salary or wage. It may include company-sponsored health insurance, retirement plan matching contributions, tuition reimbursement programs and more.

Core Benefits of Fringe Benefits

Health insurance:

Studies show that health care costs are the number one cause of personal bankruptcy in the United States. By providing employees with a company-sponsored healthcare plan, you can help them maintain their family's financial stability.

Retirement Plan Contributions:

Employees need to have enough funds saved for retirement, and studies show that 401k contributions alone will not be sufficient by 2050. Providing your staff members with matching donations on a retirement account means they'll have more money when it comes time to retire.

Tuition Reimbursement Programs:

If you're an employer who offers tuition reimbursement programs as part of fringe benefits, this is something to seriously consider if competitiveness or retention rates are important factors for success within your business.

Increased productivity and efficiency: Fringe benefits are for increasing productivity and efficiency for your workforce. They're able to stay healthy, focus on their work more intently, and can also find success through a career with you that is fulfilling both personally and financially.

Financial stability:

As an employer who offers fringe benefits as part of the employment package, these perks must provide financial stability for your employees and for yourself to ensure retention rates or competitiveness within the business sector. 

Doing this means offering enough incentives to feel valued at work while increasing productivity due to less stress outside of office hours.

Employee benefits:

These benefits are an essential part of the employment package. They may also include employee discounts, a great retirement plan, various assistance programs, and athletic facilities.

Advantages of Fringe Benefits

Offer a sense of security for employees: A fringe benefit is an additional way to offer your staff members the sense of security they need. Every day, people are struggling with finding employment and some end up scraping by on part-time jobs that don't provide enough benefits or stability. 

Providing them with health insurance, retirement plans, tuition reimbursement programs, and more can help alleviate this struggle because there's less financial stress outside of work hours.

Increase productivity levels:

Providing incentives like these as company-sponsored perks means that employee morale will increase while their productiveness levels too (in addition to being more competitive in the workplace). It'll also reduce absenteeism rates which save employers money when dealing with HR issues related to team dynamics.


Employers who offer fringe benefits as part of their employment package will reap the rewards in the long term. These perks are an investment into your employees' happiness and well-being because they'll be more productive at work while providing a sense of security outside of office hours too.

How Do Fringe Benefits Work?

As mentioned earlier, fringe benefits are paid for by the employer and are not part of the employee's pay. There are various types of fringe benefits that you can offer as part of your company-sponsored perks, including but not limited to:

  • Company-sponsored health insurance coverage plans
  • Tuition reimbursement programs
  • Retirement plan contributions
  • Paid time off per year (PTO)

You're able to choose what type of fringe benefit package best suits your business needs when it comes down to the business expenses vs reward ratio. They all come with different price ranges depending on how many incentives you provide employees with each year. 

Also, consider the achievement awards, additional-cost services you may need to cut down when incorporating this package.

Things To Consider Before Implementing a Fringe Benefits Program

Before starting up a new fringe benefit program within your company, it's essential to consider the following:

  • How much does this program cost per employee?
  • Does your company currently offer any other incentives that you might cover under a fringe benefit package?
  • What type of benefits will your employees appreciate most, and are they in need of right now based on their concerns or requirements outside of work hours?

Why Are Fringe Benefits Important?

The purpose of fringe benefits is to provide an additional level of compensation for workers, independent contractors and their families. 

There are many different types of fringe benefits throughout the calendar year, including healthcare insurance, social security, group-term life insurance, dental or vision coverage, retirement planning services and plans, options such as 401(k), worker's compensation, lower business expenses, exemption from certain costs, flexible spending, achievement awards, holiday gifts, expense reimbursement, freedom to be an independent contractor, educational assistance programs or textbook discounts. 

These help keep employees competitive in the work market during the calendar year by giving them access to valuable resources that they might not otherwise be able to get on their own without sacrificing a more significant percentage of their paycheck.

What Do You Feel Would Happen if These Types of Benefits Were Eliminated?

If you eliminated benefits like health insurance, retirement plans or educational assistance from the workplace, it would disproportionately affect low- and middle-income earners. 

Employees who cannot obtain these benefits on their own either due to a high deductible or unaffordable premiums will be at risk for an increased financial burden that can impact productivity negatively. It also limits the number of positions lower-income workers may apply for in order not to exceed their allotted budget.

Which Fringe Benefits Should a Company Consider?

Internal revenue services help the company and its employees. Whether for personal use or family, carry out the proper valuation of the benefits to know them.

Mental Health and Wellness

A fringe benefit will help maintain mental health and wellness. Your employees' mental health is very crucial as it can affect their performance. 

You want to make sure your company shows they care for the team's wellbeing by offering a wide range of benefits that promote this wellbeing, including medical coverage. Your employee can also use dependent care assistance for personal use or a group.

Medical Coverage

You should consider providing medicare coverage to your staff if you have more than 50 full-time hourly workers or 25 full-time salaried workers to offer them some peace of mind when taking off work sick or injured because the need arises. 

This option protects against any costs incurred from illness, such as prescriptions, doctors visits and hospital bills, and will help your employees to feel more confident in their decision.

If an employee has a severe medical condition, they may need to take time off work during which they won't be receiving any gross income and may not have been able to save up for this period away from work. 

The employer should offer the option of paid sick leave where possible as part of its fringe benefits packages. This way, if anything does happen when it's least expected, at least you know there is some financial back-up available for them - even if it's only a few days' worths each year! 

Paid sick leave is an excellent option for those out of work, ensuring they don't have to worry about finances while recovering.


The employer should consider providing a pension to the employee to encourage them to stay with your company. There are two types of annuities:

Defined Contribution

This pension is when you put in money every month and then receive a payout at retirement age - which means there is no guarantee that they'll have enough saved up, although some employers offer matching contributions.

Defined Benefit

In this case, the employer pays out monthly payments based on salary during their years served and provides additional funds into a fund until they retire or resign from the position. 

When considering whether employees will live off these benefits alone once retired, it would seem safer for both parties involved to choose a defined benefit because this is more predictable than the defined contribution.

Training and Development

The employer needs to provide training and development for personal use to grow in their role, potentially leading them on a path of growth within the company. Team members should also have the opportunity to take part in external courses related to their field of work, which will help them become better at what they do - as well as helping your business stay competitive!

Flexible Working Arrangements

Flexible working hours should be in the mix as it will allow your employees to tackle the day in different ways and with more control. 

This aspect is crucial for you because everyone can't work at one time, so this could help ensure that there are no staffing gaps when needed most - which would also mean increased productivity from staff members who do want to work during those times!

Unemployment Insurance

If your company employs more than 20 full-time employees, then you may need to offer unemployment insurance. This type of benefit protects the employee if they lose their job and provides them with financial support until they find another one. 

It's worth noting this isn't necessary for all companies as it varies depending on factors such as size and location - but remember, when considering what fringe benefits are suitable for your employees' wellbeing, not just yours!

Voluntary Benefits

Voluntary benefits can help boost an individual's wellbeing by giving them access to things that might be out of their standard day-to-day budget, which otherwise wouldn't have been possible without these types of extras from work. 

An example would be sending someone who has an illness themselves to a regular course of treatment such as physiotherapy. You can offer this in the form of a gym membership, private healthcare or other sorts of benefits like these which will help your employees take care of their health and wellbeing while they're working for you!

Maternity and Paternity Leave

An employer needs to offer maternity or paternity leave. The reason is that their employees can take time off work after they've had a child without losing any earnings, which would be happening if you worked somewhere else where there are no such benefits available - this way, it doesn't feel like a gamble.

In addition, doing this may encourage some mothers who are considering going back into employment sooner rather than later because of financial constraints but don't want to worry about how their baby will be cared for while they're gone.

Dependent care assistance is an option for those who can, and wish, work while juggling children or other dependents.

Paid Vacation Days

With paid vacation days, employees won't feel pressured when taking time off and will be more satisfied with working conditions, while the company may increase productivity. In addition, paid vacation days are a great option as they will give employees time to be with their families, catch up on sleep, and relax - all things that can positively affect mental health!

Educational Assistance

Educational assistance is another excellent benefit for employees as it can help them get a better job and even advance in their current position. This benefit will also be an advantage for your company because if people are more educated, they will likely have increased knowledge of what you're doing - which means they'll stick around longer!

Childcare Services

When childcare facilities or adoption facilities are available onsite or nearby, this helps the employee stay focused on work and provides peace of mind that there's someone who will look after the children while gone from home, making it worth considering where possible.

Transport Benefits

Transport benefits are an essential part of a good fringe benefits package. They can provide employees with the opportunity to save money and time and even improve their health while commuting - all while working for your company. Of course, a commuter may use more money to get to the business premises, but they will reap more with great commuting benefit plans.

Pet-Friendly Policies

For animal lovers, pet-friendly policies are a great way to stay sane while on the job. Doing this will also help your employees feel less stressed because they'll have something else to take care of - which is always necessary for them!

Meal Plan Options

A meal plan option can be helpful as it means you don't need to stop working or break away from what you're doing to get a bite and still have the opportunity to get back into it later. This option is also critical if an employee doesn't want their workday interrupted by having food delivered all the time but has no other choice.

Fringe Benefits Not Required by the Law:

Some fringe benefits not required by the law include but are not limited to:

  • Onsite daycare centres
  • Offices with a gym facility onsite for employees use, of course, at no cost.
  • Unlimited vacation time or endless sick days and the option to work from home when needed.
  • A work uniform or clothing the employee is required to wear only at work.
  • A company car for commuting to and from work

What About Tax?

When dealing with taxes, you should look at the type of internal revenue service, tax returns, employment taxes, tax withholding, employee stock options, and taxable fringe benefits. In addition, the market value of the fringe benefits is not subject to income tax. Proper valuation of surcharges will increase the market value of the benefits. Check out the employer's tax guide to learn more.


The benefits offered by a company are an essential thing to consider when deciding on potential work opportunities. The reason is that they can make the difference between someone who is happy and satisfied with their jobs or not - which means that it's worth taking into account before anything else.

For fringe benefits to be practical, there needs to be a proper valuation, clear communication, either by cell phones or emails, about what they offer for employees to have complete information and make sure you're aware of all your rights relating to this topic. Just make sure you don't sign any contracts without reading them first!

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