Importance of Fringe Benefits
Fringe benefits are additional rewards usually not related to job performance that employees receive form their organizations for being members of the organization and for their positions in the organization.
Fringe benefits are also known as employee benefits, service programs, wage supplements, supplementary compensation, non-wage benefits, hidden payroll, indirect benefits, etc.
The term fringe benefits are preferably used because the employer-provided benefits such as paid holidays, pensions, etc are on the fringe of wages.
Almost all organizations provide fringe benefits to their employees.
These benefits continue to grow in importance. Several reasons account for offering fringe benefits;
- Attraction and retention.
- Tax considerations.
- Employer’s preference.
- Social security.
- Human relations.
Attraction and retention
The main reason for providing fringe benefits is to attract and retain efficient employees.
Tax considerations
Fringe benefits are indirect remuneration, which is preferred by employees in tax considerations. Any increase in direct pay adds one’s taxable income. But most fringe benefits are not taxed.
Employer’s preference
Employers also prefer indirect pay (fringe benefits) to direct remuneration because any increase in benefits less distorts salary structures. It is also easy to explain to shareholders as the social responsibility of the company.
Social security
Fringe benefits in the name of social security measures provided to the employees against certain risks such as accidents and occupational diseases motive workers to be more productive.
Human relations
fringe benefits are directed to satisfy the employees’ needs such as economic, social and psychological. Thus, if fringe benefits are allowed, it becomes easy to improve and maintain good human relations.
Finally, it can be said that an organization with the introduction of fringe benefits, seeks to increase employee morale and motivation, remain cost-effective and introduce changes without much resistance.
