As a business owner, fringe benefits are a vital constituent for boosting the productivity and motivation of your employee. You might have to offer several types of compensation to introduce and retain the top talent in your organization. It is also an effective tool to engage your employees in various business operations.
Offering fringe benefits is an excellent way to appreciate your employee’s contribution and loyalty to the company. Fringe benefits are a great way to show your employees that you appreciate their contributions to the company. They can also assist in the retention of staff and boost employee engagement.
If you are on your way to providing fringe benefits to your employee, learning about Fringe benefits examples will give you a better understanding of the entire concept. This article will explore fringe benefits and provide you with fringe benefits examples to offer you a better understanding of how to use them for your company’s advantage. So, let’s get into the article.
Fringe Benefits Types
Fringe benefits are compensation or perks given to an employee in addition to their regular salary. These are provided as an extra employee benefit and are not considered part of the employee’s regular salary.
As an employer, learning about various fringe benefits, their types, and how you can offer such benefits to your employees will help you design a better employee benefits package. Learning about fringe benefits enables you to understand how these perks can impact your business’s budget and taxes.
Fringe benefits can be either monetary or non-monetary. Monetary fringe benefits include health insurance, vacation pay, and retirement plans. Non-monetary fringe benefits include company cars, lodging on your business premises, free tickets, employee stock options, and gym memberships. Certain fringe benefits are required by law, while other benefits are discretionary.
Fringe Benefits Examples
Here are some fringe benefits examples that can help you procreate an excellent employee benefits package to get you started.
Taxable Fringe Benefits
As an employer, you should know that some fringe benefits you offer your employees are taxable. Usually, perks and compensations with high value are taxable. Taxable benefits are included in the employee’s gross income. Some fringe benefits are also subjected to federal income tax withholding, Social Security, and Medicare taxes.
You need to calculate the fringe benefits after providing them to your employees. You can also report these benefits on your Wage and Tax Statement, also known as Form W-2. For calculating federal income tax withholding, you will need the fair market value of the fringe benefit. For calculating Social Security and Medicare taxes, you will need to withhold the employee and employer share of taxes.
Some examples of taxable fringe benefits are company cars, housing allowances, free tickets, bonuses, vacation, and holiday pay. Athletic club membership, country club dues, and tuition reimbursement are also considered taxable fringe benefits. Let’s learn about some common taxable fringe.
Bonuses are one-time payments that you offer to your employees in addition to their regular salary or wages. These are given as an extra employee benefit and are not considered part of the employee’s regular salary. They show your employees that you appreciate their contributions to the company.
Paid vacation is an excellent way to show your employees that you appreciate their contributions to the company. Paid vacation days can be used for any purpose, such as leisure, travel, or personal errands. It helps improve the mental health, work-life balance, and productivity of your employees. It can also help reduce stress levels and improve employee morale.
Paid vacation is a type of paid time off where the employee is given a set number of days off from work each year. The number of days off depends on the company’s policy and the employee’s years of service.
Athletic Club Membership
Athletic club membership is a type of fringe benefit that allows your employees to use the facilities of an athletic club at a discounted rate. This benefit can help improve the health and wellbeing of your employees. It can also help them relieve stress, improve their work-life balance, and increase productivity.
Health Resort Expenses
If you want to cover health resort expenses for your employee, you can reimburse them for their costs while staying at a health resort. Health resorts offer various health and wellness services, such as massages, fitness classes, and spa treatments. Though covering health resort expenses is costly, it can have positive effects on your employees’ physical and mental health.
If you offer a housing allowance to your employees, you can reimburse them for their costs while renting or buying a house. This benefit can help your employees save money on housing costs. It can also help them find a comfortable and affordable place to live.
Non-Taxable Fringe Benefits
Not all fringe benefits are taxable. You can offer some non-taxable fringe benefits to your employees without calculating taxes. These benefits are not included in the employee’s gross income and are not subject to income tax withholding, Social Security, and Medicare taxes.
Examples of nontaxable fringe benefits are adoption assistance, retirement planning services, child care, commuter assistance, educational assistance, and employee discounts. Flexible spending accounts, health savings accounts, employer-provided cell phones, and group-term life insurance coverage are also considered non-taxable fringe benefits. Let’s take a look at some of the common tax-free fringe benefits.
You can also offer educational assistance as a fringe benefit. It enables your employees to get expense reimbursements for their educational expenses. This type of fringe benefit is non-taxable and can help your employees enhance their skills and knowledge.
Employee discounts are a great way to show your appreciation to your employees. They allow your employees to purchase goods and services at a discounted price from your company. Discounts on goods and services can include anything from clothing to travel.
Accident and Health Benefits
You can offer your employees various accident and health benefits as a fringe benefit. These benefits can help your employees cover the cost of medical expenses. You can also offer health savings accounts to your employees. They are only available to employees who have a high-deductible health plan.
Examples of accident and health benefits are dental, eye care, prescription drug, and health savings accounts. You can also offer long-term care and short-term disability insurance as fringe benefits.
You can offer your employees retirement plans, such as 401(k) plans and pension plans, as a fringe benefit. Such plans help free your employees from the financial burden of retirement. It also allows them to save for their retirement.
Group-Term Life Insurance
Group-term life insurance provides life insurance coverage to your employees. Companies offer different policies with different coverage amounts. You can decide the amount of coverage you want to provide to your employees. You can also choose to increase or decrease the coverage amount.
Legally Required Fringe Benefits
Some fringe benefits are required by law. Legally required benefits depend on the country you live in, the size of your company, and the number of employees you have. Some examples of legally required fringe benefits are unemployment insurance, workers’ compensation, family and medical leave, and social security.
To learn about this type of fringe benefits, you need to review your country’s labor laws. You should also consult with a lawyer to ensure that you provide the legally required benefits to your employees. You can also get assistance from benefits professionals to ensure that you provide the required benefits. Here is a brief description of some legally required fringe benefits.
Workers’ Compensation Insurance
Workers’ compensation insurance provides benefits to employees who are injured or ill due to their job. The state ensures that workers injured on the job receive compensation to help them cover their medical expenses and lost wages.
The compensation provided by employers is limited, and it varies from state to state. Waiting periods, maximum benefits, and coverage also differ from state to state.
Workers’ compensation covers self-insurance and state-run insurance. Self-insurance helps injured or sick employees pay their medical bills. It also covers a portion of their lost salaries. State-run insurance is an insurance program that is run by the state government. It covers all businesses in the state and compensates employees who are injured or become ill as a result of their job.
This fringe benefit involves contributions from the employers through payroll taxes. The unemployment insurance program provides benefits to employees who have lost their job. The benefits help the employees cover their living expenses while looking for a new job.
The state government administers the unemployment insurance program. The cost of benefits and the eligibility requirements vary from state to state. It is offered to both part-time and full-time employees. It is usually provided to employees who lost their jobs due to no fault of their own.
Family and Medical Leave
This fringe benefit covers employees who need to take time off from work to care for a family member or their medical condition. The Family and Medical Leave Act (FMLA) requires employers to provide employees with 12 weeks of unpaid leave per year.
For private-sector employers, the company must have at least 50 employees to be covered by this act. The employee must have worked for the company for at least 12 months to be eligible for this benefit. Employees are eligible for this type of paid leaves in case of severe health conditions, pregnancy, and childbirth.
This type of leaves also includes Military Caregiver Leave. Military Caregiver Leave is a type of leave that allows employees to take time off from work to care for a family member injured while serving in the military.
This type of insurance provides benefits to employees who cannot work because of a disability. It offers half of the employee’s salary for a certain period. This fringe benefit is not mandatory in all the states.
The structure of disability insurance is much like that of medical insurance. Employees can pay for the coverage with their own money, or the employer can pay for the insurance.
Social Security and Medicare
Social security and Medicare are provided to disabled or retired workers. The employer and employees contribute to these programs through payroll taxes. The federal government administers these programs. They are not mandatory for all employers.
Employers need to withhold 6.2% of employees’ wages for social security taxes and 1.45% of employees’ salaries for Medicare taxes. The employer also needs to pay 6.2% of the employee’s wages for social security taxes and 1.45% of the employee’s wages for Medicare taxes.