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Fringe benefits are fundamental organizational programs that boost the productivity and motivation of employees. You can offer several types of compensation to introduce and retain the top talent in your organization. Fringe benefits are 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. These plans also assist in the retention of staff and boosting 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 describes fringe benefits and their examples to understand how to use them to your company’s advantage.
Fringe Benefits Types
Fringe benefits are compensation or perks offered to an employee in addition to their regular salary. These are extra employee benefits and are not a 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 helps you design a better employee benefits package. You must learn about fringe benefits to understand how these perks impact your business’s budget and employment taxes.
Fringe benefits are both monetary and 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.
Fringe Benefits Examples
Here are a few fringe benefits examples that will help you get started with developing excellent fringe benefit programs.
1. Taxable Fringe Benefits
As an employer, you must know that a few of the fringe benefits you offer are taxable. Perks and compensations with high value are taxable. Taxable benefits are included in the employee’s gross income. A few other benefits are subject to taxable income, social security, and medicare taxes.
After finding out how to calculate fringe benefits, you report these benefits on your wage and tax statement, known as Form W-2. For calculating federal income tax withholding, you need the fair market value of the fringe benefit. For calculating social security and medicare taxes, you need to withhold the employee and employer’s share of taxes based on the applicable fringe benefits tax rate.
A few 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 also come under the fringe benefits taxable category.
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Here are the taxable fringe benefits examples:
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. Employees use paid vacation days for purposes, such as leisure, travel, or personal errands. Paid vacations improve the mental health, work-life balance, and productivity of your employees. It also reduces stress levels and improves 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 allows employees to use the facilities of an athletic club at a discounted rate. This benefit improves the health and well-being of your employees. It helps them relieve stress, improves their work-life balance, and increases 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 expensive, it generates 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 helps employees save money on housing costs. It also helps them find a comfortable and affordable place to live.
2. Non-Taxable Fringe Benefits
Not all fringe benefits are taxable. There are a few non-taxable fringe benefits that you can offer to your employees without calculating taxes. These benefits exclude from employees’ 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. Here are a few common tax-free fringe benefits.
Educational assistance enables employees to get expense reimbursements for their educational expenses. This type of fringe benefit is non-taxable and helps employees enhance their skills and knowledge.
Employee discounts are a great way to show appreciation to employees. Discounts allow employees to purchase goods and services at a discounted price from your company. Discounts on goods and services include items and perks from clothing to travel.
Accident and Health Benefits
Accident and health benefits cover the employee’s cost of accidental and medical healthcare expenses. These types of fringe benefits include health savings accounts that you provide to your employees. They are available to only those employees who have a high-deductible health plan.
Examples of accident and health benefits are dental, eye care, prescription drug, and health savings accounts. Long-term care and short-term disability insurance offer also come under fringe benefits.
Retirement plans include 401(k) plans and pension plans as fringe benefits. These plans relieve employees of 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 employees. Companies offer different policies with different coverage amounts. Employers decide the amount of coverage that will cover employees’ expenses.
3. 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. Some examples of legally required fringe benefits are unemployment insurance, workers’ compensation, family and medical leave, and social security.
Review your country’s labor laws to learn about this type of fringe benefit. Consult with a lawyer to ensure that you provide the legally required benefits to your employees. You must get assistance from benefits professionals to ensure that you provide the legally 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.
Know that employers provide limited compensation, 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 run by the state government. It covers all businesses in the state and compensates injured and ill employees as a result of their job.
This fringe benefit involves contributions from employers through payroll taxes. The unemployment insurance program is beneficial for employees who lose their job. With this benefit plan, 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. Both part-time and full-time employees can leverage this plan.
Family and Medical Leave
This fringe benefit covers employees who need vacations 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 leaves per year.
For private-sector employers, the company must cover at least 50 employees by this act. The employee must have worked for the company for at least 12 months as an eligibility criterion for this benefit. Employees are eligible for this type of paid leaves in case of severe health conditions, pregnancy, and childbirth.
These types of leaves include military caregiver leaves. Military Caregiver Leave is a type of leave that allows employees to take time off from work to care for a family member who got 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. However, this fringe benefit is not mandatory in all 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 for disabled or retired workers. The employer and employees contribute to these programs through payroll taxes. The federal government administers these programs.
Employers must 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.
Fringe benefits are a great way to compensate your employees and boost their morale and energy for work. They help boost employee productivity which benefits the organization’s growth. Know that offering fringe benefits is a challenging task. There are several advantages and disadvantages of fringe benefits that you must research well before drafting the benefits plan. However, you can avoid the risks by implementing the program in a step-by-step way keeping in view the state labor rules, the organization’s policies, and target goals.
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