1. Definition of fringe benefits
Employee benefits (also called fringe benefits) are various non-wage compensations provided to employees in addition to their normal wages or salaries.
2. Purpose of fringe benefits:
The purpose of employee benefits is to retain people in the organization and not to stimulate them to greater effort and higher performance.
3. Advantages of fringe benefits:
Advantages for employer
• Improves efficiency and productivity as employees are assured of security for themselves and their families.
• Premiums are tax deductible as corporation expense, which means savings with quality coverage.
• Helps attract and retain better qualified employees.
• Provides high risk coverage at low costs easing the company’s financial burden.
Advantages for employees
• Employees with personal life insurance enjoy additional protection.
• Confidence in company’s schemes boost staff morale and pride in company.
• Employees enjoy cheaper rates negotiated through their employer than they could obtain as an individual.
• Peace of mind leading to better productivity as employees are assured of provision for themselves and families in any mishap.
4. Types of fringe benefits:
• Premium Payments: This is the period of time a worker has worked, and payment is based on daily or weekly.
• Payment for time not worked: Which include payment for sick leave and for time during which an employee is under medical care. Payments for holiday, vacations, call back time, dressing time, portal-to-portal time and wet time.
• Payment for employee service: This include Cafeteria subsidies, union credit, house financing etc.
• Payment for special duties: Such as working on grievance redressal procedures and labour contract negotiations.
• Payments for health & Security benefits: These include retirement plans, social security payments, Saving plans, Profit sharing plans, Group Life Insurance etc.
• Other expenditure: Like holiday bonus, on educational reimbursements, employee uniforms, work cloths, supper money or meal allowance etc.
Each company, organization can apply different types of benefits for their employees.
Popular types of employee benefits can include ones as follows:
1. Medical insurance
2. Disability insurance
3. Life insurance
4. Retirement benefits
5. Domestic partner benefits
6. Paid time off
7. Fringe benefits
Dependent care assistance plan is an employer benefit plan that provides employees with dependent care assistance, such as paying for or providing qualified child and dependent care services necessary for them to seek or obtain gainful employment or remain gainfully employed.
Flexible benefit plan is a benefit program regulated under IRC 125 (a type of US labor law) that offers employees a choice between permissible taxable benefits (including cash) and nontaxable benefits such as life and health insurance, vacations, retirement plans and child/dependent care.
Although a common core of benefits may be required, the employee may determine how his or her remaining benefits dollars are allocated for each type of benefit from the total amount offered by the employer.
HSA is a tax-free account that can be used by employees to pay for qualified medical expenses. Contributions do not have to be spent the year they are deposited.
Money in the account earns interest and accumulates tax free, so the funds can be used now and in the future.
If an employee leaves the job, he or she can take the account with him or her and continue to use it to pay for qualified healthcare expenses.
To be eligible for a Health Savings Account, an individual must be covered by a High Deductible Health Plan (HDHP), must not be covered by other health insurance (does not apply to specific injury insurance and accident, disability, dental care, vision care, long-term care), is not eligible for Medicare and can’t be claimed as a dependent on someone else’s tax return.
Paid time off (PTO) is a benefit program granting employees a specific number of vacation or personal days off which that are paid by the employer.
The number of days is generally based on the employer’s policy for accrual of paid time off.
Flexible Benefits Program is an individualized plans allowed by employers to accommodate employee preferences for benefits.
A flexible spending arrangement (FSA), or Flexible Spending Account, as they are commonly called, is one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer in the United States.
An employer-sponsored retirement plan where employee benefits are sorted out based on a formula using factors such as salary history and duration of employment.
Investment risk and portfolio management are entirely under the control of the company.
There are also restrictions on when and how you can withdraw these funds without penalties.
Vision plans are mostly supplements to HMO or PPO plans, or can be purchased separately. These cover basic eye examinations, and sometimes discounts on eye correction equipment, but do not include surgical procedures.