How Fringe Benefits Work
The various fringe benefits that are provided to employees vary from one
company to another, since the employer can choose the benefits that will be
provided to employees during a certain period. Employees are given the
chance to select the fringe benefits that they are interested in
during recruitment.
Whether they are interested in a company car, taking an employer-paid gym
membership or education financial assistance, the employee is at liberty to
take the options that provide maximum comfort at their current position in
the company. With retail employers, employees may also be provided with
employee discounts, gifts, and no-additional-cost services.
Although the goal of providing fringe benefits to employees is to ensure their
comfort at the workplace, it also helps the company stand out for potential
employees. In highly competitive markets, employers may find it challenging
to retain top employees on salary alone. Fringe benefits serve as additional
compensation.
Providing unique fringe benefits to employees helps the company stand out
from its competitors. It provides a greater opportunity to attract high value
and talented employees from schools or from competing companies.
Types of Benefits
Fringe benefits can be categorized into two categories. Some benefits are
required by law and others are provided at the employer’s discretion.
1. Fringe benefits required by law
The mandatory fringe benefits are intended to provide employees with
medical care, mitigate them from economic hardships in the event they lose
employment, and provide them with retirement income to sustain them
during retirement. The following are some of the mandatory fringe benefits
that employers are required to provide:
Health insurance
This fringe benefit is contained in the Patient Protection and Affordable Care
Act. It requires businesses that employ more than 50 people to provide
healthcare plans, and employees are required to have health insurance
coverage. The health care plans cover visits to primary care physicians,
specialist doctors, and emergency care.
Unemployment insurance
The Federal Unemployment Tax Act (FUTA) requires employers to pay a
federal and state unemployment tax to the Department of Labor, which
provides wages, training, and career guidance to employees who become
unemployed due to no fault of their own. Such benefits are meant to provide
brief monetary assistance to unemployed citizens who meet the requirements
of the act.
Medical leave
Businesses that employ over 50 employees are required by law to provide
family and medical leave to an employee who has worked for over one year in
the company. The medical leave is unpaid, protected, and can last up to 12
weeks.
Worker’s compensation
The worker’s compensation benefit is administered by the Department of
Labor to federal workers who are injured at their workstation or acquire an
occupational disease. Employees are provided with medical treatment, wage
replacement benefits, rehabilitation, and other benefits. The compensation
requirements vary by state, and injured employees should contact their state
worker’s compensation board.
2. Fringe benefits not required by law
The following benefits are provided at the employer’s discretion. On the side
of the employer, most of these benefits are taxable, but with certain
exceptions. Examples of these fringe benefits include:
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Stock options
Disability insurance
Paid holidays
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Education reduction
Retirement planning services
Life insurance
Paid time off
Commuter benefits
Achievement awards
Fitness training
Employee discounts
Meal plans