What is meant by fringe benefits?
Ever wondered what the meaning of fringe benefits is? Look no further. We’ve covered the highs and lows of fringe benefits here, just for you.
What are fringe benefits?
Fringe benefits are essentially any type of non-monetary compensation provided to an employee or director at work.
Fringe benefits are a type of compensation employers can give employees which is outside of their stated wage or salary.
You may have come across the term benefits in kind. This is technically another term for fringe benefits. Fringe benefits play a major part in reward and recognition packages. Examples of fringe benefits might include medical or dental insurance, a company car, housing allowance, or even educational assistance.
How do you know your fringe benefits?
Perks will vary from position to position in the company – not everyone will be entitled to the same fringe benefits. Certain fringe benefits are offered to employees depending on the classification and the value placed on the employee’s position.
Employers normally provide all employees with some sort of annual personalised benefits statement. Sometimes this is part of the contract, otherwise it’s general a written document that all employees should receive.
What are the benefits of having fringe benefits?
What a mouthful. You can bite a fair chunk of advantages off of fringe benefits. Here are our top three:
1. Talent Acquisition
Often, employees will offer unique fringe benefits to attract certain types of potential hires. Think of more techy companies, for example. They’re more likely to provide employees with iPads, company laptops or mobile phones. A fitness company, on the other hand, are likely to provide gym memberships or discounts on sportswear.
One of the main ideas behind fringe benefits is that they make companies look more attractive. Benefits appeal to new talent, so advertising the different perks your company has on offer will attract more talent to recruit.
Beyond traditional health-care plans and pensions, employees nowadays expect a great range of benefits that reflect their changing needs and lifestyles. Meeting these expectations will give employers an opportunity to differentiate themselves in a competitive market for talent.
A well-structured benefits system can help to retain staff by giving them a reason to stick around other than just being paid for doing their job.
3. Improved employee experience
One of the main reasons you should consider fringe benefits as an employer is the fact that it can help improve your employee’s experience at work. Fringe benefits have been proven to alleviate some of the most common causes of stress among employees, such as health care and financial security.
Any kind of reward scheme can help employees feel that their hard work is being recognised, improving their self-esteem and sense of self-worth. This can help to augment their engagement and motivation at work, and make them feel like they’re getting more than just a paycheque at the end of the month. Happier employees will produce happier results, wouldn’t you agree?
How do fringe benefits affect taxes?
Yes, yes, we know it’s… taxing to discuss tax all the time, but it’s got to be done. We’ll try and keep it short and simple.
Basically, since 6 April 2016, all employees (with certain exceptions) are treated equally when it comes to the taxation of fringe benefits.
On the whole, employees are taxed what it costs to provide the benefit. In the UK, benefits are often taxed at the individual's normal tax rate. This tax is paid in place of salary or wages.
Still confused? Generally, fringe benefits tax (FBT) is paid by your employers for the benefits you, as an employee, receive in place of salary or wage. The employee doesn’t pay the tax directly, so to speak.
Your employer takes the tax you owe from your wages through Pay As You Earn ( PAYE ). The amount you pay depends on what kind of benefits you get and their value, which your employer works out. This tax is separate to income tax and it is calculated based on the value of the fringe benefits provided.
Certain fringe benefits may be exempt from taxation if specific conditions are met. These are advantageous because they don’t affect the employees income.
Is salary sacrifice a type of fringe benefits?
Another option for fringe benefits is salary sacrifice. This is where an employee gives up a portion of their salary in return for a fringe benefit. This could be for childcare vouchers or maybe pension contributions, for example.
Are social benefits a fringe benefit?
Benefit packages can often include a range of social benefits focused on health care, childcare or care for elders and environmental issues.
Some of these can be tax free. Your employees can make use of a company gym without any tax implications, for example, whether it is provided free or at a subsidised price. You can also provide healthy food in a company canteen without paying tax.
However, if you want to hand out gym or food vouchers for external companies, this is likely to be taxed.
As for environmental perks, you can offer a cycle to work scheme which can be free of tax. Cycling to work can be encouraged by providing employees with tax-free bicycles. On the other hand, paying for public transport as part of a benefit package can be a great idea! But for larger areas, monthly passes will taxed.
How to design your fringe benefits package
Here are some elements of what makes a successful benefits package and how to make them stand out.
Make it count
Make sure your business objectives and benefits are aligned. You can do this by revisiting your business strategy regularly to make sure that it evolves at the same time as any changing regulations or employee requirements. Keep your benefits updated and upgrade them.
While, of course, the aim is to improve your employee experience, you also want to support your business priorities. Good reward management can transform your company.
You should therefore research employee behaviour, first and foremost, and figure out what will (a) benefit them as an individual (b) improve their productivity for the company. To do this, make sure you use real data and analytics to support your decision-making, and if you’re going to go for insurance or memberships as benefits, establish they’re of good quality first!
Think about local relevance
Be aware, especially when dealing with companies with offices based in various locations, that there may be locational and cultural differences that need to be accommodated to. For instance, an office in the middle of the capital city is going to benefit from different perks to an office set up in the middle of the countryside, five miles from any public transport.
Provide core security and increase employee choice
It should be noted that core security perks are benefits that benefit all employees. For example, health cover, life insurance, and pensions are among the core benefits that provide employees with financial security and should be made available to all.
Once these essentials have been taken care of, employees should be offered a selection of extra perks to choose from.
These options can be tailored to the employees’ career stage, their caring responsibilities (as a parent or carer), or personal aspirations (for instance, educational training programmes such as e-learning or internal training days), or maybe health or gym memberships for those who are more health concerned.
Make sure your employees actually know about the benefits package
How can employees truly benefit from fringe benefits if they don’t even know what they’re benefiting from? Or how it’s helping the company? Make sure that you explain how the fringe benefits fit in with the company’s goals. This will not only boost your employees’ appreciation and understanding of the benefits, but help them actually figure out how to use their benefits for their own advantage too.
Fringe benefits at Perkbox
Perkbox uses technology to help you personalise, manage, deliver and measure the best company perks.
We’re big fans of choice at Perkbox. We think you should give your employees the chance to choose what they actually want to work for. They can do this with our easy-to-use pulse surveys where they can opt for staff benefits that they’ll actually use.
We know what we’re talking about; we’re specialists in employee motivation and customer engagement.
There are so many options to choose from. You can keep your employees fit with affordable private healthcare, discounted gym memberships, wellness programmes, or even treat them to big brand-discounts.
With whatever package you opt for, fringe benefits will make your employees’ pay cheques go much, much further.
Get started with Perks today.
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