The Concept of Fringe Benefits

The human concept of labor has been recognized widely in the industrial world. The employer, though not bound, provides several benefits and services to the employees, working in the organization to maintain and promote the employees’ favorable attitude towards the work and work environment, because maintenance of favorable attitude towards the work and work environment, because maintenance of favorable attitude is an essential part of motivation and high morale. Such benefits and services, being a part of wage and salary administration, include all expenditure incurred to benefit employees over and above regular wages and direct monetary incentives related to output and are generally referred to as fringe benefits. The real wages of workers are increased by the benefits provided by the employer and thus, they are regarded as supplement to their wages. Many years ago, benefits and services were labeled ‘fringe’ benefits because they were relatively insignificant or fringe components of compensation. However, the situation now is different, as these have, more or less, become important part of a comprehensive compensation package offered by employers to employees.

Fringe benefits are benefits which supplements the employees’ ordinary wages and which is of value to them and their families in so far as it materially increases their retirement benefits. According to the Glossary of Industrial Relations and Wage Terms “Fringe benefits are supplements to wages received by workers at a cost to the employers. The term encompasses a number of benefits-paid vacation, pension, health insurance plans, etc. which usually add up to something more than a ‘fringe’ and is sometimes applied to a practice that may constitute a dubious benefit for workers.”

Features of Fringe Benefits

  • Fringe benefits are supplementary to regular wages or salaries.
  • These benefits are paid to all the employees based on this membership in the organization.
  • These benefits are indirect compensation because these are usually extended as a condition of employment and are not directly related to performance.
  • Fringe benefits involve a labor cost for the employer and are not meant directly to improve efficiency.
  • Fringe benefits raise the living standard of the employees.
  • Fringe benefits refer to items for which a direct monetary value to the employee can be ascertained eg. Provident funds, pension, etc. On the other hand, services refers to the items like medical facilities, recreation, etc.
  • These benefits may be statutory or voluntary.

Objectives of Fringe Benefits

Fringe benefits are given to achieve the following objectives.

  1. To recruit and retain the best employees.
  2. To protect employees against certain hazards e.g. life insurance, old age pension, etc.
  3. To improve motivation and morale of the employees by satisfying some unsatisfied needs.
  4. To improve work environment and industrial relations.
  5. To ensure health, safety and welfare of employees.
  6. To develop a sense of belongingness and loyalty among workers.
  7. To meet statutory requirements.
  8. To satisfy the demands of trade unions.
  9. To improve the public image of the organization.

Kinds of Fringe Benefits 

The benefits and services to be included under the title ‘fringe benefits’ are numerous. A few of them are – Bonus for quality and attendance, contribution to group insurance plan, lay off and termination pay, travel expenses, suggestion awards, medical leave with pay, overtime, university and trade courses, etc.

The Chamber of Commerce, USA has included 5 types of benefits under fringe benefits.

  1. Statutory payments such as old age pension unemployment insurance, group insurance, etc.
  2. Payment for pension and labor welfare
  3. Rest or leave with pay
  4. Payment for time not worked
  5. Other benefits such as profit sharing, suggestions reward, reimbursement of tuition fees, festival allowance, etc.

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