Compensation Management

Objectives of Fringe Benefits and Importance of Fringe Benefits

Fringe benefits are also called as employee benefits. These benefits are supplemental compensation which employee receives from his employer, aside from their direct wages or incentive pay. These are not substitutes for wages or salaries. These benefits represent labour costs over and above straight-time earning. They are granted to employees to provide them with facilities and assistance and are either voluntarily granted by the company or a part of the collective bargaining agreement or required by law.

They are given to employees regardless of differences in individual performance. Their costs go into overhead charges which must be included as part of the expenses in producing goods and services. Employee benefits are available to all employees based on their membership in the organisation.

Objectives of Fringe Benefits

(1) Attracting the Best Talents – Fringe benefits vastly enhance the ability of the organisation to attract the best employees. This is because they create goodwill for the organisation in the labour market.

(2) Tax Free for the Employees – They are normally a non-taxable form of earnings available to the employees. As such, they enable the employees to get the real value of the compensation due to them.

(3) Improving Employee Morale – Fringe benefits are often viewed by the organisation as an effective technique to improve the morale and motivation of the employees. They facilitate better retention of the employees by limiting employee dissatisfaction and labour turnover.

(4) Achieving the Desired Unity – They improve unity among the employees as these benefits are available to all the employees, irrespective of their work performance. They indeed eliminate and prevent envious and other resentful feelings among the employees.

(5) Improving Industrial Relations – They are efficient means to improve the industrial relations of the organisation. The irritants relating to the basic wages and incentives can be removed through fringe benefits.

(6) Concern for Employee Well-Being – Fringe benefits are a sure way of expressing the concern of thẹ organisation to improve the health and safety of the employees. They make the employees believe that their management really cares for them.

(7) Reducing HR Cost – Since the fringe benefits are offered to all the employees, the cost of benefits would be less. The cost of some benefits (like transportation and canteen) would come down drastically when they are offered to a large number of persons.

Importance of Fringe Benefits

(1) Helps in Employee Retention – Individuals, particularly those with families, consider the benefits an employer offers an important factor when deciding to accept a job offer or leave a company. Satisfied employees reduce turnover and, in turn, training and recruiting costs.

(2) Provides Financial Security – Fringe benefits help to enhance a worker’s financial security. Benefits that help employees plan for retirement, provide tuition reimbursement and receive legal assistance can also help ease the financial burdens and encourage saving money.

(3) Helps to Gain Employee’s Trust – Fringe benefits can help to enhance the way employees feel about themselves and the company for whom they work , a competitive employee benefit package can help to retain employees , as well as help the company to gain employee trust . A greater sense of trust among employees can improve a company ‘ s culture and organisational development , as workers will feel the employer values their contributions to the company ‘ s objectives .

(4) Increases Productivity – When fringe benefits include health benefits , workers are sick less often due to preventative care and a company can see a drop in absenteeism . When employees feel well , they are more productive , perform better and produce a higher quality of work . A company that invests in its employees will in turn find that employees make personal investments in the company when they strive to improve upon their skills and expand upon their knowledge .

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Sarvesh Arora

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