Fringe Benefits

Fringe Benefits

The term "Fringe Benefits" refers to additional benefits provided to workers in addition to the normal compensation paid in the form of wages or salary. Many years ago benefits and services were labeled "Fringe Benefits" because they were relatively insignificant or marginal components of compensation. However, the current situation is different, as these have become, more or less, important factors in a comprehensive compensation package offered by employers to employees.

Characteristics of Fringe Benefits:

1. Fringe Benefits are complementary forms of compensation.

2. All workers are paid based on their membership in the organization.

3. Fringe Benefits are indirect compensation because they are usually extended as a condition of employment and are not directly related to performance.

4. Fringe Benefits help to improve the living conditions of employees.

5. Fringe Benefits can be statutory or voluntary.

 Objectives of Fringe Benefits:

1. Create and improve strong working relationships.

2. Motivate employees by identifying and meeting their unmet needs.

3. Provide security to employees against social risks such as old-age benefits and maternity benefits.

4. Protect the health of employees and provide security for employees against accidents.

5. Promote the welfare of employees.

6. Create a sense of belonging among employees and retain them.

7. Comply with the requirements of the different laws relating to supplementary benefits.

To have a solid benefits program, there are certain requirements. The program must be based on specific objectives that are in line with organizational philosophy and policies. It must be affordable and profitable. Through surveys and committees, a benefits package can be developed to meet the needs of employers.

Types of Fringe Benefits:

A. Pay for time not worked:

This category includes:

i) Hours of work

ii) Paid vacation

iii) Shift premium

iv) Holiday pay

B. Employee safety:

Employee physical and occupational safety must also be provided with a view to ensuring the safety of the employee and their family members. When the employee's services are confirmed, his job becomes safe. In addition, a continuous minimum wage gives a sense of security to life. This category includes:

i) Retrenchment Compensation

ii) Dismissal compensation

C. Health and safety:

The safety and health of employees must be taken care of to protect them against accidents, unhealthy working conditions and protect the productive capacity of the worker. In India, the Factories Act, 1948 stipulated certain requirements related to working conditions with a view to providing a safe working environment.

D. Workers' compensation:

In addition to health and safety measures, compensation has also been provided under the Workmen’s Compensation Act of 1923. The purpose of the law is to deal with the contingency of disability and death of a worker due to an employment injury or occupational disease specified under the law under the sole responsibility of the employer.

E. Health benefits:

Today, organizations provide various medical services, such as hospitals, clinics and dispensaries, not only to employees, but also to their families. The Employees State Insurance Act, 1948 applies to all factories and establishments that operate on energy and employ 10 or more people and those that do not use energy and employ 20 or more people. Benefits under the law include the following:

i) Sickness benefit

ii) Medical benefit

iii) Temporary disability benefit

iv) Permanent disability benefit

v) Maternity benefit

F. Recreational and welfare facilities:

Recreation and wellness benefits include:

i) Canteens

ii) Consumer stores

iii) Credit societies

iv) Housing

v) Legal assistance

vi) Advice to employees

vii) Welfare organizations

viii) Holiday homes

ix) Educational facilities

x) Transportation

xi) Parties and picnics

G. Old age and retirement benefits:

Industrial life generally breaks the whole family system. Employees' ability to save is very low due to lower wages, high cost of living, and rising aspirations of employees and their family members. As such, employers provide some benefits to employees, after retirement and during old age, in order to create a feeling of security about old age. These benefits are called old age and retirement benefits. These benefits include:

i) Provident fund

ii) Pension

iii) Deposit-linked insurance

iv) Gratuity  

v) Medical benefits

Reference: Rao, V S P, (2010). “Human Resource Management Text and Cases”, 3^rd ed., Excel Books, New Delhi.