What Are Fringe Benefits?

Fringe benefits are benefits that supplement an employee’s normal salary. While the name might suggest that fringe benefits are uncommon or unique, they are what most of us would call regular employee benefits.

What Are Fringe Benefits Examples?

Some of the most common examples of fringe benefits are health insurance, workers’ compensation, retirement plans, and family and medical leave. Less common fringe benefits might include paid vacation, meal subsidization, commuter benefits, and more.

Employee benefits are typically decided on by businesses and HR departments during the employee benefits administration process.

Why Do Companies Give Fringe Benefits?

Many companies offer a combination of both common and uncommon fringe benefits to help:

• Attract new hires. When you offer fringe benefits that a competitor does not, you have a greater chance at recruiting top talent in your industry.
• Keep current employees satisfied. Fringe benefits can help create a better work-life balance and boost morale, which can incentivize employees to stay. The key is offering resources that align with your employees’ interests and goals; fringe benefits help you achieve this.
• Create the gateway to career advancements. Some benefits, like job training and tuition reimbursement, can make way for your employees to acquire new skills, leading to promotions within the company.

While businesses typically offer fringe benefits to increase employee satisfaction, others can also help reduce dissatisfaction.

For example, since most employees view health insurance as a necessity, providing it as a benefit won’t necessarily increase employee satisfaction—it will simply prevent the dissatisfaction your employees would feel if your organization did not provide health insurance.

» Learn More: 10+ Companies With the Best Benefits

Is Vacation Time a Fringe Benefit?

Yes, vacation time qualifies as a fringe benefit. It’s a non-wage compensation that is not included in an employee’s salary or hourly compensation.

Paid vacation is not a requirement in many employees’ eyes, so offering it can boost their feelings of work satisfaction.

Do Fringe Benefits Count as Income?

According to the IRS, fringe benefits are generally counted as income, but there are exceptions. Some fringe benefits are subject to income tax withholding and employment taxes, while others are not.

Are Fringe Benefits Taxable?

In the US, the IRS provides a detailed list of tax-free benefits in IRS Publication 15-B. All other benefits are subject to tax.

Here are some examples of tax-free benefits:

• Accident and health benefits
• Achievement awards
• Adoption assistance
• Athletic facilities
• De minimis benefits (small perks like free coffee)
• Dependent care assistance
• Educational assistance
• Employee discounts
• Employee stock options
• Employer-provided cell phones
• Group-term life insurance coverage
• Health savings accounts
• Lodging on business premises
• Meals
• No-additional-cost services
• Retirement planning services
• Transportation (commuting benefits)
• Tuition reimbursement
• Working condition benefits

» Learn More: Want to Offer Employee Perks? Here Are 13 Great Ideas

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