FRINGE BENEFITS

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 benefit is a benefit 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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