What Is Considered a Fringe Benefit?
According to IRS Publication 15-B, a fringe benefit is simply a form of pay provided for the performance of services. Fringe benefits are typically made available by employers to employees in addition to their wages and can include a wide range of items. Fringe benefits vary widely depending on the company, with larger companies often being able to offer a wider selection than smaller companies.
Other People Are Reading
-
Function
-
Fringe benefits are provided by companies in addition to money paid in the form of salaries, wages, commissions or bonuses. They give employees easy access to products such as insurance that they may have difficulty in obtaining on the open market. Fringe benefits often increase over an employee's tenure, giving him more incentive to stay with a company.
Types
-
Companies may make a variety of fringe benefits available to employees. Common benefits can include insurance products for life, health and disability. Companies may also provide retirement plans such as pensions or a 401(k). Other benefits can include paid vacation time and sick days, family and bereavement leave, profit sharing and health and wellness programs.
-
Benefits
-
Fringe benefits such as health insurance are often less expensive when obtained through an employer than through the private market. They may also provide tax benefits, such as in the case of a 401(k) where the employee can deduct contributions from his taxable income. For employers, the ability to offer excellent fringe benefits can aid in employee retention as well as in the recruitment of candidates for open jobs.
Considerations
-
When considering whether to accept a job or to leave an employer, fringe benefits should be taken into consideration as well as the wages offered. For example, if you have worked for a company for several years and have accumulated four weeks of vacation time, you may have to start with only two weeks if you move to a different employer. If you choose to leave your employer to become self-employed, the cost of purchasing benefits on your own may be prohibitive.
Time Frame
-
In some cases, you may have to wait to become eligible for certain fringe benefits. For example, it is not uncommon for a new employee to have to be employed with a company for 60 to 90 days to become eligible for health insurance. Existing employees may only be permitted to make benefit choices once a year, so selections must be made wisely.
-
References
- Photo Credit Cash image by Greg Carpenter from Fotolia.com
