What Are Fringe Benefits for an Employee?
Fringe benefits generally are non-cash remunerations that employees receive in addition to wages or salary compensation. Most people are familiar with common fringe benefits such as health insurance, sick days, vacation time and pension plans. Once offered by relatively few companies as incentives to attract workers, many fringe benefits have become so ingrained in work culture that the reduction or elimination of them is met with fierce resistance. Higher-paid company officer and executive benefits often are called "perks" (perquisites) and may come in lavish and ostentatious forms like golf-club memberships or use of company jets.
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Insurance
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The rise of unions in the United States in the 1930s and 1940s ushered in the age of employee-paid, tax-free health insurance benefits for employees. War-time wage freezes and labor shortages during World War II accelerated the spread of company-provided insurance plans, used as incentives to attract workers in lieu of higher wages. Fully-funded employer insurance plans grew widespread through the 1950s and continued into the '90s, and weren't limited to union members. Health, dental, vision, accident, disability, life and other types of insurance coverage were staple fringe benefits, as were generous pension plans. Most companies have reduced insurance offerings and many require employee contributions in order to receive insurance --- mainly health insurance --- benefits.
Time Off
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Paid sick time and vacation time are fairly standard for much of the industrialized world's work force, even when health insurance or other benefits aren't available. Entry-level employees usually receive fewer days off than more senior workers, and skilled employees often are provided better time-off packages as inducements to join a company. Other fringe time-off offerings include maternity leave (both paid and unpaid), grievance days and PTO, or paid time off, which provides more flexible work schedules for today's often remote employee workforce. Sabbaticals are extended leaves of absence granted by employers without negatively impacting an employee's continuous-work record. Usually unpaid, long-term paid sabbaticals sometimes are offered as rewards for valuable and long-serving employees. Salary.com reports that workers in the United States with 15 years or more of service averaged 15 paid days off each year and about a month of vacation time.
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Education Reimbursement
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Many companies offer tuition assistance to employees who enroll in college or university courses. Tuition may be partial or full and reimbursed upon satisfactory completion, and may be tied to coursework directly related to an employee's job duties. For example, a company may pay for a director of operations to pursue her master of business administration degree, but probably wouldn't reimburse her for a course she completed in art history.
Housing
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Although paid housing benefits aren't unusual for senior management personnel and executives, the practice has gained traction among more middle-class occupations, such as teachers. Cash-strapped school districts often find it more economical to offer housing benefits in lieu of higher salaries when recruiting teachers. Of course, many companies also pay for moving expenses when new employees are hired, particularly when new workers are moving long distances, and business-related lodging is almost always reimbursable.
Child Care
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In-house company child-care services are more common today than ever, and many businesses provide stipends or cash and tuition assistance to employees with children. The Internal Revenue Service allows for much of the balance of non-employer-paid child-care costs to be deducted.
High-End Benefits
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While perks like company cars are long-standing traditions for management personnel, some occupations can demand lucrative fringe-benefit packages. Nurses and other professionals who are in high demand can receive large cash bonuses for signing on with employers, along with perks such as having their student loans paid off and receiving generous health insurance and time-off packages.
Tax Implications
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Most fringe benefits, like health insurance plans and paid time off, are not treated as taxable income by the IRS. But some perks may be taxable. Discounts that retail employees receive, for example, may be taxable. Generally, any income that is, or can be, reported on your W-2 form is taxable. Make sure to review IRS guidelines if you've received substantial monetary fringe benefits from your employer, such as the repayment of student loans.
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