What Is Fringe Benefit?

Fringe benefits are accurately named, as they are meant to be additional compensation for work performed or for services rendered. They are intended to be viewed differently than a base salary or regular wages, but like money are designed to provide incentive for the worker.

Fringe benefits are provided in several forms, but there are specific guidelines for the recording and taxing of these benefits, no matter what form they take. A person receiving such benefits is usually an employee but this is not absolutely necessary. The employer or business owner is generally considered the provider. Fringe benefits may also be provided directly to customers or clients, either in a formal way or as an informal way of showing appreciation for services rendered.

In an employer/employee situation, fringe benefits are subject to taxes just as other forms of pay are subject to income tax etc. There may be some specific exclusions that should be covered in certain sections of federal and state revenue codes. Employers and business owners must record and report the “payment” of fringe benefits. Internal revenue agencies provide forms for numerous benefit types and situations.

Some examples of fringe benefits would be: insurance on the employee and/or family members, with insurance cost paid by the employer; use of a company vehicle at specified times; vacation and sick-leave time as written in the company handbook; retirement/pension plans to which the employer contributes. Some companies provide a choice of benefits from a “menu” that allows employees to choose cash or other benefits that are subject to tax, or choose a benefit that is separate from wages and salaries. Some employees may then choose a benefit that qualifies as non-taxable.

Guidelines for revenue agencies at the state and federal level exclude some benefits from the benefits that may be offered. For example, discounts for employees on products and services offered by the company are generally not qualified as fringe benefits under tax guidelines. Some government regulations excluded commuting benefits, meals and on-site lodging as well.

Fringe benefits, in a more general sense, may be provided to independent contractors and occasional workers who are not employees of the company or business. There are specific guidelines for how these may be offered and how they will be taxed or, in some cases, how they will be exempt from tax.

In the course of several decades, some fringe benefits have come to be standard with full-time work. These might include sick-leave days or vacation time, and might include health insurance or life insurance. Mileage paid for use of a personal vehicle is treated differently in various states and from company to company.

In some fields of work, skilled employees are in great demand. Companies may offer very attractive benefit packages in addition to higher hourly wages or annual salaries. In some cases, employees are attracted to a business or retained by the business because of the generous fringe benefits offered. Health insurance for the individual and/or the family members is one fringe benefit that helps secure and keep quality employees.

Written by Lucas Beaumont

Generalist. Wikipedia contributor. Elementary school teacher from Saskatchewan, Canada.

Leave a Reply

What Is Disinflation?

What Are Kinds Of Companies?