Purpose of Fringe Benefits

Fringe Benefits

Fringe benefits and services include a motley crowd of fringes starting from accident compensation to paid holidays. Such benefits are always in addition to regular wage payment i.e. direct remuneration. Such benefits support regular wage payment. They are also known as fringes, service programmes, employee benefits or hidden payroll Fringes embrace a broad range of benefits and services, to employees as part of their compensation package. They constitute indirect compensation as they are extended as a condition of employment and not directly related to individual performance.

The purpose of fringe benefits is to retain efficient and capable people in the organization over a long period. They foster loyalty and act as a security base for the employees. Fringe benefits may be defined as broad/wide range of benefits and services that employees receive as an integral part of their total compensation package. They are based on critical job factors and performance.

Fringe benefits constitute indirect-compensation as they are usually extended as a condition of employment and not directly related to performance of concerned employee. Fringe benefits are supplements to regular wages received by workers at a cost of employers. They include benefits such as paid vacation, pension, health and insurance plans, etc. Such benefits are computable in terms of money and the amount of benefit is generally not predetermined.

Fringe benefits `constitute a substantial labour cost for any organization and not mere fringe costs and fringe items. Such benefits are important and useful to managements, employees and the unions. The terms fringes and services are often used interchangeably either offer benefit to employees in one form or the other.