Fringe Benefits HRM

FRINGE BENEFITS
Definition:-
• Fringe benefit may be defined as
“Compensation in addition to
direct wages or salaries, such
as company car, house allowance,
medical insurance, paid holidays, pension
schemes, subsidized meals. Some fringe
benefits are regarded part of a taxable
income.
In simple words
“Any nonwage payment or benefit granted to
employees by employers”
• Employers' payments for fringe benefits
are included in employee-compensation
costs and therefore are not usually taxed.
If the cost of fringe benefits were paid
directly as wages, the worker would pay
taxes on this amount and therefore have
less to spend when purchasing equivalent
benefits independently
OBJECTIVES OF FRINGE
BENEFITS
• The view point of employers is that fringe
benefits form an important part of
employee incentives to obtain their loyalty
and retaining them. The important
objectives of fringe benefits are:
• 1.To create and improve sound
industrial relations
2.To boost up employee morale.
3.To motivate the employees by
identifying and satisfying their unsatisfied
needs.
4.To provide qualitative work
environment and work life.
• To provide security to the employees against social risks like
old age benefits and maternity benefits.
6.To protect the health of the employees and to provide safety

to the employees against accidents.
7.To promote employee’s welfare by providing welfare

measures like recreation facilities.
•
8.To create a sense of belongingness among employees and to
retain them. Hence, fringe benefits are called golden hand-
cuffs.
•
9.To meet requirements of various legislations relating to
fringe benefits.
Need for Extending Benefits to Employees
(i)Rising prices and cost of living has brought about incessant demand for
provision of extra benefit to the employees.
(ii)Employers too have found that fringe benefits present attractive areas of
negotiation when large wage and salary increases are not feasible.

(iii)As organizations have developed ore elaborate fringe benefits programs
for their employees, greater pressure has been placed upon competing
organizations to match these benefits in order to attract and keep employees.
(iv)Recognition that fringe benefits are non-taxable rewards has been major
stimulus to their expansion.
(vi)The growing volume of labor legislation, particularly social security
legislation, made it imperative for employers to share equally with their
employees the cost of old age, survivor and disability benefits.
(vii)The growth and strength of trade unions has substantially influenced the
growth of company benefits and services.
(ix)The management has increasingly realized its responsibility towards its
employees and has come to the conclusion that the benefits of increase in
productivity resulting from increasing industrialization should go, at least
partly, to the employees who are responsible for it, so that they may be
protected against the insecurity arising from unemployment, sickness, injury
and old age. Company benefits-and-services programs are among some of
the mechanisms which managers use to supply this security.
TYPES OF FRINGE BENEFITS
Organizations provide a variety of fringe benefits. The fringe
benefits are classified under four heads as given here under:
Personnel
Identification,
Employment Health Old Age and
Participation
Security Protection Retirement
and
Stimulation
Employment Security :
• Benefits under this head include unemployment, insurance, technological
adjustment pay, leave travel pay, overtime pay, level for negotiation, leave
for maternity, leave for grievances, holidays, cost of living bonus, lay-off,
retiring rooms, jobs to the sons/daughters of the employees and the like.
Cont.…….
• Physical and job security to the employee should also be provided with a
view to promoting security to the employee and his family members. The
benefit of confirmation of the employee on the job creates a sense of job
security. Further a minimum and continuous wage or salary gives a sense
of security to the life.
Safety Health Protection
• Benefits under this head include accident insurance, disability insurance,
health insurance, hospitalization, life insurance, medical care, sick
benefits, sick leave, etc.
Old Age and Retirement
• Benefits under this category include: deferred income plans,

pension, gratuity, provident fund, old age assistance, old age
counseling , medical benefits for retired employees, traveling
concession to retired employees, jobs to sons/daughters of the
deceased employee and the like.
Personnel Identification, Participation and Stimulation
• This category covers the following benefits: anniversary awards,
attendance bonus, canteen, cooperative credit societies, educational
facilities, housing, income tax aid, counseling, quality bonus, recreational
programs, stress counseling, safety measures etc.
Other benefits are:-
• Payment for Time Not worked

• Extra Pay for time Worked
• Retrenchment Compensation
• Lay-off Compensation
Payment for Time Not worked:
• Benefits under this category include: sick leave with pay,
vacation pay, paid rest and relief time, paid lunch periods,
grievance time, bargaining time, travel time etc.
Extra Pay for time Worked:
• This category covers the benefits such as: premium pay,
incentive bonus, shift premium, old age insurance, profit
sharing, unemployment compensation, Christmas bonus,
Deewali or Pooja bonus, food cost subsidy, housing subsidy,
recreation.
Retrenchment Compensation:
• The Industrial Disputes Act, 1947 provides for the payment of

compensation in case of lay-off and retrenchment. The non-seasonal
industrial establishments employing 50 or more workers have to give one
month’s notice or one month’s wages to all the workers who are
retrenched after one year’s continuous service. The compensation is paid
at the rate of 15 days wage for every completed year of service with a
maximum of 45 days wage in a year. Workers are eligible for
compensation as stated above even in case of closing down of
undertakings.
Lay-off Compensation:
• Layoff is the temporary suspension or permanent termination of employment of
an employee or (more commonly) a group of employees for business reasons, such as the
decision that certain positions are no longer necessary or a business slow-down or
interruption in work. Originally the term "layoff" referred exclusively to a temporary
interruption in work, as when factory work cyclically falls off. However, in recent times
the term can also refer to the permanent elimination of a position.
• In case of lay-off, employees are entitled to lay-off compensation at the rate to 50% of the
total of the basic wage and dearness allowance for the period of their lay-off except for
weekly holidays. Lay-off compensation can normally be paid up to 45 days in a year.

Fringe Benefits HRM

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FRINGE BENEFITS

6.To protect the health of the employees and to provide safety

7.To promote employee’s welfare by providing welfare

• Benefits under this category include: deferred income plans,

• Payment for Time Not worked

• The Industrial Disputes Act, 1947 provides for the payment of

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