What are fringe benefits?
Fringe benefits refer to the additional perks offered to employees alongside their salary. Any kind of compensation that is offered to the employee for his/her work other than salary can be counted as a fringe benefit. This may include health insurance, a company car, or a company phone, etc.
Fringe benefits make a job more attractive even when the salary offered is at par with what other companies are offering. Employees are more likely to take a job with additional benefits as it makes the position more lucrative.
Different companies may offer different fringe benefits, and these benefits may vary across different designations in a single organisation. Fringe benefits can help employees save money in the long run.
Who can receive fringe benefits?
Fringe benefits are offered to employees and to various other members of an organisation who may be categorised as non-employees. These include:
Other additions can be made to the list based specifically on the national revenue agency’s guidelines. Companies may not always give fringe benefits to all the people falling in the above categories.
What is offered as compensation under fringe benefits?
Fringe benefits may be optional or necessary depending on the classifications made by the revenue services of a country. The following fringe benefits are made compulsory by most revenue agencies:
There may be some benefits that are not mandated by the government but are additionally offered by companies to make the position lucrative. Some of these might be:
Are fringe benefits taxable?
Just like wages, fringe benefits are also taxable. However, not all fringe benefits come under the taxable category. Unless specified otherwise, most fringe benefits are taxable.
The following sections of a fringe benefit may not be taxed:
If the recipient of the benefit is counted as a non-employee, then any or all the benefit can be excluded from the taxable income. Thus, the classification as employee or non-employee is important for this reason. The benefit received by a non-employee may not be subjected to any income tax withholding; however, he/she may be asked to report that income elsewhere.
Why do employers offer fringe benefits?
Fringe benefits offer various advantages to employees, but employers may also seek to gain some benefits from them. These include: