Companies compete with each other to recruit talented workers and need to make themselves attractive to potential employees with in-demand skills. Once they’re hired, it’s important to keep workers content and motivated.
Good pay is a big part of that, however, it’s not the only form of compensation that employees look for. Even a generous salary doesn’t cover everything that you and your family need. I can barely keep the fridge stocked these days as my kids get older.
That’s where fringe benefits come in.
What Are Fringe Benefits?
Fringe benefits are add-ons to your compensation package and also referred to as, “perks”, a cute word that brings to mind things like free espresso or reserved parking. Fringe benefits cover much more than that, and many of them are crucial.
Benefits like insurance, financial plans, and health packages are employee lifelines. They give workers and their families a sense of security and a feeling that they’re taken care of.
Everybody gains from fringe benefits. Employees have an incentive to work, improve, and advance. The company entices and retains more talent and enhances its reputation. Morale is high and productivity improves.
Below, you’ll find some of the most common fringe benefits to look for in a compensation package (and a few that aren’t so common).
Health Care and Medical Coverage
Health care is the first fringe benefit that leaps into most people’s minds. Medical insurance is a huge concern for almost everyone, and for good reason. Premiums are more expensive these days, and many people can’t afford them based on their salary alone. Major illnesses and life-altering accidents are terrifying to think about.
Many companies offer comprehensive medical insurance plans and some make substantial contributions to medical premiums on your behalf. They usually provide coverage for you and your family, or dependents. Doctor visits, hospital stays, prescriptions, and medical devices are commonly covered.
Some companies’ health benefits are more far-reaching than others. Not all businesses offer dental or optical coverage. Most don’t cover elective procedures, such as plastic surgery. Insurers are also typically slow to accept new, unproven medical technologies.
Take a close look at your potential employer’s health plan. Look for benefits like family leave, health savings accounts, gym memberships, dependent care, disability insurance, and mental health options. These peripheral benefits can be the difference between companies that are competing for your talent.
Workers’ Compensation and Life Insurance
Worksite accidents and job-related illnesses happen. Workers’ compensation covers both you and your company from financial loss from a work-related injury or illness. Most states require employers to carry workers’ comp (New Jersey and Texas are exceptions). Get the details on the coverage provided by your employer.
Life insurance covers the financial losses of your dependents in the event of your death. Many employers offer life insurance coverage, although it’s optional. Most offer group-term life insurance at little or no cost. You can also elect to buy supplemental coverage, like life insurance for your spouse or children.
Retirement Plan Contributions and Investment Perks
Retirement isn’t something we think about a lot when we’re working. Half of all Americans aren’t saving for their post-work lives, however, it’s important to consider. There’ll come a time when you can’t work, but you’ll still need funds to live on.
Most companies make significant contributions to employees’ retirement plans. They may set up a 401(k) plan and match your paycheck’s contributions to it. Some set up qualified retirement plans in which you don’t have to contribute anything. Others have pension plans that are based on your years of service to the company.
Your company may offer other investment benefits, too such as stock options, which are common in public companies. Others provide the opportunity to take out below-market financial loans. You might also get a free brokerage account to track your 401(k) and other investments you might make.
“Bonus” Fringe Benefits
Some companies offer new employees real deal sweeteners. This is especially the case for tech giants that are driving the 21st-century economy and who are always in recruitment mode. Skilled tech workers get some amazing and even ridiculous perks from the corporations that court them.
Microsoft offers their Seattle full-timers free transportation on their Connector buses. Before the COVID-19 pandemic, Google offered free gourmet meals for on-site workers. Ben & Jerry’s gives their employees 3 pints of ice cream every day. Almost all companies offer employee discounts on their purchasable products. Yes, please!
Other, less peculiar bonuses can include paid vacation days, tuition reimbursement or assistance, professional development services, company cars, discounted memberships at warehouse stores like Costco, or childcare. Sign me up!
Are All of These Fringe Benefits Taxable?
Of course, there’s a catch to a lot of fringe benefit packages. Like so many catches in American life, it involves the IRS.
Technically, fringe benefits are income and are therefore taxable. When you file your taxes, they need to be reported as part of your gross income. The amount you’d claim for the benefit is its “fair market value” and it represents how much you’d pay for that benefit outside of the work environment.
Mileage reimbursement over a certain threshold is one such taxable gain. Relocation expenses for moves less than 50 miles are taxable. Employer incentives paid to bicycle commuters are taxed to the employee. Cash bonuses and reimbursements for education that aren’t job-related are also taxable.
Fortunately, there are many non-taxable fringe benefits and generally, they’re the most important ones. They include health benefits, group-term life insurance up to $50,000, educational assistance, work-related travel and entertainment, stock options, and more. Some perks, called “de minimis” benefits, don’t cost too much and are tax-exempt. These might include company picnics and sports tickets, as long as they’re infrequent.
For an official list of which fringe benefits are taxable and which ones are not, you can have a look at the IRS’s riveting Publication 15-B.
Modern companies understand why it’s vital to keep their employees healthy and comfortable. Yes, a happy workforce is a more productive workforce, however, companies are also judged by their responsibility and how they treat their loyal staff.
Fringe benefits express that investment beyond the transaction of work for wages. Companies need to make these bonuses available to ensure they hire and retain the best workers.
Take a look at the extra benefits the company you work for offers to ensure you’re taking full advantage. If you’re currently on the job hunt, look for those perks to see how a company’s employees are rewarded. You deserve nothing but the best!
Here’s to the Wellness of Your Wallet!