What Are Fringe Benefits and How Do They Empower Your Team?

Basic benefits only go so far. Extras can make your employees stronger and happier.

Written by Sunny Betz
What Are Fringe Benefits and How Do They Empower Your Team?
Image: Shutterstock
UPDATED BY
Brennan Whitfield | Jan 12, 2024

Fringe benefits are the additional benefits that companies give to employees beyond their salaries or wages. These benefits may include professional development stipends, meal subsidies, employee stock options, commuter benefits and more. The idea behind fringe benefits is that they help keep current employees satisfied and act as a way to attract new employees to the company.

What Are Fringe Benefits?

Fringe benefits are perks employers may offer to employees in addition to monetary compensation. Examples include fitness stipends, travel reimbursement, pet insurance and meal plans.

A basic benefits package that covers sick time, health insurance and a two-week vacation is great, but it only goes so far. Workers today expect their employers to support them in additional ways.

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Fringe Benefit Examples

Fringe benefits that are commonly part of compensation packages include health insurance, retirement plans and worker’s compensation. Others include:

However a company decides to build its benefits package, the best bet is for them to involve their employees’ perspectives along every step of the way.

Liz Pavese, director of behavioral science at coaching tech company Coachhub, says  conducting a pulse check through employee surveys will help leaders make more intentional decisions while choosing the right fringe benefits.

“If we don’t ask, we won’t ever know,” she told Built In. “Don’t ask about things that you really aren’t willing to legitimately consider, because you certainly don’t want to put out expectations that are going to be too far reaching. You have to ask with care and intention.”

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Advantages of Offering Fringe Benefits

Improves Employee Retention

Employees with access to a wide range of fringe benefits are more likely to stay loyal to their companies. They want their employers to recognize they have needs their salaries don’t quite cover — and values beyond money — and if the employer doesn’t offer support in that way, they’ll simply find another one that does.

But turnover is expensive for companies. Recruiting a new employee costs an average of $4,683 per hire, according to the Society of Human Resource Management. So while offering fringe benefits can be pricey up front, it may benefit companies in the long run, as such benefits often entice workers to stick around longer.

 

Boosts Employee Engagement 

When employees feel supported and valued, they are more likely to work hard for the success of the company and take pride in their job.

Leila Malekottodjary, vice president of people at HR tech company Homebase, says leaders don’t necessarily need to offer massive stipends or expensive add-ons to make a difference in their employees’ lives, either.

“Often it’s a small gesture that matters,” she told Built In. “One thing that really resonates a lot with our employees is sending them surprise gifts. Whether it’s branded swag, boxes of snacks or custom coffee mugs, everyone gets excited and the Slack blows up.”

Employees have lives outside of work, as well as physical and mental health goals and dreams for the future. If companies want them to be strong players, they need to give their people the tools to succeed, and not just at the office.

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Helps With Employee Recruitment

A fringe benefits package can do more than support current employees — it can also help companies attract new ones. Research from Glassdoor found that 63 percent of job applicants consider company benefits to be a top deciding factor in their job search. Perks and benefits are a part of a company’s employer brand, and adopting fringe benefits will give them a leg up in the fight for talent.

“There’s an explosion of companies offering different types of benefits now,” Malekottodjary said. “People are trying everything they can to give people reasons to join their companies.”

 

Are Fringe Benefits Taxable?

If you’re a U.S. employee receiving a fringe benefit, like a subsidized gym membership or a four-day work week, you don’t have to go about tax season any differently.

For employers, though, it can get a little complicated. According to the IRS, any fringe benefit provided to workers is taxable — unless the law specifically excludes it.

Some of the most common fringe benefits that are non-taxable include:

  • Health and accident benefits
  • Adoption assistance
  • Educational assistance
  • HSAs
  • Meals
  • Retirement planning services
  • Transportation benefits
  • And more

When it comes to fringe benefits, it’s important for employers to check all their boxes and follow tax codes closely. Otherwise, they might wind up facing consequences, said Jasmine DiLucci, tax lawyer at Dallas-based firms JD Tax Law and DiLucci CPA. 

Every company’s circumstances, locations and offerings are different, so it’s important for HR leaders to consult tax professionals and work with their financial departments to determine the specific course of action when it comes to tax law compliance.

 

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Frequently Asked Questions

Paid vacation, meal subsidies, pet insurance and flexible working hours are some examples of fringe benefits.

Job benefits are considered the basic benefits all employees receive when working with a company, and include salary, medical insurance and retirement plans. Fringe benefits are supplementary to basic job benefits, and can be considered as perks for working with a certain company. 

Basic job benefits are offered by a majority of companies, while fringe benefits aren't guaranteed to be offered and will vary depending on the company.

Paid time off (PTO) is considered a fringe benefit in the United States as it is not federally mandated. According to the U.S. Fair Labor Standards Act, U.S. employers aren't required to provide payment for time not worked, including vacation, sick time or federal holidays.

Hal Koss contributed reporting to this story.

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