When Liz Pavese thinks about her earliest experience with fringe benefits, the first thing that comes to mind is her ten-year-old dog, Rossi. 

“This was many years ago,” said Pavese, a Ph.D who is director of behavioral science at fully distributed coaching tech company Coachhub. “My [former] husband and I, at the time, decided that kids were not [going to be] a part of our family, but we have a beautiful chocolate Lab.”

Back then, Pavese worked for an organization that offered a number of extra benefits beyond those she was most familiar with. One was pet insurance, a benefit that helps employees like Pavese afford vet check-ups and procedures for their pets. Access to pet insurance gave Pavese peace of mind. She no longer needed to worry as much about paying for Rossi’s care, and it made her feel her employer had her best interests at heart.

“I loved it,” she said. “It was a really great way to [support] employees of all lifestyles, values and different family makeups.”

What Are Fringe Benefits?

Fringe benefits are add-on perks employers can offer in addition to standard required benefits to more holistically support their team. Examples include fitness stipends, travel reimbursement, pet insurance, childcare reimbursement and meal plans.

Pavese’s story shows how a holistic benefits package can make a real difference in someone’s life. A basic benefits package that covers sick time, health insurance and a two-week vacation is great, but only goes so far. Employees have needs that basic benefits, while indeed helpful, can’t entirely fill. Fringe benefits, or add-on perks to your standard benefits package, are a powerful way to support employees in a way that exceeds expectations. 

 

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“When you’re thinking about the whole experience you’re bringing your employees, you’re enhancing their experience at work in a much more holistic and dynamic way,” Pavese said. “[Fringe benefits] make them feel valued by the organization, elevate their feelings of belonging, and [strengthen] their connection to the company and the mission. It’s a really great way to focus on retaining employees, as well as their overall employee engagement.”

 

What Are Fringe Benefits?

Your employees do the hard work of keeping your company running. In turn, it’s your responsibility as a leader to support their personal needs so they’re able to perform at the top of their abilities. This is where your benefits package comes in. 

Some benefits, like medical insurance and vacation time, are legally mandatory. Beyond those basics, your employees have a lot of other needs too. They may have children at home, continuing education goals, or, as in Pavese’s case, a pet to take care of. Fringe benefits, among them company-paid childcare and pet insurance, help you care for your employees more holistically than possible with only a bare-bones benefits package.

“There’s all of these ways to meet people where they are in a meaningful way that fits into their lives,” Pavese said. “[Fringe benefits] can bring the kind of human-centered approach to work that I think is very sorely needed.”

A fringe benefits package can do more than support your current employees — it can also help you 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. Your perks and benefits are a part of your employer brand, and adopting fringe benefits will give you a leg up in the fight for talent.

“Hiring is so tough in this market, and people are trying everything they can to give people reasons to join their companies.” 

“There’s an explosion of companies offering different types of benefits now,” said Leila Malekottodjary, vice president of people at San Francisco-based HR tech company Homebase. “Hiring is so tough in this market, and people are trying everything they can to give people reasons to join their companies.” 

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Which Benefits Should You Offer?

Many leaders are well aware of the competitive advantage that fringe benefits afford. Because of this, tech companies are coming up with imaginative benefits to sweeten the deal for potential candidates. Companies like Gopuff and Dropbox promise employees generous fitness stipends and tuition reimbursement. New York-based dating app company Hinge even offers its employees a $200 monthly dating stipend

4 Factors To Consider While Selecting Fringe Benefits

  • What types of support have your employees been requesting?
  • Are your employees getting married, having kids, or reaching other milestones that need support?
  • When interviewing candidates, what benefits do they desire the most?
  • Have you asked your employees for input on your existing and potential benefits?

There’s enough options out there to make your head spin. But before you start selecting benefits that will attract job candidates, take a pulse check. Tuning into your employees’ needs first, and building a package as unique as they are, will be more effective than picking the flashiest or trendiest benefits. 

“Start with some questions: What requests are coming your way? Are you seeing lots of people struggling with mental health stuff? Are you seeing people starting families?” said Malekottodjary. “Really spend the time to understand your workforce, how they live their lives, and what they prioritize. I would also listen to your recruiting teams. They’re probably hearing a lot of questions from candidates about benefits that are important to them.” 

However you build your benefits package, involve your employees’ perspectives along every step of the way. Pavese says that conducting a pulse check through employee surveys will help you make more intentional decisions while choosing the right fringe benefits.

“If we don’t ask, we won’t ever know,” she said. “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.”

 

Nail the Logistics

Giving your employees money for office supplies or wellness resources may seem like a straightforward transaction, but leaders need to keep plenty of logistical concerns in mind when doling out fringe benefits. 

“Really spend the time to understand your workforce, how they live their lives, and what they prioritize.”

One of the biggest of these is taxes. Because some fringe benefits come in a monetary form, many can be considered a part of your employees’ overall compensation, and thus subject to taxation. Financial bonuses or stipends are the most obvious taxable benefits, but the rules of what does and doesn’t qualify can get complicated, said Juan Dominguez, CEO and managing partner at Los Angeles-based law firm The Dominguez Firm.

According to the IRS, the non-taxable fringe benefits include: accident and health benefits, achievement awards, group-term life insurance, meals, retirement planning service, commuting benefits, and more,” he said. “Any fringe benefit is automatically considered taxable unless specifically stated otherwise in the tax code.” 

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

“If you do not properly follow the code, then the benefits are taxable compensation to the employee,” she said. “If the employer does not properly add it to the employee’s W-2, then the employer can end up paying the employee’s tax that should have been collected along with penalties and interest.”

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. However, DiLucci offered some general advice to companies navigating this aspect of fringe benefits. Her first tip? Keep records. 

One of the most common fringe benefits to provide for employees is meals,” she said. “This type of benefit is only a non-taxable fringe benefit if the meals are furnished on business premises for the convenience of the employer. This means that the main burden of proof remains with the employer when providing free meals to employees. It’s important to stay protected and keep records showing location and employer convenience.”

Instead of giving funds upfront, some companies offer monetary reimbursement for certain services as a benefit. In practice, this could be reimbursing an employee for travel expenses they’d previously incurred, or covering the cost of a gym membership they’d already purchased. Often, employees will need to submit a written request and receipts in order to be reimbursed. In such cases, establish some kind of employee agreement during the onboarding process, DiLucci said. That way, in case your practices come under inspection, you’ll have records showing all parties involved have understood and followed the rules.

“Before hiring an employee or upon signing a new employment agreement, you can outline expectations surrounding reimbursement submissions and can also include information regarding requirements of the job regarding meals and lodging that support a tax position consistent with treating the fringe benefits as non-taxable,” she said.

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Flexibility and Creativity Win

After you’ve familiarized yourself with the applicable tax laws, the fun begins. Lots of benefits options are available to you, and it’s exciting to share those benefits with your employees. Embrace the opportunity to be creative with your choices, and pick benefits that will have the biggest positive effect on your teams.

One of the most effective benefits Coachhub provides is free access to fitness and wellness apps, Pavese said. “Small things can really make a difference,” she said. “[This] ensures that people have what they need to be healthy, perform at their best and bring their best selves to work.”

It’s high time that we start thinking differently about how we can support people to be their best selves.

Malekottodjary agrees that leaders don’t necessarily need to offer massive stipends or expensive add-ons to make a difference in their employees’ lives.

“Often it’s a small gesture that matters,” she said. “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.”

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

“It’s a really unique opportunity that we’re in right now,” said Pavese. “We’ve seen the impact that the pandemic has had on borders, on organizational life, and on people’s lives. It’s high time that we start thinking differently about how we can support people to be their best selves.” 

 

Top 10 Benefits Candidates Want Most

66% of tech professionals reassess staying in their current role when their employer changes their reward package. In this guide we outline the top benefits candidates want to see and how businesses can stay agile and evolve.

 

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