Fringe Benefits Essay
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1.What do you mean by fringe benefits? Give any two examples? Ans. A Different offers a company groups together for an employee are collectively known as a fringe benefits packages. B An employment benefit given in addition to one’s wages or salary, or Benefits, other than wages or salary, provided by an employer for employees Any nonwage payment or benefit granted to employees by employers. C A payment to a worker in addition to salary or wages. It may take the form of cash, goods, or services, and may include such items as health insurance, pension plans, vacation time, disability income and paid vacations.
D It it the Compensation provided by the employer to the employee at no charge that is above and beyond salary or wage.
E Employee benefits and benefits in kind (also called fringe benefits, perquisites, perqs or perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries. Examples of these benefits include:
housing (employer-provided or employer-paid),
group insurance (health, dental, life etc.),
disability income protection,
daycare & tuition paymetns,
vacation (paid and non-paid),
personal use of a company owned vehicle and other similar benefits
funding of education, and other specialized benefits.
•Purpose of Benefits
The purpose of employee benefits is to increase the economic security of staff members, and in doing so, improve worker retention across the organization.
Definition of ‘Fringe Benefits’
A collection of various benefits provided by an employer, which are exempt(free from) from taxation as long as certain conditions are met. Any employee who receives taxable fringe benefits will have to include the fair(reasonable) market value of the benefit in their taxable income for the year, which will be taxed with social security(PF,ESI) benefits payments. •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.(read & understand carefully, below explanation is given) [Whatever benefits that employer gives to the worker are included in the employee compensation, and thus such benefits are not taxed. But if the employer provides this benefits directly in form of wages than workers will have to pay taxes on this amount and therefore have less to spend while purchasing or paying such equivalent benefits independently.]
•In many cases, fringe benefits can add significantly to an employee’s total compensation, and are a key ingredient in attracting and retaining employees. For the most part, fringe benefits are not taxable to the employee, though they are generally tax-deductible for the employer
•The major types of fringe benefits include health insurance, retirement plans and paid time off.
Are Fringe Benefits Taxable?
Any fringe benefit you provide is taxable and must be included in the recipient’s pay, unless the law specifically excludes it. The Fringe Benefits Guide of the Internal Revenue Code sets forth a number of tax exclusions identified by the responsible agencies as applied to fringe benefits. These rules exclude all or part of the value of certain benefits from the recipient’s pay.
For example, an employee’s gross income does not include the following types of qualified fringe benefits:
•Accident and health benefits.
•De minimis (minimal) benefits.
•Dependent care assistance.
•Group-term life insurance coverage.
•Health savings accounts (HSAs).
•Moving expense reimbursements.
•Retirement planning services.
•Transportation (commuting) benefits.