The term Fringe benefits refer to various extra benefits provided to the employees, in addition to the compensation paid in the form of wage or salary. These benefits can be defined as any wage cost not directly connected with the employeesâ€™ productive effort, performance, service or sacrifice. It is also defined as those benefits which are provided by an employer to or for the benefit of an employee and which are not in the form of wages, salaries and time-related payments.
Different terms are used to denote fringe benefits. They are welfare measures, social charges, social security measures, supplements, sub-wages, employee benefits etc. The ILO described â€˜fringe benefitsâ€™ as â€œWages are often augmented by special cash benefits, by the provision of medical and other services or by payments in kind, that forms part of the wage for expenditure on the goods and servicesâ€? . In addition workers commonly receive such benefits as holiday with pay, low cost meals, low-rent housing etc. Such additions to the wage proper are sometimes referred to as fringe benefits. Benefits that have no relation to employment or wages should not be regarded as fringe benefits even though they may constitute a significant part of the workerâ€™s total income.
Thus, fringe benefits are those monetary and non-monetary benefits given to the employees during and postâ€“employment period which are connected with employment but not to the employeesâ€™ contributions to the organization.
The term â€˜fringe benefitsâ€™ covers bonus, social security measures, retirement benefits like provident fund, gratuity, pension, workmenâ€™s compensation, housing, medical, canteen, co-operative credit, consumer stores, educational facilities, recreational facilities, financial advice and so on. Thus, fringe benefits cover a umber of employee services and facilities provided by an employer to his employees and in some cases to their family members also. Welfare of employee and his family members is an effective advertising and also a method of buying the gratitude and loyalty of employees. But, while some employers provide these services over ad above the legal requirements to make effective use of their work force, some restrict themselves to those benefits which are legally required.
Need for Extending Fringe Benefits:
During the World War II certain non-monetary benefits were extended to employees as means of neutralizing the effect of inflationary conditions. These benefits which include housing, health, education, recreation, credit, canteen etc. have been increased from time to time as a result of the demands and pressures from trade unions. It has been recognized that these benefits help employees in meeting some of their lifeâ€™s contingencies and to meet the social obligation of employers.
Most of the organizations have been extending the fringe benefits to their employees, year after year, for the following reasons,
Employees demand a more and varied types of fringe benefits rather than pay hike because of reduction in tax burden on the part of employees and in view of the galloping price index and cost of living.
Trade Union Demands:
Trade Unions compete with each other for getting more and a new variety of fringe benefits to their members such as life insurance, beauty clinics. If one union succeeds in getting one benefit, the other union persuades management to provide a new model fringe. Thus, the competition among trade unions within an organization results in more and varied benefits.
Employerâ€™s prefer fringe benefits to pay-hike, as fringe benefits motivate the employees for better contribution to the organization. It improves morale and works as an effective advertisement.
As a Social Security:
Social security is a security that society furnishes through appropriate organization against certain risks to which its members are exposed. These risks are contingencies of life accidents and occupational diseases. Employer has to provide various benefits like safety measures, compensation in case of involvement of workers in accidents, medical facilities etc with a view to provide security to his employees against various contingencies.
To Improve Human Relations:
Human relations are maintained when the employees are satisfied economically, social and psychologically.
Fringe benefits satisfy the workerâ€™s economic, social and psychological needs. Consumer stores, Credit facilities, Canteen, Recreational facilities etc satisfy workerâ€™s social needs, whereas retirement benefits satisfy some of the psychological problems about the post-retirement life. However, most of the benefits minimize economic problems of the employee. Thus, fringe benefits improve human relations.