Objectives of fringe benefits


The view point of employers is that fringe benefits form an important part of employee incentives to obtain their loyalty and retaining them. The important objectives of fringe benefits are:

1. To create and improve sound industrial relations

2. To boost up employee morale.

3. To motivate the employees by identifying and satisfying their unsatisfied needs.

4. To provide qualitative work environment and work life.

5. To provide security to the employees against social risks like old age benefits and maternity benefits.

6. To protect the health of the employees and to provide safety to the employees against accidents.

7. To promote employee’s welfare by providing welfare measures like recreation facilities.

8. To create a sense of belongingness among employees and to retain them. Hence, fringe benefits are called golden hand-cuffs.

9. To meet requirements of various legislations relating to fringe benefits.

Need for Extending Benefits to Employees

(i) Rising prices and cost of living has brought about incessant demand for provision of extra benefit to the employees.

(ii) Employers too have found that fringe benefits present attractive areas of negotiation when large wage and salary increases are not feasible.

(iii) As organizations have developed ore elaborate fringe benefits programs for their employees, greater pressure has been placed upon competing organizations to match these benefits in order to attract and keep employees.

(iv) Recognition that fringe benefits are non-taxable rewards has been major stimulus to their expansion.

(v) Rapid industrialization, increasingly heavy urbanization and the growth of a capitalistic economy have made it difficult for most employees to protect themselves against the adverse impact of these developments. Since it was workers who are responsible for production, it was held that employers should accept responsibility for meeting some of the needs of their employees. As a result, some benefits-and-services programs were adopted by employers

(vi) The growing volume of labor legislation, particularly social security legislation, made it imperative for employers to share equally with their employees the cost of old age, survivor and disability benefits.

(vii) The growth and strength of trade unions has substantially influenced the growth of company benefits and services.

(viii) Labor scarcity and competition for qualified personnel has led to the initiation, evolution and implementation of a number of compensation plans.

(ix) The management has increasingly realized its responsibility towards its employees and has come to the conclusion that the benefits of increase in productivity resulting from increasing industrialization should go, at least partly, to the employees who are responsible for it, so that they may be protected against the insecurity arising from unemployment, sickness, injury and old age. Company benefits-and-services programs are among some of the mechanisms which managers use to supply this security.

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