The majority of employers in the private and public sectors offer their employees a variety of benefits in excess of stated salaries. These additional on-the-job perks, typically referred to as fringe benefits, are viewed as compensation by an employer but are generally not included in an employee’s taxable income. A wide range of fringe benefits exists and what is offered varies from one employer to another, but the most common benefits include life, disability and health insurance bundles; tuition reimbursement or education assistance; fitness center access or discounts; employee meals and cafeteria plans; dependent care assistance; and retirement plan contributions.
The most common fringe benefits offered to employees include combinations of insurance coverage. Typically, employers offer up to $50,000 of group term life insurance, short- and long-term disability coverage and health insurance options. Employers commonly share the cost of premiums with employees in an effort to offset total cost to the employee.
Another common fringe benefit is education assistance or tuition reimbursement for college courses or the completion of an advanced degree program. Employers offering education assistance may allow employees to work flexible schedules so class and work obligations can be integrated or they may provide reimbursement for all or part of tuition expenses.
For larger employers with ample space, access to an on-site fitness center is a common fringe benefit to employees. Smaller employers may also offer gym memberships at a discount or a fitness equipment reimbursement up to a certain limit each year.
Meals and Cafeteria Plans
Meals or discounted cafeteria plans may also be offered to employees as fringe benefits. Employers recognize that the cost of lunch or dinners when employees work late can add up quickly and, as such, meals are provided by some employers at no cost to the employee.
Child care assistance is another benefit offered through some employers, as working full-time with children can present scheduling conflicts and prohibitive day care costs. Some larger employers offer employees dependent care on-site, either at a discount or for no cost, while smaller companies may provide a monthly bonus to employees for the specific purpose of paying for dependent care.
Retirement Plan Contributions
One of the most important fringe benefits an employer can offer is contributions to an employee’s retirement plan. Some companies offer matches on employee 401(k) paycheck deferrals, while others make qualified contributions to retirement plans without requiring employees to make contributions themselves. This can be a powerful tool in saving for the long-term and provide a much higher total compensation to employees above and beyond their salaries.
Most employers offer some variation of fringe-benefits to employees to make the overall work environment pleasant to current workers and more attractive to prospective employees. The combination of any of the nontaxable compensation listed above can be a valuable bonus to employees and a retention planning tool for employers.
Jared Hoole, CFP®
Lakeside Financial Planning, Burlington, MA
Some fringe benefits come in the form of reduced prices on goods and services. Often, workers can get employee discounts on products that their company or one of its subsidiaries makes. Some employers provide staffers with cell phones, and cell phone providers offer corporate discounts on their plans to certain large companies. Museums and cultural institutions might offer free admission to employees whose firms are major donors or event sponsors, too.
In terms of lifestyle, some firms reimburse employees for commuting or moving expenses. They might provide daycare services or assistance with care for dependents. Financially, employee stock options are a key fringe benefit. Firms give workers shares in corporate stock outright or the chance to buy at a discounted price.