What You Should Know About Fringe Benefits

fringe benefits

Many employee benefits and compensations in the form include various forms of non-wages benefits offered to employees as well as their regular salaries or wages. In instances where the employee exchanges salaries for any other form of advantage is generally known as a “wage replacement” or “wage replacement agreement”. It may be resorted to circumvent a statutory wage reduction at the time of retirement, and/or when an employer has a genuine difficulty in meeting the requirements of his employees for some valid business reason. Other reasons for entering into a wage replacement agreement are to make provisions for employees who may have been disabled or who may have become invalid due to an accident.

This means that the employees’ agreement has to take care of these aspects. It should define the amount of money that will be taken by the employer out of their employees’ salaries, as well as any other benefit(s) that can be reasonably expected from these employees. Moreover, it should also define the procedures to be followed in case of a ‘disability retirement’. Finally, it should clearly state that the employer is liable for all the costs involved in a disability retirement. The amount of money that an employer takes out of his employees’ salaries, along with any other employee benefit, like bonuses, is known as the employer’s surplus.

Employees often feel that signing up for the company health insurance plan, as well as a host of other employee benefits such as paid annual leave, pensions, etc., are necessities rather than luxuries. However, it is important to note that many employees regard these benefits as necessities, as they are needed to ensure their economic survival in the long run. At times, employees’ contributions towards these benefits may be deducted from their salary. In such cases, the employer is not legally allowed to deduct any money from their employees’ salaries until the benefits are disbursed to them. Likewise, employees are not allowed to opt for any kind of benefit whatsoever until after the company has provided them with at least six months’ notice.

Although the laws regarding fringe benefits are pretty clear-cut, employers can still choose to take certain advantages over employees. For instance, they may choose to deduct some benefits from the employees’ salaries, thereby reducing their overall ‘tax burden’ and increasing their ‘reward’ from the government. This practice is known as an anti-tax move, which can be advantageous for an employer.

Many employees find the idea of receiving these benefits a touch annoying. After all, these benefits are not seen as wages, but as perks. But this should not be viewed as a bad thing, because it is a fact that employees actually prefer to receive them and would not want to give them up. Therefore, as an employer, you should not be afraid of providing these benefits, even if you have to pay a bit more in the form of a tax. Instead, you should try to convince your employees that the tax they would pay if they do not get these benefits is much lower than the amount they would pay if they had to pay for them, but were not entitled to them. This is a subtle trick that will help you retain your present employees and lure new ones into your company.

There are certain situations where the tax you pay on a particular benefit could be considered income for the employee, rather than ‘wages’. Such include health insurance benefits, retirement benefits, deferred bonuses (such as the ones given to some long-term employees), and certain compensatory costs. However, in general, any kind of tax that you pay on these benefits is nothing compared to what you might end up paying if an employee quits or is fired.

Author:

Leave a Reply

Your email address will not be published. Required fields are marked *