Today’s job market is increasingly competitive, which means employers are tasked with finding new ways to attract and retain talented individuals. For many, a widely-used part of this strategy for recruiting and keeping employees is an enticing fringe benefits package.
Fringe benefits, also known as employee benefits, are additional compensation beyond wages or salary. They can range from monetary (e.g. bonuses or mobile phone allowances) to non monetary (e.g. generous annual leave, flexible working arrangements, and wellness programmes).
In fact, in a 2019 UK study, 66% of employees said these kinds of benefits were more important to them than their basic salary. This article will delve into the definition of fringe benefits, examples of fringe benefits and their importance to an entire organisation—from employees to HR managers and executives.
Essentially, a fringe benefit’s explained as a supplement benefit to employee salary, providing an advantage that goes beyond what is expected from employment. These are distinct from statutory benefits like annual leave or maternity pay, and are independent of work compensation like wages, salary, or overtime pay. Typically, these are non-cash benefits: paid memberships, life insurance, healthcare support, a company phone, or phone bill compensation.
Benefits like these are often considered non-essential, but they’re more than extras. As with other initiatives, they are designed to enhance an employee’s experience in the workplace and beyond, making their lives easier.
The most popular examples of fringe benefits for employees that companies can use to attract and keep their staff include:
Fringe benefits are not limited to the above. They can also encompass paid leave for an employee’s birthday, as this is non-statutory. Other examples include flexible or hybrid working arrangements, food subsidies or vouchers and financial support for training, learning, and development.
Benefits like these add additional value to employees. They help to ensure that employees feel valued for their contributions and support their lives outside of work. Fringe benefits show employees that the company recognises their concerns around health, family, and their future aspirations, and will support this while they are a part of the team
By addressing a diverse range of employee needs, from physical and mental health to work-life balance, fringe benefits contribute to an individual's sense of satisfaction and wellbeing in the workplace. It’s easy to see why: if your people feel supported with the issues that worry them, like their healthcare or finances, they are likely to appreciate belonging to the company both when they’re at work and when they’re not.
Benefits are also known to boost employee engagement by driving loyalty to the company and boosting worklife balance. For example, flexible working arrangements directly support this balance, because—when individuals are trusted to do their jobs with the freedom to choose their schedules—they are also likely to be more motivated and productive as a result.
Attractive fringe benefits can also help reduce your employee turnover rate. If the benefits packages speak to the individual requirements of your employees, this can encourage loyalty to your organisation, and limit the incentives for them to switch to a competitor. Scientific research into US business also shows a link between companies that offer benefits like dental care and life insurance and greater company performance.
Given that fringe benefits can deliver significant benefits for organisations, from reduced turnover to more productive employees, it’s no surprise that many companies today adopt them. For instance, in 2023 a poll revealed 4 in 10 businesses were at least considering offering benefits to employees.
But it's worth remembering that they can bring challenges, such as the extra cost and admin burdens. That’s why organisations should be aware of tips and best practices for when they roll out these benefits:
Before designing a fringe benefit package, companies are advised to find out exactly what their employees want from these add-ons, and match that with their potential business impact. A company-wide survey is a good place to start, as it could offer employees the chance to rank proposed fringe benefits in order of preference. Some, for instance, will prefer flexible working arrangements to mental health support or getting their phone bill paid.
Generally speaking, in the UK fringe benefits are taxed as income. This means employees have to pay tax on the value of the benefit—at their normal rate. The amount owed is taken from the employee’s salary through Pay As You Earn.
But there are some exceptions to this rule (e.g. childcare vouchers and company cars, which are taxed at a rate distinct from other fringe benefits). Some can also be exempt from taxation, depending on the circumstances. As such, it is best that HR departments communicate the different rules to employees.
Once they are rolled out, to ensure fringe benefits are as effective as they can be, it’s important that employers can assess the return on investment of each fringe compensation package. Cost-benefit analysis tools that HR departments can use include company-wide surveys and questionnaires, interviews and focus groups, and using key performance indicators (KPIs) for the benefits, e.g. any productivity gains seen by the company or overall employee satisfaction based on feedback.
Fringe benefits have become a core element of successful employee compensation for workers in UK companies. At Vivup, we provide organisations with a one-stop shop for all the benefits they offer their people.
We’re experts in benefits administration and we know the importance of ensuring your teams remain engaged and motivated at work. There are a wide range of options you can choose from to do so, and our platform makes it easy for your employees to access all of them in one convenient place. Support your team’s wellbeing in the workplace and outside by giving them the support they need to be resilient in the face of what life brings.
Book a demo today to see how Vivup can help your organisation.