Maximize Employee Satisfaction With Fringe Benefits

Q: What are the most popular fringe benefits?

Health insurance is one of the most popular fringe benefits. Many employees will not even consider working for an employer unless health insurance is covered. In the wake of COVID, another popular one is telecommuting.

Q: How do fringe benefits affect employee morale?

Fringe benefits provide additional perks to working with a particular company. Because employees are being compensated in more ways than one, they are happier to work with an employer when they feel they are getting a good return on their time and effort.

Q: How can I determine the budget for fringe benefits?

Remember, not all fringe benefits necessarily cost money, but to determine your budget, take a close look at your financial statements and analyze your quarterly and yearly revenue. What is your gross profit margin ? The Bureau of Labor Statistics reports that the average fringe benefit rate is 30%, but you obviously must stay within your budget. To determine what you can truly afford, we suggest speaking with a CPA in your area so you don’t accidentally affect your company’s daily operations and growth.

Maximize Employee Satisfaction with Fringe Benefits

Lauren WardUpdated July 6, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

What are fringe benefits? A fringe benefit is an added bonus employers provide to their employees for working with the company. It can have monetary value, but is not an increase in hourly wages or salaries. In other words, it’s a perk for working. Employers that offer fringe benefits often do so because they want to increase their employee retention rate as well as company morale. While many things can affect both, offering employee fringe benefits is one way to help with both.

What Are Fringe Benefits?

A fringe benefit is when a company offers an additional perk to working with them that is not directly related to employee pay. While it’s not a form of monetary compensation, the benefit often has a monetary value because it would cost the employee money if they were to buy it themselves.A fringe benefits example would be health insurance. To further entice top-tier talent, many companies offer to pay for their employee’s health insurance as an additional benefit to working with them. Another common fringe benefit is telecommuting or flextime. Some employees allow their employees the option of working from home or having flexible work hours throughout the work week.Recommended: Best Small Business Loans

The Importance of Employee Fringe Benefits

For an employer, fringe benefits have a number of benefits. Perhaps the biggest one is that it can increase a company’s retention rates. The happier your employees are, and the more benefit they see to working with you, the less likely they will be to leave. Therefore, not only will you attract higher quality employees who understand the true value of what you’re offering, but you will not have to perpetually train new employees. A direct result of employee retention is an improvement in company culture. Employees that are happy to stay with your company will be more likely to be happier at work each day. This will naturally create a bond between your employees, and may even work itself into better customer relations. While employee fringe benefits may cost you more money, the return can be great, and is one example of why you should reinvest profits when possible. Recommended: Can You Refinance a Business Loan?

Types of Employee Fringe Benefits

There are many benefits small business owners can offer their employees. We’ve listed some of the more popular ones below, but a full list can be found on the IRS’s Publication 15-B.

Health and Wellness Benefits

Health insurance: Perhaps the most common fringe benefit, health insurance often includes dental, vision, and medical insurance coverage. Gym membership: Some companies offer their employees complimentary memberships to nearby gyms to help encourage them to stay active and fit. Flexible spending account: Also known as an HSA, a flexible spending account allows employees to set aside pre-tax dollars for any healthcare expenses they may have throughout the year.Mental health programs: The World Health Organization estimates there has been a 13% rise in mental health issues. Many employers are trying to help by offering their employees free access to mental health professionals.

Retirement Benefits

401(k): Employers match an employee’s contribution to their 401(k).IRA: Companies contribute money to their employees' individual retirement accounts.Employee stock: Employees are given company shares, which may pay dividends if the company is successful. Pension plans: Employees receive a monthly income even after they have retired.

Time Off Benefits

Paid sick leave: Employees still receive pay should they be unable to work because of an illness or accident. Paid holiday: Employees receive paid time off on designated holidays.Paid personal day: Employees can take paid time off for personal reasons.Paid vacation: Employees receive a certain amount of paid vacation days off each year.

Professional Development Benefits

Continuing education: Employer provides financial assistance to employees taking educational courses at accredited colleges, universities, and technical schools.Professional development: Employers give free access for employees to access certain learning platforms or resources. Conferences: Employers pay for employees to attend industry-specific conferences. Professional certifications: Employer pays for employees to pursue a professional license that is relevant to his or her job. Recommended: 6 Tips for Managing Small Business Finances

How to Choose the Right Fringe Benefits for Your Company

To choose the right fringe benefit for your company after you have determined your budget for each employee, we suggest conducting an employee survey to determine which benefits they would be most interested in. While you may think you know what they’ll want, they may surprise you. Remember that fringe benefits aren't intended just to attract the best talent, but they are also to retain the best talent. To do that, you must give your employees something they actually want. Recommended: Being Your Own Boss: Benefits, Drawbacks, and Tips

Implementing Fringe Benefits

The IRS has an extensive guide to fringe benefits. Some of the benefits are taxable, while others are not. Before you implement any employee fringe benefit, it’s crucial that you understand how it will affect your company’s taxes and your employee’s taxes.If it feels overwhelming, consider speaking with a CPA. Not only can a CPA help you narrow down your budget for fringe benefits, but they can also help you understand the impact they will have on everyone’s overall taxes. Recommended: What is the business cycle?

The Takeaway

Employee fringe benefits can be a great way to retain and attract the best talent in your industry. Before you speak with your employees about it, make sure you do extensive research on the costs of each benefit. Once you’ve determined what you can afford, take a poll to ascertain what your employees would be most interested in. This way, you know you’re giving them something they want.Take your employee satisfaction to the next level by exploring business financing options through Lantern Credit.

Frequently Asked Questions

What are the most popular fringe benefits?

How do fringe benefits affect employee morale?

How can I determine the budget for fringe benefits?

Photo credit: iStock/Vadym Pastukh

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About the Author

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.

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