8/6/2019 Fringe Benefits 117

1/15

The term fringe benefits refers to

the extra benefits provided toemployees in addition to thenormal compensation paid in

the form of wage or salary.

Fringe Benefits

8/6/2019 Fringe Benefits 117

2/15

Main features

They are supplementary forms.

They are paid to all employees.

They are indirect compensation.

They help raise the living conditions.

They may be statutory or voluntary.

8/6/2019 Fringe Benefits 117

3/15

Need for Fringe Benefits

y (i)Rising prices and cost of living has brought aboutincessant demand for provision of extra benefit to theemployees.

y (ii)Employers too have found that fringe benefits presentattractive areas of negotiation when large wage and salaryincreases are not feasible.

y (iii)As organizations have developed ore elaborate fringebenefits programs for their employees, greater pressurehas been placed upon competing organizations to matchthese benefits in order to attract and keep employees.

8/6/2019 Fringe Benefits 117

4/15

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

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

y

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

8/6/2019 Fringe Benefits 117

5/15

y vii)The growth and strength of trade unions has substantiallyinfluenced the growth of company benefits and services.(viii)Labor scarcity and competition for qualified personnel

has led to the initiation, evolution and implementation of anumber of compensation plans.

y (ix)The management has increasingly realized itsresponsibility towards its employees and has come to theconclusion that the benefits of increase in productivityresulting from increasing industrialization should go, at leastpartly, to the employees who are responsible for it, so that theymay be protected against the insecurity arising fromunemployment, sickness, injury and old age. Companybenefits-and-services programs are among some of themechanisms which managers use to supply this security.

8/6/2019 Fringe Benefits 117

6/15

Objectives of Fringe Benefits

To create & improve sound IR.

To motivate the employees.

To provide security to the employees. To protect the health of the employees.

To promote employees welfare.

To create a sense of belongingness.

To meet the requirements of variouslegislations relating to FB.

8/6/2019 Fringe Benefits 117

7/15

Types of Fringe Benefits

Payment for time not worked.

Employee security.

Safety & health. Workmens compensation.

Health benefits.

Voluntary arrangements.

Welfare & recreational facilities.

Old age & retirement benefits.

8/6/2019 Fringe Benefits 117

8/15

TYPES OF FRINGE BENEFITS

y 1.For Employment Security

y 2.For Health Protection

y 3.For Old Age and Retirement

y 4.For Personnel Identification, Participation and

Stimulation

8/6/2019 Fringe Benefits 117

9/15

y 1.For Employment Security :

Benefits under this head include

unemployment, insurance, technological adjustment pay,

leave travel pay, overtime pay, level for negotiation, leave

for maternity, leave for grievances, holidays, cost of living

bonus, call-back pay, lay-off, retiring rooms, jobs to the

sons/daughters of the employees and the like.

8/6/2019 Fringe Benefits 117

10/15

y 2.For Health Protection:

Benefits under this head include

accident insurance, disability insurance, healthinsurance, hospitalization, life insurance, medical

care, sick benefits, sick leave, etc.

8/6/2019 Fringe Benefits 117

11/15

y 3.For Old Age and Retirement:

Benefits under this category

include: deferred income plans, pension, gratuity,

provident fund, old age assistance, old age counseling

, medical benefits for retired employees, traveling

concession to retired employees, jobs to

sons/daughters of the deceased employee and thelike.

8/6/2019 Fringe Benefits 117

12/15

y For Personnel Identification, Participation and

Stimulation:This category covers the following benefits:

anniversary awards, attendance bonus, canteen,

cooperative credit societies, educational facilities,

beauty parlor services, housing, income tax aid,

counseling, quality bonus, recreational programs,

stress counseling, safety measures etc.

8/6/2019 Fringe Benefits 117

13/15

y a)Payment for Time Not worked: Benefits underthis category include: sick leave with pay,

vacation pay, paid rest and relief time, paidlunch periods, grievance time, bargaining time,travel time etc.b)Extra Pay for time Worked: This categorycovers the benefits such as: premium pay,incentive bonus, shift premium, old ageinsurance, profit sharing, unemploymentcompensation, Christmas bonus, Deewali orPooja bonus, food cost subsidy, housing subsidy,

recreation.

8/6/2019 Fringe Benefits 117

14/15

y Employee Security

Physical and job security to the employee should also be

provided with a view to promoting security to theemployee and his family members.

y Retrenchment Compensation:

The non-seasonal industrial establishments employing

50 or more workers have to give one months notice orone months wages to all the workers who are

retrenched after one years continuous service. The

compensation is paid at the rate of15 days wage for

every completed year of service with a maximum of 45

days wage in a year. Workers are eligible for

compensation as stated above even in case of closing

down of undertakings.

8/6/2019 Fringe Benefits 117

15/15

y Lay-off Compensation:

In case of lay-off, employees are entitled to lay-off

compensation at the rate to 50% of the total of the basicwage and dearness allowance for the period of their lay-off

except for weekly holidays. Lay-off compensation can

normally be paid up to 45 days in a year.

y Safety and Health Compensation: Employees safety and

health should be taken care of in order to protect theemployee against accidents, unhealthy working conditions

and to protect workers capacity. In India, the Factories Act,

1948, stipulated certain requirements regarding working

conditions with a view to provide safe workingenvironment. These provisions relate to cleanliness, disposal

of waste and effluents, ventilation and temperature, dust and

fume, artificial humidification, over-crowding, lighting,

drinking water, latrine urinals, and spittoons