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Employee Benefit

Employee benefits are non-wage compensations that help attract, retain, and motivate employees, while fringe benefits are additional perks beyond base salary. Both types of benefits can include various forms such as pension schemes, health insurance, and intangible benefits, and they play a significant role in enhancing employee satisfaction and loyalty. A comprehensive benefits package is essential for organizations to remain competitive in the labor market and fulfill legal requirements.

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10 views3 pages

Employee Benefit

Employee benefits are non-wage compensations that help attract, retain, and motivate employees, while fringe benefits are additional perks beyond base salary. Both types of benefits can include various forms such as pension schemes, health insurance, and intangible benefits, and they play a significant role in enhancing employee satisfaction and loyalty. A comprehensive benefits package is essential for organizations to remain competitive in the labor market and fulfill legal requirements.

Uploaded by

naitikabhargava2000
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Employee Benefits and Fringe Benefits

1. Employee Benefits
Employee benefits are non-wage compensations provided to employees in
addition to their regular salaries. These benefits play a crucial role in attracting,
retaining, and motivating employees. Offering a comprehensive benefits package
can give organisations a competitive edge in the labour market. While benefits
incur significant costs for employers, they are often valued highly by employees
and can also include legally mandated benefits.

Key Aspects of Employee Benefits:


 Attraction and Retention: Helps attract and retain talented employees.
 Customisation: Employers can offer standardised benefits or flexible
plans that allow employees to choose benefits based on their needs.
 Cost Consideration: Employers must carefully plan the proportion of
compensation allocated to benefits.

Flexible Benefits Plan:


 Definition: A program that allows employees to choose from a range of
benefits offered by the employer, tailoring the package to their individual
needs.
 Advantages: Increases employee satisfaction by addressing diverse
needs.
 Challenges: Involves higher administrative costs and complexity.

2. Types of Benefits
Benefits can be categorised into several types to address different employee
needs:
2.1. Pension Schemes:
 Includes: Personal and family pension plans.
 Purpose: To provide financial security post-retirement.

2.2. Personal Security:


 Includes: Health insurance, life insurance, accident insurance.
 Purpose: To enhance employees’ and their families’ security during
health crises or unforeseen events.

2.3. Financial Assistance:


 Includes:
o Loans
o House purchase schemes
o Relocation assistance
o Discounts on company goods or services
 Purpose: To support employees’ financial needs and improve their
standard of living.

2.4. Personal Needs Entitlements:


 Includes:
o Holidays and leave (maternity, paternity, sabbaticals)
o Childcare support
o Career breaks
o Financial and retirement counselling
o Fitness and recreational facilities
 Purpose: To help employees balance work and personal responsibilities.
2.5. Intangible Benefits:
 Includes:
o Positive work culture
o Recognition programs
o Opportunities for professional growth
 Purpose: To enhance job satisfaction and employee morale.

2.6. Special Allowances:


 Includes:
o Location allowances
o Subsistence allowances (meal and accommodation
reimbursements)
o Shift payments for night work
o Stand-by and call-out allowances
 Purpose: To compensate employees for additional costs incurred due to
their job requirements.

2.7. Other Benefits:


 Includes:
o Subsidised meals
o Clothing allowances
o Reimbursement of telephone costs
o Mobile phones as perks
o Company cars and petrol allowances
 Purpose: To improve employees’ standard of living and convenience.

3. Fringe Benefits
Fringe benefits refer to additional compensation provided to employees beyond
their base salary. They include both monetary and non-monetary perks designed
to enhance the overall compensation package.

3.1. Types of Fringe Benefits:


1. Statutory Benefits: Mandated by law.
o Includes:
 Social security
 Medical care
 Unemployment compensation
 Workmen's compensation
 Provident fund
 Gratuity
2. Contractual Benefits: Agreed upon between employers and employees.
o Includes:
 Dearness allowance
 House rent allowance (HRA)
 City compensatory allowance
 Medical and transport allowances
 Night-shift and heat allowances
 Educational allowances
3. Voluntary Benefits: Provided at the employer’s discretion.
o Includes:
 Group insurance
 Death benevolent fund
 Leave encashment
 Leave travel concession (LTC)
 Conveyance allowance
 Service awards and suggestion awards

3.2. Objectives of Fringe Benefits:


 Attracting Talent: Makes the organisation appealing to skilled
employees.
 Tax Efficiency: Often non-taxable, increasing the net value of
compensation.
 Employee Morale: Enhances satisfaction and loyalty.
 Unity: Ensures fair treatment across the workforce, reducing conflicts.
 Industrial Relations: Improves harmony between employees and
management.
 Employee Well-being: Demonstrates organisational commitment to
employees’ welfare.

3.3. Provision in Income Tax Act 1961:


Section 115WB (2) specifies elements considered as fringe benefits:
 Includes:
o Entertainment and hospitality
o Conferences and sales promotions
o Employee welfare and conveyance
o Use of hotel and lodging facilities
o Maintenance of motor cars
o Use of telephones (including mobile phones)
o Festival celebrations
o Health club facilities
o Gifts and scholarships
o Tour and travel expenses
Section 115WB (1) defines fringe benefits as:
 Privileges, services, or amenities: Provided directly or indirectly by
employers.
 Free or concessional tickets: For employees or their family members.
 Employer contributions: To approved superannuation funds.
 Specified securities or sweat equity shares: Allocated to employees.

Conclusion
Employee benefits and fringe benefits are crucial for enhancing employee
satisfaction, attracting talent, and maintaining a motivated workforce. A well-
designed benefits package not only fulfils legal requirements but also serves as a
strategic tool for improving employee loyalty and productivity.

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