Fringe Benefits Payments

Fringe Benefits Payments

Fringe Benefits, payments and services provided by an employer in addition to normal earnings. The earliest 'fringe benefits' were probably the welfare services introduced by paternalistic employers during the nineteenth century, but the number and variety has increased during the past fifty years. Holiday pay is the largest item measured as a cost to the employer. Sick pay and redundancy payments are among the latest examples. Some benefits provide income for the employee in time of need, e.g. occupational pension plans and insurance schemes of various kinds. Non-monetary benefits in goods or services include canteens, social facilities, housing or travel subsidies, discounts on company products, payments in kind, medical services, educational facilities and so on.

Fringe benefits can be measured either as receipts to the employee or as costs to the employer, although the two need not be equal; e.g. employee benefits from an insurance scheme need not be the same as employer contributions. For convenience they are usually calculated as costs to the employer. The cost of fringe benefits varies with staff and manual workers. The latter usually enjoy holidays with pay and some of the welfare services listed above, but staff fringe benefits are more extensive. Pension and sick-pay schemes are more generous, and the fringe benefits of the top executive grades increasingly include company cars and houses, as well as expense accounts.

Fringe benefit costs vary between industries and among firms, but for manual workers they probably add 10-20 per cent to direct wage costs. Staff employees probably cost the employer 15-30 per cent of their salaries in fringe benefits. This does not mean that the individual employee receives this amount: some benefits are selective so that an employee does not necessarily benefit, as with sick pay; and many benefits are in kind.

Fringe benefits are sometimes introduced voluntarily by the employer in order to attract and keep employees when labour is scarce, or because high taxation of incomes makes a rise in pay ineffective. Sometimes they are granted because of trade anion pressure, e.g. the third week's holiday with pay in some British industries. A payment which an employer is legally required to make on behalf of his employees, such as the National Insurance contribution, is usually accepted as a fringe benefit cost. In general, when benefits are introduced voluntarily, they have mach the same purpose as wage payments. A company hopes thereby to attract labour to itself and to retain the labour it already has. In this sense, fringe benefits have increased considerably in the past five years and in some industries are an important part of labour costs.

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