Fringe benefits and employer-provided benefits in nature comprise various kinds of non-wage compensations offered to employees as well as their regular salaries or wages. In cases where an employee trades wages for any other form of advantage, this is commonly known as a “wage replacement” or “wage substitution.” Non-wage compensations can also be termed as fringe benefits. Some employees may receive fringe benefits as part of their regular salary, while others may receive them as a perk at the end of a term of employment. These benefits may include a company car, free refreshments at the company cafeteria, travel expenses for meetings or conferences, or even stock options. These perks or rewards are almost always provided as part of a company’s employee benefits package or plan.
When employers consider benefits, they first take into account the employees’ needs and the nature of his job. It is then logical to think about the kind of fringe benefits that employees would appreciate or need. Most employers are aware that some employees may find these types of benefits useful. Nevertheless, many employers still provide these types of benefits despite having a limited or no actual need for them. There are two reasons for employers doing so.
The first reason is that they don’t want to or aren’t able to provide benefits of their own. In some cases, it may simply not be financially feasible to offer benefits of any kind to all employees. The second reason is that they don’t want to or can’t offer benefits that employees might find valuable.
Many employers understand the need to set the correct payroll tax rate for their business. This is because, if an employee’s taxes are taken out of his or her pay, that employee will have more cash to put in his or her own pocket. Fringe benefits are considered a fringe benefit because they are something that the employee will only use for his or her own benefit and then will give to the employee’s dependents upon leaving the employer’s employments. Therefore, the employer has to calculate and then allocate these benefits to the employees.
Usually, this type of benefit is only offered to employees on a voluntary basis – that is, the employee doesn’t have to work for the employer to be eligible for the benefit. Employees can receive these benefits by signing an agreement that states the terms of the benefits (e.g., the employee must work for the employer for a specific period of time and agree to certain terms regarding the benefits). Some of these agreements may also stipulate that the benefits can only be used for the employee’s dependents (only those employees who earn less than twenty-five percent of the employee’s gross monthly salary may receive such benefits). If an employee does not qualify for these benefits, however, he or she can still receive them under certain conditions. For instance, some employers may pay some of the employees’ fringe benefits through income taxes.
Under certain circumstances, it may be unlawful for an employer to pay any part of an employees’ fringe benefits. In particular, an employer may not make an exception for employees who have already commenced work for another employer or for an unplanned leave of absence or maternity leave. An employee should always consult with his or her employer about fringe benefits. In fact, the employment lawyer is often an excellent source for employers who need to determine if there is any allowable exception to the rule. The employment lawyer will know if the employer can make an exception for the employee or not.