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8/6/2019 Fringe Benefits 117
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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
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