Employee benefits, sometimes called fringe benefits are those rewards that employees receive for being members of the organisation. Benefits are elements of remuneration given in addition to the various forms of cash.
They also include items that are not strictly remuneration such as annual holidays. Unlike wages, salaries and incentives, benefits are not related to employee performance.
The term fringe benefits was coined by the War Labour Board of the USA, reasoning that employer-provided benefits such as paid vacations, holidays and pensions were on the “fringes of wages” – the agency exempted them from pay controls. Benefits are also known as perks.
Benefits are rewards given to employees over and above basic salary. They have the following characteristics.
- They are usually provided as a package of items e.g. pension, ca allowance, school fees, medical etc.
- They are an important element of pay to particular individuals – older persons may value a particular benefit than would a younger person.
Employees are not allowed to choose their preferred package. Benefits are usually on a “take it or leave it” basis.
- Benefits are usually temporary in nature – they are never permanent and are at the discretion of management.
- Their availability is subject to the company’s ability to provide them.
- Benefits once given are normally not commutable to cash.
- Once established, they are very difficult to withdraw and may result in industrial strife especially for those concerning unionisable staff.
The total compensation strategy in a company entails an attempt to integrate salary and benefits into a package that will encourage the achievement of organisations goals. The objectives of the employee benefits policies and practices of an organisation are to:-
- Provide an attractive and competitive total remuneration package, which both attracts and retains high quality staff.
- Provide for the personal needs of the employees.
- Increase the commitment of employees to the organisation
- Provide for some people, a tax efficient method of remuneration.
- To facilitate an organizations downsizing strategy through a generous severance package.
Benefits are supposed to create more favorable attitudes towards the business, which can improve commitment and organizational performance in the longer term.
- They motivate and energise the workers.
- They add quality to employee’s life and their dependents.
They reflect the organizations valuation of the employees.
- They help reduce stress
- They encourage multi-skilling of the workforce.
- They may be used to reduce absenteeism and employee turnover.
They may be used to encourage early retirement.
They may impact on an applicant’s decision to join the firm.
- They may impact on employee work performance.