FRINGE BENEFITS Are extra benefits provided to workers other than usual compensation in form of salary Referred to as ‘fringe benefits’ because years ago they were small, relatively inconspicuous Purpose - retain employee in organization on long term basis. Differ from incentive plans since benefits & services not contingent on performance of individual, team or organization Accrue to all employees by virtue of their membership in organisation Organization should make employees abreast of fringe benefit programmes to motivate them 2 & improve status of their organization. Are of two types: Mandatory & Voluntary
FRINGE BENEFITS Rapid industrialization, heavy urbanization & growth of capitalistic economy made it difficult for employees to protect themselves against adverse impact of these developments Labour scarcity & competition for qualified personnel led to evolution & implementation of no. of compensation plans Realisation on part of management wrt its responsibility towards employees that benefits of productivity increase resulting from increasing industrialization should go, at least partly, to employees responsible for it, they be protected against insecurity arising from unemployment, sickness, injury & old age. Labour legislation on social security, made it imperative for employers to share with employees cost of old age, survivor & disability benefits 3 Hence the importance of fringe benefits
FRINGE BENEFITS Influence of other factors on ‘Fringe Benefits’ Rising prices & cost of living brought about incessant demand for provision of extra benefits to employees Employers found fringe benefits attractive areas of negotiation when wage & salary increases not feasible Greater pressure placed upon competing organizations to match these benefits to attract & retain employees Fringe benefits - non-taxable rewards; major stimulus to their expansion 4
FRINGE BENEFITS Coverage of Benefits Benefits consist of items/ awards supplementary to normal pay. Some –pensions & sick pay - are essential entitlements, common term ‘fringe benefits’ is perhaps misleading. Benefits such as cars, medical insurance & ‘perks’, are in nature of optional extras & recruitment retention & incentives strategies of organization Entitlements include the following: Pension Provisions › regarded as most important benefit after basic pay › kind of deferred pay, building up rights to guaranteed income on retirement (or to dependants, on death) 5 › financed by contributions from company with facilities for contribution by employees as well.
FRINGE BENEFITS Sick Pay › Sickness or enforced absence from work haunt workers with prospect of lost earnings; provision for genuine sufferers. › Many employers supplement benefit by additional sick pay schemes Medical Benefits › Say private medical and/or dental insurance. Some medical services may also be provided at workplace: for example eye & hearing tests (where relevant to the industrial context). Maternity Leave & Maternity Pay Holidays › Benefit, taken for granted › Employees who have been continuously employed for 26 weeks entitled to 15 days’ leave per annum, rising to 20 days for leave › No statutory right to ‘customary’ holidays (public holidays, 6 Christmas etc) ; may be granted by contract terms. › Additional holiday entitlements regarded as fringe benefit, including sabbaticals & long-service leaves.
FRINGE BENEFITS Otherbenefits include the following: Company Cars › highly-regarded benefit in India/ UK, especially among managerial staff, status symbol, and for those whose work requires extensive travel (eg. sales & service staff). Transport Assistance › Examples include loans for purchase of annual season tickets, or bulk buying of tickets by employers for distribution to staff. Housing assistance, in the form of › Allowances to staff transferred or relocated – lodging, and so on, or 7 › assistance for house purchase – bridging loan, preferential mortgage terms.
FRINGE BENEFITS Catering Services › Most commonly, subsidized food or luncheon vouchers. Recreational Facilities › Subsidy & membership of social & sports clubs or provision of facilities such as a gymnasium or bar. Allowances for › Telephone costs › Professional subscriptions or work related reading matter. › Discounts or preferential terms on the organization’s own products services. EG: Bank employees receive mortgage subsidy-discounts on unit trusts or insurance products; bonus interest on accounts or savings plans; or reduced interest rates on overdrafts & loans. Educational Programmes › In-house study opportunities, or sponsorship of external study 8 (not necessarily work-related).
FRINGE BENEFITS Family-friendly Policies › Workplace nurseries, term-time hours contracts, career break schemes. Severance Pay › Provides a one-time payment when an employee is terminated. Done on humanitarian ground. Insurance: › May be life, health & accident. May be for individual or group Disablement benefit › Insured employees, disabled temporarily or permanently due to employment injury, occupational diseases, or both entitled to cash benefit Dependent’s benefit › If insured person dies as a result of employment injury, his 9 dependents are entitled to compensation under the Act
FRINGE BENEFITS Other Fringe Benefits › Entertainment benefit by way of food, drink or recreation › If an employee owes debt to the organisation, it may release employee from obligation to pay › Provision of personal attendants- sweeper, gardener & watchman › Increasingly common for employees & their families to be provided with vacation & holiday facilities › Customary in India to provide gifts directly or indirectly in the form of vouchers or tokens to employees on social, festival & religious occasions 10
EXAMPLES OF FRINGE BENEFITS Educational Motorola India offers educational assistance to employee’s spouses for getting a suitable job abroad when employee is given international assignment NIIT gives employees paid sabbaticals for 6 months every 5 years HLL offers career break to employees wishing to study Family Motorola India provides childcare centres to working mothers & flexible working hours to certain employees NIIT offers wedding anniversary allowance LG has initiative called ‘Joyful Working Team’ where employees &families taken for lunch or sporting activities like rafting. ‘Happy Moments Board’ to share positive happenings in members’ lives Infosys allows employees leave without pay for a year to 11 allow them to join their partners abroad