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MBA Sem-III: Compensation Management
Unit-IV
Components of Compensation packages:
1. Fringe benefits
2. Incentives
3. Pension plan
1. Fringe Benefit
Fringe benefits are benefits which employees
or directors receive from their employment
but which are not included in their salary
cheque or wages. On the tax return form they
are called 'benefits in kind'. They include such
things as company cars, private medical
insurance paid for by the employer and cheap
or free loans.
The taxation of perquisites -- or fringe benefits
-- provided by an employer to his employees,
in addition to the cash salary or wages paid, is
fringe benefit tax.
Any benefits -- or perks -- that employees
(current or past) get as a result of their
employment are to be taxed, but in this case
in the hands of the employer.
Examples of Fringe Benefits
Main Features of FB:
 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.
Objectives of FB
 To create & improve sound IR.
 To motivate the employees.
 To provide security to the employees.
 To protect the health of the employees.
 To promote employee’s welfare.
 To create a sense of belongingness.
 To meet the requirements of various
legislations relating to FB.
Items covered under fringe benefits
As per the Finance Bill, fringe benefits shall be
deemed to have been provided if the employer
has incurred any expense or made any payment
for the purposes of:
(a) entertainment;
(b) festival celebrations;
(c) gifts;
(d) use of club facilities;
(e) provision of hospitality of every kind to any
person whether by way of food and beverage or
in any other manner, excluding food or beverages
provided to the employees in the office or
factory;
(f) maintenance of guest house;
(g) conference;
(h) employee welfare;
(i) use of health club, sports and similar
facilities;
(j) sales promotion, including publicity;
(k) conveyance, tour and travel, including
foreign travel expenses
(l) hotel boarding and lodging;
(m) repair, running and maintenance of motor
cars;
(n) repair, running and maintenance of aircraft
(o) consumption of fuel other than industrial
fuel;
(p) use of telephone;
(q) scholarship to the children of the
employees.
Types of FB:
 Payment for time not worked.
 Employee security.
 Safety & health.
 Workmen’s compensation.
 Health benefits.
 Voluntary arrangements.
 Welfare & recreational facilities.
 Old age & retirement benefits.
Introduction of the Tax (India)
With the notification of the Finance Act,
2005, the Fringe Benefit Tax has become
a law and every person falling within the
definition of employer will now be
required to comply with the provisions
relating to the Fringe Benefit Tax.
Thanks
Cm u4-lect1-to-lect9
Cm u4-lect1-to-lect9
Cm u4-lect1-to-lect9
Cm u4-lect1-to-lect9
Cm u4-lect1-to-lect9

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Cm u4-lect1-to-lect9

  • 1. MBA Sem-III: Compensation Management Unit-IV Components of Compensation packages: 1. Fringe benefits 2. Incentives 3. Pension plan
  • 2. 1. Fringe Benefit Fringe benefits are benefits which employees or directors receive from their employment but which are not included in their salary cheque or wages. On the tax return form they are called 'benefits in kind'. They include such things as company cars, private medical insurance paid for by the employer and cheap or free loans.
  • 3. The taxation of perquisites -- or fringe benefits -- provided by an employer to his employees, in addition to the cash salary or wages paid, is fringe benefit tax. Any benefits -- or perks -- that employees (current or past) get as a result of their employment are to be taxed, but in this case in the hands of the employer.
  • 4.
  • 6. Main Features of FB:  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.
  • 7.
  • 8. Objectives of FB  To create & improve sound IR.  To motivate the employees.  To provide security to the employees.  To protect the health of the employees.  To promote employee’s welfare.  To create a sense of belongingness.  To meet the requirements of various legislations relating to FB.
  • 9.
  • 10. Items covered under fringe benefits As per the Finance Bill, fringe benefits shall be deemed to have been provided if the employer has incurred any expense or made any payment for the purposes of: (a) entertainment; (b) festival celebrations; (c) gifts; (d) use of club facilities; (e) provision of hospitality of every kind to any person whether by way of food and beverage or in any other manner, excluding food or beverages provided to the employees in the office or factory;
  • 11. (f) maintenance of guest house; (g) conference; (h) employee welfare; (i) use of health club, sports and similar facilities; (j) sales promotion, including publicity; (k) conveyance, tour and travel, including foreign travel expenses
  • 12. (l) hotel boarding and lodging; (m) repair, running and maintenance of motor cars; (n) repair, running and maintenance of aircraft (o) consumption of fuel other than industrial fuel; (p) use of telephone; (q) scholarship to the children of the employees.
  • 13. Types of FB:  Payment for time not worked.  Employee security.  Safety & health.  Workmen’s compensation.  Health benefits.  Voluntary arrangements.  Welfare & recreational facilities.  Old age & retirement benefits.
  • 14.
  • 15.
  • 16. Introduction of the Tax (India) With the notification of the Finance Act, 2005, the Fringe Benefit Tax has become a law and every person falling within the definition of employer will now be required to comply with the provisions relating to the Fringe Benefit Tax.