Benefits and perquisites

1. Mohan Madgulkar-Compensation Management/2006
Benefits and perquisites

2. Mohan Madgulkar-Compensation Management/2006
Meaning of fringe benefits
• Those benefits which are supplied by an employer to
or for the benefits of an employee and which are not
in the form of wages, salaries and time rates payment
• Any wage cost not directly connected with the
employees productive effort, performance or
sacrifice.
• Benefit is primarily a means in the direction of
ensuring, maintaining and increasing the income of
the employee. It is a benefit which supplements
ordinary wages and which is of value to them and
their families in so far as it materially increases their
retirement.

3. Mohan Madgulkar-Compensation Management/2006
Meaning of perquisites
• An element of compensation provided in
addition to cash which can directly facilitate
more effective performance for the job, as well
as augmenting the total value of compensation
• The term perquisites should be reserved for
those benefits which are not fundamentally
catering personal security and personal needs.

4. Mohan Madgulkar-Compensation Management/2006
Objectives of benefits
• To increase the commitment of the employees to the
organization
• To provide for the actual or perceived needs of
employees
• To demonstrate that the company cares for its
employees
• To ensure that an attractive remuneration package is
provided which attracts and retains high quality staff
• To provide tax-efficient method of remuneration
which reduces tax liabilities with those related to
equivalent cash payments

5. Mohan Madgulkar-Compensation Management/2006
Goals of fringe benefits
• Social goal
• Human relations goals
• Macro economic goals

6. Mohan Madgulkar-Compensation Management/2006
Benefits policies
• Range of benefits to be provided
• Scale of benefits provided
• Proportion of benefits to total remuneration
• Allowing choice
• Allocation of benefits
• Harmonization
• Market considerations
• Government policy
• Trade unions

7. Mohan Madgulkar-Compensation Management/2006
Major categories
• Payment for time not worked
• Hazard protection
• Employee services
• Legally required payment

8. Mohan Madgulkar-Compensation Management/2006
Cost to the company
• Cost to the company includes the value of all
the perks and benefits one gets from the
company in addition to ones salary. All the
components of the salary may not be always
apparent. In order to arrive at a comprehensive
figure one has to carefully add the value of all
components or their cash equivalent.

9. Mohan Madgulkar-Compensation Management/2006
Tax considerations
• A tax efficient remuneration package can benefit both
employers and employees. From the employees perspective it
can enhance the benefits of working for that employer, from
the employers point of view, it can mean reduced costs.
• In the past , tax efficiency was one of the main reasons for the
proliferation of benefits, but it has become progressively less
important as governments have tightened up the fiscal rules
relating to employee benefits.
• Because fiscal regulations are constantly changing, it is
essential to update the information related to tax law for
salaried persons.