Fringe benefits are essential for maintaining employee retention and competitiveness, representing additional costs beyond wages, with typical rates averaging 45%. Employers must carefully consider the impact of cost-cutting measures on these benefits, as they play a crucial role in attracting and retaining talent, particularly for high-performing employees. Key components of fringe benefits include required payroll taxes and various company-paid benefits, which significantly influence the overall fringe rate.

1. Fringe Benefits:
Why They Matter

2. Stay Competitive
You must stay competitive and find a balance between
employee retention and backlog. Focus on indirect costs and
what can be done to reduce them and/or make them variable.

3. Cut the Fringe?
This is the challenge. Do
you look to the fringe
benefits for quick cost
reductions? Do you double
the cost to the employee
for health benefits, for
example?
Consider first what could be the
result? Would it ultimately cost you
some key personnel?

4. Fringe Rate – What Does it Cost?
Fringe benefits are accounted for in the fringe rate
(total cost of fringe benefits/wages), a multiplier used
to calculate the total cost of labor.
Fringe rates within the BBRS-supported companies
range from 30 percent to 100 percent (depending on
the employee’s wages and benefits elected), with an
average rate of about 45 percent, so for every $1 of
labor, there is a total cost of $1.45 to include fringe
benefits.

5. Fringe Benefits – What are They?
Fringe benefits are costs paid by
employers on behalf of their
employees in addition to normal wages
and salaries …

6. Required:
• Payroll Taxes
– Social Security
– Medicare
– Federal Unemployment
– State Unemployment
• Worker’s Compensation

7. Company-Paid Benefits
– Medical/Dental/Vision
– Long-Term Disability
– Short-Term Disability
– Life Insurance
– 401(k) Match
– Profit Sharing
– Paid Time Off
– Holidays
Medical/Dental/Vision and retirement benefits make
up about 60 percent of the fringe rate and are the
variables that can make the most significant impact
on the fringe rate, by increasing or decreasing the
benefit.

8. Optional Company Offerings
• Company Offerings
– Flexible Spending Account
– Discount Programs
Optional, but valued by employees

9. Cost vs. Value
• A great fringe benefit package typically comes with a
significant price tag, but is a key factor in attracting
and retaining personnel.
• Some of the most frequently leveraged benefits to
retain “high-performing employees” were health
care and retirement benefits, according to a 2013
report from the Society for Human Resource
Management (SHRM).

10. Reference materials
• One in five (20 percent) organizations reported
leveraging their benefits program to retain
employees, according to State of Employee Benefits
in the Workplace—Leveraging Benefits to Retain
Employees - See more at:
http://www.shrm.org/hrdisciplines/benefits/articles/
pages/benefits-recruit-retain-communicate.
aspx#sthash.KbQVnpXH.dpuf
• (http://www.shrm.org/hrdisciplines/benefits/articles
/pages/benefits-recruit-retain-communicate.aspx).