Chapter-3

Conceptual
Framework of
Fringe Benefits
and Social
Security
 90

CHAPTER - 3

CONCEPTUAL FRAMEWORK OF FRINGE BENEFITS AND

SOCIAL SECURITY

3.1 Introduction

Fringe benefits constitute a major part of employees’ total compensation package.

Direct wage and salary payments are only a part of the total compensation package. The rest
represents employee benefits. In general, these are not directly related to the productive
efforts of employees, but are available to all regardless of the quantity or quality of their
individual work output. Fringe benefits are tangible benefits, which the employees of an
organisation receive from their employer in addition to the monetary wages and salary.
One of the Regional Chairman of the National War Labour Board in the U. S. A.
coined the term “ Fringe benefits” in 1943.' The term did not come into use until 1950s.
‘Fringe’ has assumed many varied meanings because of its complexities. According to some
industrial relations practitioners, the term “ fringe” denotes higher labour cost without
additional production. To others, like Michael, fringe means “ Procedures adopted to provide
supplementary compensation which is over and above the agreed upon wage or salary rate
and for which no additional productivity is required.” ^
According to Webster Dictionary, fringe means “ an ornamental border...., an edging,
trimming or a margin” . Fringe, in summary, is a “ fancy trimming” . To the workers, public or
private enterprises, the fringe payment has evolved from such an ornamental, incidental
trimming to a bonafide part of their income. According to Encyclopaedia Britannica (2003),
the term ‘fringe’ means an ornamental boarder, edge, brink, brim, hem, margin, periphery,
verge, perimeter, skirt etc.
Wage supplements, welfare expenses, non-wage labour cost, sub-wages, hidden
payroll, supplementary compensation, transpecuniary incentive, perquisites other than wages,
employee welfare, social charges, perk and extra-wages are popular synonyms for the term.

' Reid, G. L., and Robertson, D. J., Fringe Benefits, Labour Costs and Social Security, George A llen
and U nw in, London, 1965, p-18
^ M ichael, Lionel B., Wages and Salary Fundamentals and Procedures, M o G rahill Book Co. Inc, N ew
Y o rk, 1950, p-4 and p -I5 4
 91

Employees receive compensation as a reward for rendering their services. Rewards

have been segregated into two parts viz., intrinsic and extrinsic. Intrinsic rewards are those

rewards which are given by an employee himself for doing a good job. Extrinsic rewards are

those rewarded by the employer. Extrinsic rewards have been divided into the following

classifications: (a) The Traditional wage or salary (b) Profit sharing (c) Related rewards

(promotions and other opportunities for advancement (d) Supplementary (fringe) benefits.'

3.2 Concept of Fringe Benefit

The term “ Fringe benefit” connotes the benefits, which are given to the employees in
addition to their salary or wages. Sometimes the benefits are given as a condition of service or

provided as voluntary benefits to the employees. A number of benefits come under the ambit
of ‘fringe benefit’ and these benefits constitute a solid part of total compensation package.
However, to make the concept of the term “ fringe benefif’ clear the discussion on the

definition given by various authors is made hereunder.

D. Belcher defines fringe benefits as “ any wage cost not directly connected with the

employees’ productive effort, performance, service or sacrifice.”^

The above definition puts stress that the payment of fringe benefits does not increase

the employees’ productive effort, performance etc. This signifies that this benefit is automatic

and it does not have relations with work/services of the employees.

According to ILO Publication (1956) of a study entitled “ International

Comparison of Real Wages” , ‘fringe benefit’ has been defined as “ wages are often
augmented by special cash benefits, by the provision of medical or other services, or by

payments in kind that free part of the wage for expenditure on other goods and services. In

addition, workers commonly receive such benefits as holidays with pay, low-cost meals, low-
rent housing etc. Such additions to the wage proper are sometimes referred to as fringe
benefits.” The study further observes: “ Benefits that have no relation to employment or wages
should not be regarded as fringe benefits, even though they may constitute a significant part

' Dunn, J. D., and Rachel, Frank M., Wage and Salary Administration- Total CompensationSystems,McGraw
Hill Book Company, New York, 1972, p-275
^Belcher, D., “Fringe Benefits: Do we Know Enough About Them?" Langsner and Zollitsch, Wageand Salary
Administration, South Western Publishing Co., Cincinati Ohio, 1961, p-488
 92

of the workers’ total income. This seems fairly obvious in the case of public parks, sanitation

services, police and fire protection, etc.” ’

The definition of “ fringe benefit” by ILO reveals that the benefits, which inflate the
total wages, are nomenclatured as fringe benefit. The benefits like provision of medical or
other services, holidays with pay, low-cost meals, low-rent housing etc are enjoyed by the
employees in addition to their basic salary/wages. The ILO also puts reservation while
defining fringe benefit that the benefits should never be treated as fringe benefits if they do
not have any relation with the employment and even though they augment the workers’ total
income.
Werther and Davis have defined fringe benefits as follows: “ .... fringes embrace a
range of benefits and services that employees receive as part of their total compensation
package. Benefits and services, however, are indirect compensation because they are usually
extended as a condition of employment and are not directly related to performance.”^
The definition of fringe benefit given by Werther and Davis states that the employees get
these benefits as a condition of employment and the payment of these benefits does not also
influence the level of performance.
R. Cockman views employee benefits as “ 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-related payments.” ^ The definition points out that these benefits are
extended to the employees by the employers but not in the form o f wages, salaries and time-
related payment.

' iLO, International Comparisons of Real Wages, Geneva, 1956, pp-19-2I

^Werther, William B., and Davis, Keith., Human Resource and Personnel Management, McGraw Hill, New
York, 1996, p-465
^Cockman, R., “Employee Benefits for Managers and Executives” in Favey, A. M.(ed), Hand Book of Salary
and Wage, Grower Press, Epping, Sussex, 1975, p-73
 93

Conceptually, fringe benefits include those benefits which in the first place are
computable in terms of money, the amount of which is not pre-determined and for which no
contract, indicating when the sum is payable exists.*
The definition by Sharma (1977) accommodates those benefits that are measurable in
terms of money but not pre-determined in nature. In addition to that, for these benefits, no
contract indicating the sum payable exists.
Professors W. G. Nickels, J. M. McHugh and Susan M. McHugh define fringe
benefits as “ benefits such as sick leave pay, vacation pay, pension plans, and health plans that
represent additional compensation to employees beyond bare wages ... Fringe benefits can
include everything from paid vacations to health care programmes, recreational facilities,
company cars, country club memberships, day care services, and executive dining rooms.” ^
The above definition highlights that the fringe benefits encompass a plethora of benefits viz.,
encashment of different kinds of leave like sick leave, vacation leave and other types of leave,
also medical facilities, recreational facilities, company cars, country club memberships, day
care services, executive dining rooms, pension plan etc in addition to wages. These are
additional compensation to the employees.
The Employers’ Federation of India in its survey of “ Fringe benefits in Indian
Industry (1970)” defined fringe benefits as these are paid for or provided by employers, (a)
which materially added to the welfare of employees either during the tenure of their services
or after retirement; and (b) the expenditure on which did not form part of his normal wages
and allowances. Accordingly, such “ fringe benefits” include payments made for time not
worked, profit and other bonuses, legally required payments on social security schemes,
women’s compensation, welfare cess and contributions made by employers under such
voluntary schemes which catered for medical, educational, cultural, recreational and
retirement needs of workmen. The term also included the monetary equivalent of free light,
water, fuel etc. and of subsidized housing and related services enjoyed by workers.^
The survey by Employers’ Federation of India has made a wide coverage on fringe

benefits. It reveals that the employees are benefited by the payment of fringe benefits either

during the tenure of their services or after expiry o f their tenure of services. These benefits are

provided in addition to their normal wages and allowances. The term “ fringe benefits” , inter

' Sharma, R. C., “The Concept of Fringe Benefits in Indian Industry”, Indian Journal of Industrial Relations,
October 1977, Vol. 13, No.2, pp-243-251
^Nickels, W. G., McHugh, J. M. and McHugh, Susan M., Understanding Business, Irwin McGraw-Hill, Boston,
5‘'’edn.,1999
^Employers’ Federation of India, Fringe Benefits in Indian Industry, 1970, Monograph No.16, Bombay,p-7
 94

alia, includes benefits viz., amount paid for time not worked, profit and other bonuses, legally

required payments, voluntary benefits etc which are provided by the employer.

Fringe benefits constitute a very dynamic phase of current wage and salary

administration. The word ‘fringe’ though commonly used, is not always carefully defined.

The National Industrial Conference Board has defined the concept as “ payments to workers

over and above wages paid on the basis of time worked on production completed.” '

Gertrude Deutsch admits that there is no clear-cut definition of fringe benefit although

it is commonly used. The payments to workers in addition to wages paid on the basis of time

worked on production completed are termed as fringe benefits.

Fringe benefits are simply those benefits which are given to the employees by the

employers in addition to their salaries/wages.^

Employee benefits and services include any benefits that the employee receives in

addition to direct remuneration. The word ‘fringe’ is not appreciated by management

practitioners on the ground that now-a-days benefits and services constitute substantial labour

cost for any organization. They are no longer mere fringe costs or fringe items.^

The analysis of the definition “ fringe benefif’ made by various authors reveals that

fringe benefits are the benefits given to the employees in addition to direct remuneration. It

lays emphasis that the management practitioners are averse to payment of fringe benefits

because of the fact that the payment of those benefits generally increases the labour cost to the

organisation. The definition makes it clear that the huge amount of cost incurred by any

organisation should no longer be termed as fringe costs or items.

The term ‘fringe benefits’ refers to various extra benefits provided to employees in

addition to the compensation paid in the form of wage or salary. Fringe benefits are those

monetary and non-monetary benefits given to the employees during and post-employment

■'Deutsch, Gertrude., “Fringe Benefits in Wages Statistics." The Conference Board Business Record. February.
1951, p-55
} Ghosh, A. K., Human Resource Management(With Cases), Manas Publications, New Delhi, 2006, p-I70
^Aswathappa, K., Human Resource Management and Personnel Management(Text and Cases), Tata McGraw
'Hill Publishing Company Ltd., New Delhi, Sixth reprint, 2001, pp-314-315
 95

period which are connected with employment but not to the employees’ contributions to the

organization.'

In terms of the definition of fringe benefit made by P. Subba Rao, such benefits are
extra benefits given to the employees in addition to salary and wages. It is constituted by
monetary and non-monetary benefits which are availed of by the employees during their
service or after post-employment period. It also reveals that fringe benefits are not connected
with the employees’ contribution to the organisation.
Employee benefits, sometimes called fringe benefits, are those rewards that employees
receive for being members of the organization and for their positions in the organization.
Unlike wages, salaries, and incentives, benefits are usually not related to employee
performance.^
According to Byars and Rue, employee benefits and fringe benefits are more or less
synonymous. The members of the organisation enjoy these benefits and the payment of these
benefits does not rest on the performance of the employees.
It, thus, transpires that there is no precise definition of fringe benefits. So it is very
difficult to single out the nature of benefits (which one belongs to statutory or voluntary
groups) due to great variations. The fringe benefits in the name of statutory benefits or
voluntary benefits differ from organisation to organisation. Some organisations treat statutory
benefits as fringe benefits but some items included therein are termed as voluntary benefits by
some other organisations.^

Despite the fact that fringe benefits are now being increasingly provided by the

employers in most industries, there is vagueness about the definition of fringe benefits.

According to Reid and Robertson, the scope of the term fringe benefits depends in part

whether cost to employer or payments to employee is used as the criterion of definition. They

believe that fringe benefits are probably more important as costs and thus include holiday pay,

sick pay, the cost of higher occupation-specific pensions, and the employer contributions to

various types of welfare plan. Fringe benefits may thus be characterized as those which are

' Rao, Dr. P. Subba., Essentials of Human Resource Management and Industrial Relations, Himalaya PublishingHouse,
Delhi, 1999, p-423
^Byars, Lloyd L., andRue, Leslie W., Human Resource Management(5"' edition), Irwin Publishers, p-388
^Prasad, L. M., Human Resource Management, Sultan Chand &Sons, New Delhi, 2001, p-422
 96

essentially costs to employer in terms of money and which add to the employees’ pay or are

o f some service to them.’

Reid and Robertson explicitly admit the vagueness about the definition of fringe

benefits. According to them, fringe benefits encompass holiday pay, sick pay, the cost of

higher occupation-specific pensions, and the employer contributions to various types of

welfare plan. These benefits are costs to the employer and increase the employees’ pay as

well.

Hence the concept of fringe benefits is an extremely broad one. The term “ fringe

benefits” encapsulates virtually every payment or benefit other than the basic pay, basic wage,

or basic salary of an employee. But its chemistry varies from one country to the other. Fringe

benefits, after considering all the definitions given by renowned authors, may be termed as

those benefits which are indirect compensation having no direct connection with the

employees’ productive efforts and performance. These benefits constitute a lion’s share of

total salary/wages of an employee and augment the total compensation package. The

employees receive fringe benefits from employers as a part of their salary, which do not boost

them to work more as because they know very well that, as a service condition of blue and

white-collar employees, they are entitled to enjoy it.

The term encompasses a host of items, namely paid vacation, old age pension, sick

leave, paid holiday, meal voucher, company cars, recreational facilities, subsidised meals,

travel concessions, low-rent housing, free fuel, light, water or housing, paid for rest periods

etc.

The benefits received by employees over and above their basic salaries/wages at a cost

to employers are called “ fringe benefits” . These benefits other than wages/salaries are

extended to the employees. It is equivalent to the payments and benefits in addition to the

basic wages paid by an employer to the employees. These benefits inflate the normal earnings

of the employees. Such benefits have a monetary value and that does not affect the basic wage
rates. It increases the wealth or well being of the employees at some cost to the employer. So

it can be said that fringe benefit costs represent a sizable portion of labour costs. The benefits,

which come under the heading of “ fringe benefit” , are numerous. The absence of these

benefits generates dissatisfaction, discontentment and uproar among the employees that may

Reid and Robertson, op. cit„ p-18

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result in stoppage of work, strike etc. In essence, tiie term “ fringe benefit” may be defined as

- the benefits which are given to the employees in addition to basic salary or wages, which

are computable in terms of money and which have no relation on the performance and the

productive efforts o f the employees.

3.3 Concept of Social Security

The term “ Social security” has been gaining importance since the time immemorial.

The question of social security gets importance and significance as and when the workers,

whether they are employed in private or public concerns, lose their earning capacity

temporarily or permanently. It gives protection to the workers and their family members for

their livelihood in future. It also acts as a pathfinder, reliever to them in times of distress.

Future is full of uncertainty. To defeat this uncertainty to some extent, the role of social

security can not be gainsaid.

The industrial depression, industrial accidents, closure o f industries breed

unemployment. In a country like India, it poses a threat to the nation. Unemployment is

venom to the workers and their family members. The earning capacity of the workers gets

reduced temporarily due to sickness. The industrial accidents may cripple the workers

temporarily or permanently. They become incapacitated to do their work. The old age actually

brings frustration to the workers and members of their families. During old age, the workers

as well as the members of their families face severe crisis in maintaining their families due to

dearth of earnings. So it becomes very difficult on behalf of workers to maintain their families

with an iota of income at old age and when they become sick and incapacitated due to

industrial accidents. In these cases the State plays a pivotal role in providing security to the

workers. The social security extended to the workers by the State relieves them from distress

caused by sickness, permanent or temporary disablement and old age. It is needless to

mention the importance o f social security as a preventive measure o f distress of the workers.

So the social securities are those securities which are provided for the betterment and well

being of the workers.

The social security acts as an important element in providing social, economic and

legal security to the citizens of a country including the industrial workers when they face the

contingency. The working class people by toiling hard play a significant role for the
 98

development of the country and they contribute a lot to the country’s prosperity. Adequate

protection against certain risks and hazards for which their lives are endangered is very much

imperative either during the working period or as a consequence thereof

The concept of ‘social security’ is a multi-dimensional subject because of its contents

and complexion. It is based on ideals of human dignity and social justice. The quest for social

security and freedom from want and distress has been the consistent urge of man through the

ages. Social security has now become a fact of life for millions of people through the world.

These are provided to mitigate the rigours of poverty and to raise the living standards of the

people. The importance of social security acquired special significance with the emergence of

industrial revolution in the western countries. Social security acts as a means of abolition of

poverty and for this it has been gaining importance since the last few years.

The meaning of the term “ social security” varies from country to country. Indeed it

has different meanings not only in different countries rather for different categories of persons

as well even within the same country. The socialist countries give complete protection to each

and every citizen of the country from the womb to tomb. In other countries, social security is

extended to the needy citizens by means of various schemes adopted by the governments

keeping pace with the adequacy of resources of the government. In U.S.A. the term “ social

security” is used to denote old age, survivors, invalidity and health insurance schemes which

function under the control of the Federal Government. In Britain, the term “ social security”

encompasses Social Assistance and Social Insurance Schemes, and it is inclusive of National

Insurance Schemes, Industrial Injury Scheme and also Social Assistance Schemes under

which even supplementary benefits are provided to the workers. It also includes the scheme of

family allowance under which children’s allowances are provided to the survivors and

dependents of the deceased workers. In Newzealand, the term “ social security” is used in

reference to the functions of Department of Social Security and a Comprehensive Scheme of

benefits and health care services for the workers is regulated and governed by the relevant

provisions of the Social Security Act of 1938.

Social security represents basically a system of protection of individuals who are in

need of such protection by the State as an agent of the society. Such protection is relevant in

contingencies such as retirement, resignation, retrenchment, death, disablement which are

beyond the control of the individual members of the Society. Men are born differently, they
 99

think differently and act differently. State as an agent of the society has an important mandate

to harmonize such differences through a protective cover to the poor, the weak, the deprived

and the disadvantaged.'

The report states that the individuals get protection when they face contingencies like

retirement, resignation, retrenchment, death and disablement. These contingencies can not be

controlled by the individual members of the society.

According to Lord Beveridge, social security is “ an attack on five giants viz. want,

disease, ignorance, squalor and idleness.” The concept is related to social justice and

equality.^

The above definition points out that the social security has a relation with social

justice and equality. It is an attack on the consequences people face. These actually spread a

sense of insecurity among the workers.

The underlying idea and philosophy of Social Security, according to J. S. Clark, is

“ Community planning, community responsibility, community standard of citizens’ duties and

citizens’ rights” . It aims to banish poverty and to provide a minimum level of well being of

the people and to make wants under all circumstances unnecessary.^

The aforesaid definition states that the core object of the social security measures is to

help in alleviating and banishing the problems of poverty-stricken people by providing a

minimum level of well being. The definition has a wide coverage and considers from

community perspectives.

Social security forms an important part of labour welfare. It provides the “ security”

which is of great importance to the workers and his family’s well being. Sir William

Beveridge was a well-known humanist and economist of England. In Beveridge’s opinion the

term social security is used “ to denote the security of an income to take the place of earnings

when they are interrupted by unemployment, sickness or accident, to provide for retirement

' Government of India, Report of the Working Group on Social security, For the Tenth Five Year Plan(2002-
2007), Planning Commission, October, 2001
^Rao, Dr. P. Subba., Personnel and Human Resource Management, Himalaya Publishing House, 2002, Mumbai,
p-247
Mongia, Dr. J. N., Readings in Indian Labour and Social Welfare, Atma Ram &Sons, New Delhi, 1976, p-353
 100

through age, to provide for loss of support by the death of another person and to meet an

exceptional expenditure such as those connected with birth, death and marriage.” '

The above definition states that the social security is an important part of labour

welfare. It is provided for the well being of the workers and his family members when their

earnings are interrupted by unemployment, sickness or accident and other contingencies

which are unpredictable.

According to Sri V. V. Giri, the former President of India, the social security is “ the

security that the state furnishes against the risks which an individual of small means can not,

today, stand up to by, himself or ever in private combination with his fellows.”^

The above definition lays emphasis that the state should play an important role in

social security services because the meagre income of an individual can not protect the family

members from the contingencies.

The meaning o f social security is that a society guarantees help and assistance to sick,

disabled, destitute, aged and those who are temporarily incapacitated and need others’ help.

Perhaps the first Inter-American Conference of Social Security held at Santiago de Chile in

1942 sought to make a similar appeal when it declared - “ Each country must create, conserve

and build up the intellectual, moral and physical vigour of its active generation, prepare the

way for its future generations and support the generation which has been discharged from

productive life. The social security is a genuine and rational economy o f human resources and

value.’'^

The above definition exhibits that the social security is guaranteed by the society to

the persons who are sick, disabled, destitute, aged. It is also extended to those persons who

are temporarily incapacitated and need the help o f others. The meaning of social security

signifies that it has a genuine and rational economy of human resources and value.

According to ILO, “ social security” means “ the security that society furnishes, through

appropriate organizations, against certain risks to which its members are perennially exposed.

These risks are essentially contingencies against which the individuals of small means and

meagre resources can not effectively provide by his own ability or foresight alone, or even in

' Monappa, Arun., Industrial Relations, Tata McGrawHill Publishing Co., Ltd., New Delhi, 21®'reprint, 2002, p-
253
^Giri, V. V., Labour Problems in Indian Industry, Asia Publishing House, Reprinted 1960, Bombay, p-247
^International Labour Review, November, 1942, pp-611-612
 101

iprivate combination with his fellows. These risks are sickness, maternity, invalidity, accident,

unemployment, old age and death. It is the characteristics of these contingencies that they

imperil the ability of the working man to support himself and his dependants in health and

decency.” '

The definition by ILO reveals that the members of the community very often face the

social risks that cause undue hardship and sufferings to them. These social risks namely

sickness, maternity, invalidity, accident, unemployment, old age and death are unforeseen

contingencies over which they have a little or no control. The individuals having meagre

resources can not escape from such types of contingencies. These contingencies imperil the

ability of the worker and as a result the workers and his dependents are engulfed by extreme

sufferings.

The first National Commission on Labour defined the concept of “ social security” as

under: -

“ Social security envisages that the members of a community shall be protected by

collective action against social risks causing undue hardship and privation to individuals

whose private resources can seldom be adequate to meet them.... The concept of ‘Social

Security’ is based on ideals of human dignity and social justice. The underlying idea behind

social security measures is that a citizen who has contributed or is likely to contribute to his

country’s welfare should be given protection against certain hazards.” ^

The aforesaid definition by the National Commission on Labour analyses that the

social security protects the members of the society against social risks. It also reveals that

social risks cause the undue hardship and privation to individuals. The individuals can not

meet such social risks with their inadequate personal resources. The definition also states that

the individuals contributing a lot to the country’s welfare should be protected against certain

hazards. Collective actions taken by the State or the public organisation protect the persons by

providing social security to them. It is based on ideals of human dignity and social justice.

' I. L. 0., Approaches to Social Security, Montreal, 1942, p-80

^Varandani, G., &Prakash, Dr. Anand, Social Security for Industrial Workers in India, Deep and Deep
Publications, New Delhi, 1989, p-17
 102

Friedlander defines social security as “ a programme of protection provided by society

against tiie contingencies of modern life - sickness, unemployment, old-age, dependency,

industrial accidents and invalidism against which the individual can not be expected to protect

himself and his family by his own ability or foresight.” '

The above definition by Fridlander states that the individuals should be protected from

sickness, unemployment, old-age, dependency and industrial accidents because they are not

able to face the risks because of their own inability or foresight.

According to Laxicon Universal Encyclopaedia, the term “ social security” has been

defined as “ Social security consists of public programmes intended to protect workers and

their families from income losses associated with old-age, illness, unemployment or death.

The term is sometimes also used to include a broad system of support for all those who, for

whatever reasons, are unable to maintain themselves.” ^ The aforesaid definition reveals that

social security is provided for the purpose of protecting workers and their families in case of

loss of income occurring due to illness, employment injury, old-age invalidity or the death. It

also provides financial assistance to the persons who are unable to meet their necessities.

Social security represents a guarantee by the whole community to all its members of

the maintenance of their standard of living at least of tolerable living conditions by means of

redistribution of income based on national solidarity. In other words the concept of social

security, in its broadest sense, should be understood to mean the support provided to the

individual by the society to enable him / her to attain a reasonable standard of living and to

protect the same from falling due to occurrence of any contingency. The concept of social

security implies a broad pro-poor approach which has three major components, namely,

promotional component that aims at improving endowments, exchange entitlements, real

incomes and social consumption; preventive component that seeks to avert deprivation in

' Sharma, A. M., Aspects of Labour Welfare and Social Security, Himalaya Publishing House, Mumbai, 2001, p-
236
^Laxicon Universal Encyclopaedia, Vol-18,14.(1983)
 103

more specific ways; and protective component (also termed as safety net measures) that is yet

more specific in generating relief against deprivation.’

The workers and employers are two pillars of our national economy. The relationship

between workers and employers is one of partnership in the maintenance of production and

also the building up of the national economy. It can not be ignored that labour has a vital role

in increasing productivity, and management has to create conditions in which workers can

make their maximum contribution towards this objective. Proper regulation of employer-

employee relationship is a condition precedent for planned, progressive and purposeful

development of society. In this connection, the social and economic upliftment of the labour

is important for securing industrial peace, which is essential to increase the national

productivity.^

Social security is the means by which the basic needs of food, health care, childcare,

maternity care, old-age support, housing and other locally defined needs are provided to the

workers by the society. It is a means that increase and maintain the productivity o f the worker.

As a result, the productivity of the worker helps to keep the economic security stable.

Economic security is the primary means by which persons are able to obtain social security

needs. Social security is one of the important dimensions of the development process. It

assumes a place of special significance in the developing countries, where poverty, destitution

and income inequalities abound in large measure.

Social security is recognised as the fundamental social right guaranteed by law to all

human beings who live from their own labour and who find themselves unable to work

temporarily or permanently for reasons beyond their control. The state, as an agent of the

society, has to develop a system that provides protection to its labour through a legislative, as

well as an administrative mechanism, by providing responsive, efficient, and long-term

assistance to its work force.

Social security is one of the pillars on which the structure of a welfare state rests. The

responsibility o f the State towards weaker sections o f the community is well recognized and is

' Jhabvala, Renana, Social Security for Unorganised Sector, The Economic and Political Weekly, June, 1998,
Vol-XXXIII, No.2, pp.L.7 - L.lO.
^Chaturvedi, S. M., Labour &Industrial Law, Central LawAgency, Allhabad, 1991, p-1
 104

embodied in the Constitution itself .as one of the Directive Principles. In India, social security

measures draw their strength from the Directive Principles o f State Policy, which inter-alia,

enjoins upon the State, to strive to promote the welfare of the people by securing and

protecting, as effectively as it may, a just economic and social order. Matters relating to

Social Security are listed in the Directive Principles of State Policy and the subjects in the

Concurrent List. The following social security issues are mentioned in the Concurrent List

(List III in the Seventh Schedule of the Constitution of India) - Item No. 23: Social security

and insurance, employment and unemployment. Item No.24; Welfare of Labour including

conditions of work, provident funds, employers’ liability, workmen’s compensation,

invalidity and old age pension and maternity benefits. Part IV Directive Principles of State

Policy - Article 41 Right to work, to education and to public assistance in certain cases. The

State shall, within the limits of its economic capacity and development, make effective

provision for securing the right to work, to education and to public assistance in cases of

unemployment, old age, sickness and disablement, and in other cases o f undeserved want.'

In Indian context, social security is a comprehensive approach designed to prevent

deprivation, assure the individual of a basic minimum income for himself and his dependents

and to protect the individual from any uncertainties. The State bears the primary responsibility

for developing appropriate system for providing protection and assistance to its workforce.

Social security is increasingly viewed as an integral part of the development process. It helps

to create a more positive attitude to the challenge of globalization and the consequent

structural and technological changes. Today, social security programmes have come under

greater focus. International Labour Organization, as also the Indian Labour Conference view

social security requirements to be of paramount significance. India on its part has ratified

some ILO Conventions and it is the constant endeavour of the Government to provide a

security net to the workers so that they are secured in times of contingencies such as

retirement, resignation, retrenchment, death and disability.

' Bakshi, P. M.,The Constitution of India with Selected Comments, Universal LawPublishing Company Pvt.
Ltd., New Delhi, Updated Reprint, 2004, p-88 and p-371
 105

3.4 A brief idea on various perspectives of fringe benefit and social security

It is now pertinent to find out the components of fringe benefit and social security to
have a thorough understanding of such benefits that are provided to its employees in Indian
organisation. Classification of fringe benefit and social security has been made by various
authors in different manner. Some of such classifications are discussed in this section.
U. S. Chamber of Commerce has classified employee benefits into five categories as
follows:
(1) Legally required payments:
(a) Old age pension
(b) Disability pension
(c) Unemployment insurance
(d) Worker’s compensation
(2) Contingent and deferred benefits:
(a) Pension Plans
(b) Group life insurance
(c) Maternity leave
(3) Payment for time not worked:
I
(a) Vacation
(b) Holidays
(c) Voting Pay Allowance
(4) Paid rest periods:
(a) Waste-uptime
(b) Lunch periods
(5) Chrismas Bonus'

, ' Khanka, S. S., Human Resource Management(Text and Cases), S. Chand &Company Ltd., 2003, NewDelhi,
, p-183
 106

Professor C. W. Sargent* prepared a comprehensive list of fringe benefits and he

distinguished between wages and wage supplements. According to him, the connection
between wages and employee effort, performance, service or sacrifice is direct, measurable
and immediate. Wage supplements, by contrast, involve payments without any directly
associated effort. He provided a comprehensive list of wage supplements which is given
below:
Comprehensive list of Wage Supplements:
A. Legally required payments to provide employee security and financial protection against
various hazards and contingencies;
1. Old age and survivors insurance.
2. Unemployment insurance.
3. Workmen’s compensation.
4. State disability insurance.
B. Other payments to provide protection ( by insurance or otherwise) against:
1. Death.
2. Non-occupational accident, sickness and dismemberment.
3. Hospitalization expense.
4. Medical expense.
5. Surgical expense.
6. Retirement (pension, and in some cases, deferred profit sharing plans).
7. Employee welfare fund contributions.
8. Administrative costs of employee benefit programme.
C. Pay for time not worked:
1. Vacations.
2. Holidays.
3. Lunch periods.
4. Sickness and maternity leaves.
5. Medical care time (at the plant).
6. Personal excused absence time.
7. Time-off official duties.
8. Voting time.
9. Wet time (time lost due to inclement weather).
10. Time-off for court appearances.

^ Sargent, C. W., ‘Fringe Benefits. Do We KnowEnough about Them?, The Amos Tuck School of Business
Administration, December, 1953, pp-14-15
 107

D. Monetary awards and prizes for special activities and performance:

1. Anniversary awards.
2. Attendance bonus.
3. Plant neatness bonus.
4. Service bonus and awards.
5. Quality bonus.
6. Prize awards in employee contests relating to safety, waste reduction, morale and
other subjects.
7. Suggestion plan awards.
8. Other non-production bonuses or awards requiring some special employee activity or
service.
E. Bonuses, contributions and profit-sharing for which employee renders no direct, regular or
special services:
1. Current profit-sharing payments (not related to provision o f retirement income).
2. Savings (thrift) plan contributions.
3. Stock purchase plan contributions.
4. Festival or year end bonus.
5. Separation allowance (dismissal, severance, or terminal pay).
6. Sale of company stock at less than current value.
7. Lay o ff pay or allowance.
8. Military induction bonus.
9. Military service allowance.
10. Supplements to unemployment or workmen’s compensation.
11. Family allowance.
12. Educational subsidies or tuition or expense payments (when not related directly to the
employee’sjob).
13. College scholarship awards to employees’ sons and daughters.
F. Practices and services that benefit employees primarily
1. Credit union facilities.
2. Food service costs or losses.
3. Employee discounts.
4. Music lessons, golf instruction, and other services rendered at reduced or at no cost to
employees and dependents.
5. Garden plots.
 108

6. Vacation, health, and hospital facilities provided at low cost.

7. Housing financing.
The fringe benefits listed below were selected from a list provided by the National
Association of Manufacturers’ made a wide coverage of fringe benefits that includes
more than 100 items. Some of such items are mentioned below to provide a clear
knowledge and understanding on the subject.
A. Premium Payments for Time Worked viz.,
(1) Holidays
(2) Overtime pay
(3) Shift differentials
(4) Cost of living bonus
B. Payments for Special Duties viz.,
(1) Grievance procedures
(2) Labour contract negotiations
C. Payments for Health and Security Benefits viz.,
(1) Retirement plans
(2) Social security payments
(3) Medical, surgical and hospital insurance
(4) Unemployment Compensation
D. Payments for Time Not worked viz.,
(1) Sick and maternity leaves
(2) Medical care time ( at the plant)
(3) Paid leaves for Reserve or National Guard duty
(4) Voting time
(5) Witness time
(6) Lunch periods
(7) Rest periods
(8) Wash-up time
(9) Call-in time
(10) Call-back time
E. Payments for Employee Services viz.,
(1) Cafeteria subsidies
(2) House financing
(3) Parking space operation
F. Other Expenditures like;
(1) Christmas bonus or gift
(2) Laundry allowance
(3) Supper money or meal allowances etc.

' National Association of manufacturers, When Management Negotiates, New Yoric, 1967, pp-51-53
 109

Cockman’ has made a two-fold classification of fringe benefits:

1. Those which are offered on the basis of status - car, entertainment facilities, holiday,
foreign travel, telephone, security — insurance and medical benefits, children’s
educational facilities; and work benefits — office accommodation, secretarial services,
management training, company scholarships; and
2. Those which are key benefits, that is, share schemes, profit sharing, retirement benefits,
counseling services, and house purchase facilities.
R. Dennis Middlemist, Michael A. H itt and Charles R. Greer^, have classified fringe
benefits under various headings which are undermentioned;
(1) Legally required benefits:
Oid Age, Survivors, Disability, and Health Insurance (Social Security)
Unemployment insurance
Workers’ compensation
(2) Voluntary benefits:
(a) Insurance - Health insurance (medical / Hospital) (surgical / major medical,
catastrophic illness). Life insurance. Accident and disability insurance. Dental
insurance, Drug insurance.
(b) Payments for time not worked - Vacations, Holidays, Supplemental unemployment
benefits, Paid sick leave. Other ( personal leave, jury duty, military reserve duty,
severance pay)
(c) Retirement - Pension, Profit sharing. Thrift or savings plan. Stock purchase plans.
(d) Service - Discounts on company products, Recreation programmes. Credit unions.

Subsidizing counseling.

Social Security is a comprehensive term. All social security measures provided by the

Government are of two types:

(1) Social Assistance: Social assistance refers to the assistance rendered by the Government
to the needy persons without asking them to make contributions to be entitled to get such
assistance. In other words, social assistance includes those benefits which are provided by
the Government without any contribution from workers and employers. Workmen’s
compensation, maternity benefits, old age pensions, etc. are the examples of social
assistance.

' Cockman, op. cit., p-73

^Middlemist, R. Dennis., Hitt, Michael A., and Greer, Charles R., Personnel Management- Jobs, People and
Logic, Prentice- Hall, Inc, Englewood Cliffs, NewJersey, 1983, p-335
 110

(2) Social Insurance; Social insurance refers to a scheme of maintaining fund from the

contributions made by the employees and employer, with or without a subsidy from the
Government. In other words, social insurance can be defined as a device to provide
benefits as of right for persons of small earnings, in amounts which combine the

contributive efforts of the insured with subsidies from the employer and the Government.'

Examples o f social insurance are provident fund and group insurance.

As a Welfare State, the Government of India has been striving to provide certain

measures of social security through the following Acts;

(1) The Workmen’s Compensation Act, 1923;

(2) The Industrial Disputes Act, 1947;

(3) The Employees’ State Insurance Act, 1948;

(4) The Employees’ Provident Funds and Miscellaneous Provision Act, 1952;
(5) The Maternity Benefit Act, 1961;

(6) The Payment of Gratuity Act, 1972.

From the preceding deliberation, it gives the idea that social security is nothing but a

protection provided to the human beings for sickness, disablement, old age and for other

contingencies that can not be controlled in advance.

Social security is intimately connected with labour welfare. Labour welfare is a vast

concept and the social security for labour is a part thereof. The implementation of social

security measures may redress the grievances and dissatisfaction among the employers and

employees and as a result, it may enthuse the employees resulting in increased production.
These measures relieve individuals from anxiety when they face the loss or stoppage of
income. It brings confidence among them and makes them feel that they have a status in
industrial society. Lack of proper implementation of social security measures demotivates
them and as a consequence it impedes production. To make a stable and efficient labour force,
implementation of social security is urgently needed. These enable workers to become
efficient and that efficiency helps in reducing wastage arising from industrial disputes.

' Bhagoliwal, T. N., Economics of Labour and Industrial Relations, Sahitya Bhawan, Agra, 1995, p-46I
 Therefore, social security measures yield results in smooth and effective functioning of the
company. ‘

Social security protects the citizens against certain hazards of life either during the

working life or after the working life. It is safety and freedom from fear o f want and hunger.

Social security measures are those measures that prevent deprivation, assure the individual of
a basic minimum income for himself and his dependents and protect the individual from any

uncertainties.

From a thorough scrutiny of the benefits provided by the employer under the terminology

“ fringe benefit” and “ social security” , it is revealed that a wide coverage of benefits has been

made by various authors. Some of the important benefits under “ fringe benefit” and “ social
security” that are generally provided by the employers are mentioned in Table-3.1.

Table-3.1
A LIST OF FRINGE BENEFITS & SOCIAL SECURITY BENEFITS
Payments for time not worked Profit bonus and other bonuses
1. Paid holidays 1. Attendance bonus
2. Paid vacation 2. Anniversaiy awards
3. Lunch period 3. Service bonus and awards
4. Rest periods 4. Plant neatness bonus
5. Wash-up time 5. Gratuitous payments
6. Call-in time 6. Production bonus
7. Call-back time 7. Profit bonus
8. Dressing time (Clothes’ change time) 8. Christmas bonus
9. Portal-to-portal ( travel within 9. Festival or year-end bonus
plant or on premises) 10. Suggestion plan awards
10. Wet-time ( time lost due to inclement 11. Quality bonus
weather) 12. Prize awards in employee contest relating to
11. Time-off for court appearance safety, waste production, morale and other
12. Medical care time ( at the plant) subjects
13. Leave with pay
14. Severance pay
15. Personal excused absence time
16. Hours of work

' Chaturvedi, op. cit., p-2

 112
Welfare, Recreational facilities Other benefits
1. Canteen 1. Travel Allowance
2. Consumer Societies 2. Company cars and subsidies
3. Credit Societies 3. Uniform and tool expenses
4. Housing 4. Employee meal allowance
5. Legal aid 5. Child care facilities
6. Employee Counseling 6. Educational reimbursement
7. Welfare Organization 7. Laundiy allowance
8. Holidays home 8. Cafeteria subsidies
9. Educational facilities
10. Transportation
11. Parties and Picnic

Legally required payments or Statutory Payments under ‘ Social Security’

Social security benefits Obligatory benefits
1. Gratuity 1. Retrenchment Compensation
2. Pension 2. Workmen’s Compensation
3. Employer’s Contribution made to the 3. Maternity benefit
‘ Employee’s Provident Fund 4. Welfare cess
4. Employees’ State Insurance Scheme 5. Lay off compensation
( ESIS)
[ Sickness benefit, Maternity benefit,
Disablement benefit, Dependant’s benefit,
Funeral benefit. Medical benefit ]

3.5 Importance and Objectives of Fringe Benefits and Social Security

3.5.1 Importance of Fringe Benefits
More or less every organization, be it public or private, in our country and abroad
,provides fringe benefits to its employees. The importance o f fringe benefits as a part of
compensation package is increasing gradually and steadily. Labour unions very often create a
pressure on the employers for the regular payment of lucrative, costlier benefits. Individual
employees while choosing an employer very often put emphasis on the timely or delayed
payments of fringe benefits. The Government of India has already made several legislations
in order to create pressure on employers for timely payments of these benefits to the
employees. Fringe benefits represent extra income, additional security, or more desirable and
congenial working conditions to the employees. These benefits cost the employer. The return
from them gets less importance to the employer. Only wages can not satisfy the employees.
 113

Benefits satisfy the employee needs and wants. Fringe benefits have a considerable value in
promoting employee morale. These benefits have become an important element that raises the
material welfare of employees in the organised and unorganised sectors.
Generally employees like to have indirect remuneration than direct pay. Taxable
income o f an employee increases with the increase of direct pay. Most of the benefits
extended to the employees are not taxable and as a result the employees get benefited.
Employers are also in favour of payment of indirect remuneration than direct pay because
these benefits bring satisfaction to the employees and motivate them to stay in the
organisation. The employers also believe that the payment of fringe benefits acts as a
stimulant resulting in improvement of performance of work. The Payment o f lucrative fringe
benefits can obviously capture the attention of the white-collar employees which are very
much needed for competitive recruitment regime. In Western countries, individual workers
enjoy a high degree of social security as well as housing, medical, educational and
recreational facilities. As a result, fringe benefits act as an important element in the
maintenance of labour efficiency and service conditions. In India also, the provision of fringe
benefits has become an important feature of the service conditions o f blue and white-collar
workers.
' The employee benefits are extended to the members o f the society which help them to
enjoy comparatively better lives. The absence of these benefits brings misery to the
employees and the impact thereof yields an uncongenial atmosphere in the working place.
Every country adopts the concept of benefits in its framework which governs the country.
The Article 43 in Indian Constitution states that “ all workers should be given living wage,
conditions of work ensuring decent standard of life and fuller employment to social and
cultural opportunities.” The benefits and services given to the employees serve this purpose.
A different rationale or objective exists for the payment of benefits belonging to
different nature. Attendance bonus encourages punctuality and regularity in attendance and, in
turn, reduces the trend of absenteeism. Nutritious food given to the employees helps reduce
the deficiency caused by certain work conditions. Arrangement of different types of
promotions helps the employees for the enhancement of their competency and skill, etc.
Fringe benefits are now attracting very much attention in industrial settings. The two
arguments are generally used as economic justification for fringe benefit expenditure. First,
fringe benefits help to attract better employees to the firm, so increasing producfivity by
changing the structure o f the labour force; and secondly, the quality o f existing labour force
 114

and its efficiency are improved if certain fringe benefits are offered, without the firm
attracting any additional employees.’
Most of the organisations have been extending the fringe benefits to their employees
because of the reasons like demands of employees and trade unions, employer’s preference,
social security measures and developing dyadic relationship.
So the importance of fringe benefits lies in the fact that these benefits help to retain the
better employees in the organisation, reduce the labour turnover, improve the morale of the
employees as well as the quality and efficiency of existing labour force. The timely payments
of fringe benefits help to reduce the demands of the trade unions and employees. Very often
employees as w'ell as the trade unions clamour for regular payments of these benefits and, if
their demands are not satisfied, the organisation faces a lot of problems. To placate the
workers and the trade union leaders, fringe benefits play an important role. These benefits
also help to improve the human relations and that becomes materialised when the employees
are satisfied economically, socially and psychologically.

3.5.2 Objectives of Fringe Benefits

Fringe benefits satisfy three goals, viz..
Social Goals: Human resource is the most precious of all resources. In the words of the
Philadelphia Charter, 1944, “ Labour is not a commodity. It is entitled to a fair deal as an
active participant in any programme of economic development and social reconstruction.”
The fringe benefits act as a social lever in helping conservation of this precious resource, by
guiding against its unnatural erosion and providing the climate for its development in a
working environment.
Human Relations Goals: The management, through motivation, tries to develop and
maintain “ human relations” , i.e., “ mutual interest, individual differences, motivation and
human dignity.” The management provides with an environment which will reasonably meet
the economic, social and psychological needs of the employees so that their cooperation could
be obtained and productivity of the organization enhanced.
Macro-Economic Goals: For maintaining the growth and stability in the economy of a
country, ideal utilisation of the non-human and human resources is imperative. Fringe benefits
do provide protection, during periods o f contingencies of life, for training and development of

^ Ghosh, Biswanath., Personnel Management and Industrial Relations- Its theory and practice in India,
World Press Private Limited, Calcutta, 1993, p-203
 115

the employees, and for good working conditions and assistance to supplement their main
income, opportunities for social interaction through cultural recreational facilities, etc.'
The rationale behind providing benefits and services can be analyzed both in social and
organisational aspects.^
1. Social Context: Every society takes care of its members by providing some kinds of
benefits. The value and form of benefits depend on the economic conditions of the
society. The basic logic behind such benefits is that members of the society will enjoy
comparatively better lives as compared to what they can enjoy in the absence of these
benefits. The objective is not necessarily to make them more efficient to work. Therefore,
every country adopts the concept of benefits in its framework which governs the country.
2. Organisational Context: Since every organisation of a society is not similar to others,
each organisation adopts its own approach in providing the benefits to the employees. The
organisations which adopt philanthropic approach provide more generous benefits and
services. Generally, the organisation provides employee benefits and services to maintain
parity with the general practices adopted by other organisations in the same geographical
areas or industry sector, to provide community and commonly shared services which
employees can not provide individually, to create better image of the organisation so as to
attract and retain competent employees, to increase morale and quality of working life
(QWL) so that they can concentrate on their jobs, to satisfy trade unions and employees
by providing benefits and services to employees.
From the foregoing deliberations it is thus clear that fringe benefits are offered with a
view to:
(1) Help to attract and retain the best employees in the organisation.
(2) Increase and improve employee morale and create a helpful and positive attitude on the
part of workers towards their employers.
(3) Create an atmosphere for happier employer-employee relations and provide a
psychologically satisfactory work environment.
(4) Ensure that there is no brain drain through labour turnover and absenteeism.
(5) Provide security to the employees against old-age benefits, maternity benefits etc.
(6) Reduce fatigue and enhance productivity.
(7) Discourage labour unrest.
(8) Aid recruitment.
(9) Create a sense o f belongingness among employees.

I Mamoria, C. B., &Gankar, S. V., Personnel Management(Text and Cases), Himalaya Publishing House,
Mumbai, 2002, p-493
^Prasad, op. cit., p-424
 116

(10) Provide help and security to employees in case of any mishaps and contingencies
which the employee can not provide for himself.
(11) Create and improve sound industrial relations.
(12) Promote employees’ welfare by providing welfare measures like recreational facilities.
(13) Gain loyalty, sincerity, cooperation and willingness of employees.
(14) Improve and promote company’s image, reputation and goodwill for improving its
market image and position.
(15) Satisfy the trade unions by providing benefits and services to employees.
(16) Maintain parity with the general practices adopted by other organisations in the same
geographical areas or industry sector.
(17) To provide maximum benefits to the workers by considering them an equal part of the
organisation.
(18) Meet legal requirements relating to fringe benefits.

3.5.3 Importance of Social Security

The term “ Social security” has been gaining momentum as a means of abolition of
poverty since the last World War. It is a means by which the misery of the human race
resulting from five great evils of society, named by Lord Beveridge as want, disease, dirt,
ignorance and indigence is put to an end. Social security makes the people free from the fear
of want. It gives protection to the people facing hazards arising out of vagaries of nature, life
and work in modern societies. Social security measures have introduced an element of
subsidy and protection in the midst of the stresses and strains of modem life. It is a major
aspect of public policy today and the extent of its prevalence is an index of the progress made
by a country towards the ideal of a welfare state. Social security measures relieve individuals
of anxiety in regard to loss or stoppage of income. They get confidence that makes them feel
that they have a status in their industrial society. It also motivates them to work
wholeheartedly.
From birth to death, a man or woman faces a number of contingencies and risks, like
employment injury, occupational disease, disablement, ill health, sickness, maternity, old age
and unemployment. The women can not work when they face these contingencies. During
these contingencies, social security gives protection to them. It aims to help individuals in
such times o f contingencies. Social security is considered indispensable to strike at the root of
poverty, unemployment and disease.
 117

There is no denying the fact that social security programmes act as useful and
necessary instruments for providing protection and stability of the labour force engaged in
organised as well as unorganised sectors. The programmes meant for social security are
gaining importance to the workers day after day by its stability and acceptability to them.
Social security measures play a pivotal role in bringing industrial peace and harmony as also
in improving healthy industrial relations in the organisations. Social security helps protect the
poor and vulnerable and ensures maintenance of an acceptable standard of living.

Different political leaders, social reformers and economists have emphasized the
importance of social security in different ways. Today the philosophy of the concept is
universally acknowledged as it has been accepted in principle that social security is the aim of
all social welfare activities of all countries following different ideologies, social, political
structures and economic policies.*
In an industrial economy, it is very often found that sickness, industrial accidents,
cyclical fluctuations in business and old age create a state of unemployment. This
unemployment situation generates frustration and disappointment amongst the workers. The
family members also become the worst sufferers. Such social maladies disturb the whole
industrial climate. Sickness/ailment affects the earning capacity o f a worker at least for a
temporary period. Industrial accidents result in partial/permanent incapacitation to work. Old
age compels the people to remain dependent on others for their sustenance. So it becomes
transparent that under such circumstances, they can not face the contingencies/situation
because o f dearth of resources. Social security measure that can ameliorate the people’s
condition is urgently needed.
The need for social security is realized not only to afford the needy workers’
protection against the adversities of life, but also for the overall development of the State. The
Ex-President of India, Mr. V. V. Giri, opined that, “ Social security measures have two-fold
significance for every developing country. They constitute an important step toward the goal
of a Welfare State, by improving living and working conditions and affording the people
protection against the uncertainties of the future. These measures are also important for every
industrialization programme, for not only to enable workers to become more efficient but they
also reduce the wastage arising from industrial disputes. The man-days lost on account of
sickness and disability also constitute a heavy drain on the slender resources of the worker
and on the industrial output of the country. Lack of social security impedes production and

' Chaturvedi, op. cit., p-3

 118

prevents the formation of a stable and efficient labour force. Social security is, therefore, not a
burden, but a wise investment in the long run.”
Today, the importance of social security measures adopted in India and abroad is
needless to mention. It provides a security to the workers in times of contingencies which are
beyond the control of the people. The contingencies are retirement, resignation, retrenchment,
death and disability etc. The workers feel secure that they will get the social security benefits
even if some or all sources of income are disrupted, disturbed or terminated due to some
unforeseen contingencies. Social security benefits enable the workers to lead a decent
minimum standard of life. It gives financial or economic security to them in the event of
loosing job for whatsoever may be the reason in the circumstances beyond their control.
Social security measures are intended to provide a minimum living to the people when they
are deprived o f the same due to incapacitation, disability, unemployment or old age. Social
security protects not only the subscribers but also their families by giving benefit packages in
financial security and health care. Social security schemes are designed to guarantee at least
long-term sustenance to the families when the earning members retire, die or suffer a
disability.

3.5.4 Objectives of Social Security

Social security may reduce risk or spread income over the life cycle. Often there is a
redistribution o f income among groups with differing needs. The aim of all social security
measures is three-fold: Compensation, Restoration and Prevention. Compensation goes to
income security and is based upon the idea that during spells of risks, the individual and his
family should not be subjected to a double calamity involving both destitution and loss of
health, limb, life or work. Restoration implies cure of the sick and the invalid, re-employment
and rehabilitation, and is in some ways, an extension of the earlier concepts of the functions
of social security. Prevention is designed to avoid the loss of productive capacity due to
sickness, unemployment or invalidity and to render the available resources which are used up
by avoidable disease and idleness and thus increase the material, intellectual and moral well­
being of the community.'
Thus, it is transparent that social security measures are provided:-
(1) To ensure security to the employees against social risks like old age benefits and
maternity benefits.
(2) To promote healthy industrial relations and bring industrial peace in the industry.

' Sharma, op. cit., pp-236-237

 119

(3) To safeguard a person against economic distress resulting from hazardous activities of life
and assure him an adequate provisions for his material needs at all times.
(4) To protect against income loss due to loss of a job, disability, death of the bread-eamer,
and old age.
(5) To ensure a minimum level of material living to the needy or helpless ones of the society
by the State.

Fringe benefits and social security benefits play a pivotal role in the arena of labour
welfare. These benefits constitute a major part of employees’ total compensation package.
Employees receive a considerable part of their total remuneration as fringe benefits and social
security benefits. Fringe benefits are given to the employees in addition towage orsalary. It
includes subsidized meals, paid holiday, paid vacations etc. Socialsecurity benefits bring a
sense o f security in the minds of the employees working in the organized as well as
unorganized sectors. It includes maternity benefit, workmen’s compensation, gratuity,
pension, provident fund, benefits in terms of various labour laws etc. Today the provisions of
fringe benefits and social security benefits have become an important feature of the service
conditions of blue and white-collar workers in Indian industries. Social security and fringe
benefits facilitate in -
♦ Increasing production - quality production, productivity;
♦ Retaining excellent performers;
♦ Reducing absenteeism;
♦ Promoting dyadic relationship;
♦ Ensuring smooth function o f organisational activities;
♦ Developing high degree o f morale;
♦ Creating a culture of co-operation, collaboration and helping in the organisations;

♦ Promoting higher degree o f QWL and ’

♦ Preparing a reservoir of committed, dynamic work communities.

In order to have an idea about how fringe benefits and social security measures have
contributed to make a happy working community, it is exigently required to look to evolutive
perspectives of such benefits. A detailed deliberation has been given in the succeeding
chapter.