Learning Objectives

➢ Define Fringe Benefits

➢ Understand the Objectives of Fringe Benefits
➢ List Features of Fringe Benefits
➢ Key Reason for offering fringe benefits
➢ Understand different types of fringe benefits
➢ Recognize the recent practices of fringe
benefits
➢ Know the principles of fringe benefits
 Fringe benefits
Fringe benefits are indirect form of compensation
given to employees in addition to
the various forms of cash pay- base pay, dearness
allowance and inventive pay.

They provide a quantifiable value for individual

employees. They are the indirect form of
compensation as they are not related to the
performance but are granted to the employees
for just being a member of the organization.
 Objectives of fringe benefits
➢ To create and improve sound industrial relations
➢ To boost up employee morale.
➢ To motivate the employees by identifying and satisfying their unsatisfied
needs.
➢ To provide qualitative work environment and work life.
➢ To provide security to the employees against social risks like old age
benefits and
maternity benefits.
➢ To protect the health of the employees and to provide safety to the
employees against accidents.
➢ To promote employee’s welfare by providing welfare measures like
recreation facilities.
➢ To create a sense of belongingness among employees and to retain
them. Hence, fringe benefits are called golden hand-cuffs.
➢ To meet requirements of various legislations relating to fringe benefits.
Reasons for Offering Fringe Benefits
 Categories of Benefit
• Mandated (Statutory) and Optional
(Voluntary) Benefits
• Accounting Purpose Classification,
 Types of Fringe Benefits
• For Employment Security
• For Health Protection
• For Old Age and Retirement
• For Personnel Identification, Participation
and Stimulation
 Current Fringe Benefit Practices

• Innovation: organizations are offering many

new types of fringe benefits to their
employees
• Flexibility in fringe benefits: employees are
allowed to choose from an array of benefits
within certain cost limits and
• Harmonization is tried to be attempted to give
a feeling of equity and fair play to employees
 Principles of Fringe Benefits
➢ Benefits and services must be provided to the employees on the
basis of a genuine interest in the protection and promotion of their
well-being.
➢ The benefits must satisfy a real need. Employees resist or are
indifferent to any benefit which is not like by them
➢ The benefits must be cost-effective
➢ The benefits should be as broad based as possible
➢ Administration of the benefits should be preceded by sound
planning
➢ The wishes of employees expressed by their union
representatives and the bargaining power of the union must be
considered
➢ Employees should be educated to make use of the benefits.