A quick summary:
- What are fringe benefits? 🔎
- Heka's definition ✍️
- Making sense of fringe benefits tax in the UK 💬
- The advantages for employers and employees ✅
- Our conclusion of fringe benefits in the modern workplace 🤔
- Meet Heka! 🎉
In addition to salaries and bonuses, fringe benefits help attract, retain and reward employees. They are often a combination of things like company cars, medical costs, learning and development expenses, pension schemes and many more.
In short, we all have access to at least a couple of perks and fringe benefits. The list is endless, and companies have the power to offer more or offer less. Here, we’re exploring what exactly makes a ‘fringe benefit’ and why they are a necessity in the workplace.
Spoiler alert: your competitors are likely attracting the best talent in the industry with ample perks and fringe benefits.
What are fringe benefits? 🔎
What good is a guide without a solid definition? According to Investopedia, fringe benefits are “additions to compensation that companies give their employees”. Their definition goes on to say that fringe benefits are typically given to all employees, while others are only offered to a select few – perhaps C-level executives.
The concept is easy to understand, and Investopedia does a great job of explaining it. However, here at Heka, we love to put our own spin on things. Take a look at our definition below.
Heka’s definition of fringe benefits in the modern workplace
Fringe benefits are incentives designed to attract, retain and reward employees. It’s an organisation's understanding of what employees need to successfully do their job, and what employees want in addition to their salary and any bonuses.
Fringe benefits often come in the form of non-cash perks. These include things like paid memberships, a company car or a phone, life insurance, medical bills and much more
They are incentives offered with the same intention as all other benefits and initiatives; to make the lives of employees easier, convenient and in some cases more affordable. We have written extensively about why employers should offer a robust benefits package – to dive into our previous articles, visit our blog.
Making sense of fringe benefits tax in the United Kingdom
Tax can be confusing, but with the right guidance, it doesn’t have to be. To keep things simple, fringe benefits are taxable. An employer will take the tax owed from an employee's salary through PAYE (Pay As You Earn).
The amount you pay (as an employee) often depends on the value of such perks and fringe benefits, or in other words, the cost of providing them. However, under certain circumstances, they can be exempt from taxation.
For a full rundown of the taxes on any perks and fringe benefits you receive (as an employee), we recommend you speak with your HR department.
The advantages of fringe benefits for your team ✅
Now that we’ve discussed what they are, including the taxation involved, let’s look at the benefits. We’ll kick things off with why they’re great for both employers and employees.
Once you’ve read through our list of advantages, you’ll be in a much better position to make decisions on fringe benefits moving forward. Remember, the more we understand, the more informed we are to drive growth and improve results!
The pros of fringe benefits for employers
Firstly, let’s jump into the advantages of fringe benefits for employers. This ranges from increasing engagement to creating attractive job opportunities – find out more below.
Increasing productivity and engagement in the workplace
Productivity and engagement drive positive results for companies. In fact, leaders should actively look for ways to improve these qualities in their business. It’s only once employees are engaged that they care about the mission, objectives and ethos of their workplace.
Offering perks and fringe benefits is a company’s way of showing they are committed to creating healthier, happier employees. It proves that they want to improve their team’s productivity and engagement.
Things like learning and development opportunities and wellbeing incentives are great means to support people in the workplace. We’ve included this point first because many businesses overlook the power fringe benefits can have on business results.
Supports the recruitment and hiring process
Moving on, let’s talk about recruitment and hiring. In recent months, employers have fought harder than ever to attract talent, pulling out every stop to get new starters through the door.
As the cost of living crisis rages on and the war for talent continues, recruiters will have to remain creative and agile in their efforts to hire new employees – and that’s exactly how fringe benefits can help!
With perks and incentives, employees see more value (in addition to the salary) in a role – and as we’ve seen, organisations really must stand out in the crowd of recruiters.
This is especially true given the recession, and the need to cut back on spending that many people will be faced with. Things like company cars, mobile phones and access to paid lunches etc. are great ideas. They help employees save money while being able to do their job.
Helps to minimise employee attrition
In addition to recruitment and hiring, employers can benefit from fewer departures. It’s only when a business retains its best employees that progress is made. In fact, when people leave their job, it can impact morale tremendously for those who stay.
When a company supports its employees with perks and fringe benefits, it is making a more solid approach to retaining them. Perks must be meaningful and have a tangible impact.
In a lot of circumstances, it isn’t just poor salaries that drive employees away. It’s access to fringe benefits. It’s reported that 75% of employees are more likely to stay due to the benefits package available to them.
The pros of fringe benefits for employees
Now, let’s take a closer look at the advantages for employees. From supporting existing lifestyle choices, creating healthier, happier employees and more.
Supports their existing lifestyle
As we’ve discussed above, a looming recession threatens to cause major disruption to the lifestyles of millions of people. Personal spending will have to be cut back, and this will typically begin with luxuries in life – think gym memberships, yoga classes and other holistic wellbeing experiences.
Unfortunately, what employers must realise is that these purchases are detrimental to our health and happiness (Something we’ll discuss in more detail below). Having to remove these luxuries means a drastic change to our lifestyle; and as we know, humans are creatures of habit.
By offering the likes of gym memberships, free healthy snacks and more, you’re able to support the lifestyle of employees without the need for them to cut back – even during a recession.
Creating healthier, happier teams
The healthier and happier we are, the more able we are to perform at our best. That’s not just in the workplace but in everyday life. Going back to the point above, when employees can maintain the luxuries in their existing lifestyle, they can better support their health and happiness.
According to the CDC (Centres for Disease Control and Prevention), physical activity isn’t just good for the muscles and joints, but it keeps the brain healthy too. For that reason, it’s a no-brainer (pun intended!) that employers should support employees with wellbeing-specific fringe benefits.
The modern employee wants better perks and incentives
Perks and fringe benefits have come on leaps and bounds in the past decade. With the rise of companies like Google and Microsoft, everything from onsite fitness facilities to family planning support is increased.
Employees are accustomed to better working conditions, perks and incentives and actively seek out a career that they believe to be impact-driven. The world changes at a fast pace, and so too do the demands of the modern workforce.
Take a look at a hybrid working. Just two years ago, only a select portion of the workforce was able to work remotely. Fast-forward to the present day and more employees than ever are working a mix of home and office.
While fringe benefits have been around for a very long time, they are becoming more and more of a deciding factor for employees when:
- Choosing a job
- Staying in a certain role
- Enjoying their career
Conclusion on perks and fringe benefits ✍️
There you have it! Our full guide to understanding fringe benefits in the workplace. We’ve learnt what perks and fringe benefits are, the advantages they offer both employers and employees, along with the tax implications involved.
We’ve said it once, but we’ll say it again, fringe benefits are essential in the modern workplace. To offer a well-rounded benefits package is in the best interests of organisations.
Perks and incentives mustn’t be seen as an expense to the business – in fact, they should be viewed as an investment in the people who continue to build and push your business to new heights.
Unfortunately, too many organisations rely on employee health cash plans. While these can work, they aren't flexible or personalised. Unlike Heka, cash plans are limited to a handful of healthcare services such as physio, mental health and dental care to name a few. Via Heka, employees have the access to thousands of experiences spanning many categories.
Meet your team’s new benefits platform, Heka! 🎉
Heka is an employee wellbeing platform, offering more than 3,000+ wellbeing experiences. From bouldering to counselling, to healthy meal kits, there really is something for every member of your team.
We’ve built Heka on personalisation – after all, fringe benefits shouldn’t be limited, especially when they are focused on health and wellbeing. Our wellbeing experts would be more than happy to walk you through our wellbeing platform.