A quick summary:
- What are fringe benefits?
- Heka’s fringe benefits definition
- Making sense of fringe benefits tax in the UK
- The advantages of fringe benefits for employers
- The advantages for employees
- Fringe benefits examples
- Our conclusion of fringe benefits
- Meet your new workplace benefits platform
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 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.
They are a compelling addition to our salaries and help us with a range of needs in life, both in and outside the workplace.
In fact, some employees value benefits above salary increases. According to an article by HBR, a survey found that 80% of employees would choose new benefits over a pay rise.
Who would believe that fringe benefits could be so powerful? Well, that’s what we’re here to understand.
We’re going to explore what exactly makes a ‘fringe benefit’ and why they are a necessity in the workplace.
Spoiler alert: your competitors are attracting the best talent in the industry with ample perks and fringe benefits.
From the advantages of fringe benefits to navigating tax implications. This is an all-you-need guide on the topic.
But before we dive into some of those discussions, let’s not leave you scratching your head any longer, wondering ‘what are fringe benefits?’.
What are fringe benefits?
What good is a guide without a solid definition? According to Investopedia, when looking at what are fringe benefits, they define them as “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 fringe benefits definition
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, more 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.
But that, in a nutshell, should give a summary to the question “what are fringe benefits?” — it goes without saying that fringe benefits are an absolute necessity.
Before we look at the benefits for both employer and employee, let’s get to grips with the tax implications.
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 employers
Now that we’ve discussed what they are, including the taxation involved, let’s look at the advantages of fringe 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!
Let’s jump into the advantages of fringe benefits for employers. This ranges from increasing engagement to creating attractive job opportunities.
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 businesses.
It’s only once employees are engaged that they care about the mission, objectives and ethos of their workplace.
Offering 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 fringe benefits 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
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!
Through fringe benefits, 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 fringe benefits. 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 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 advantages 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 fringe benefits such as gym memberships, 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 fringe benefits
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 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
3 Fringe benefits that your team will love
Now, before we wrap things up, let’s learn about three super popular fringe benefits in the workplace.
Of course, there are plenty to explore, and we recommend you do your own research. However, these three are winning options if you want to build healthier, happier teams.
Health and wellbeing support
First and foremost — at least in our opinion — health and wellbeing makes for a great fringe benefit. We truly believe that when employees are healthier and happier, they perform better. Studies and surveys have been conducted to suggest this, and that’s why it’s number one on our list.
When we talk about health and wellbeing as a fringe benefit, we’re referring to things like mental health support, therapy and counselling, holistic wellness experiences, paid gym memberships and more.
These are all experiences that a number of your employees would find value in. They also happen to be categories that we offer on our very own workplace benefits platform.
Additionally, health and wellbeing fringe benefits also lean into the growing popularity of healthier lifestyles. From Gen Z to baby boomers, the rise of better lifestyle choices has increased tenfold after the pandemic.
So, not only are employees making their new career decisions based on benefits, but also the focus of said fringe benefits.
Finally, health and wellbeing fringe benefits give your company the opportunity to minimise absenteeism and presenteeism and avoid genuine illness amongst your team. Why not also try offering a duvet day to combat forms of absenteeism and pleasanteeism?
Financial wellbeing fringe benefits
The next of our top three fringe benefits is financial wellbeing support. This an extremely sensitive yet important topic in the workplace. As the recession picks up pace, it’s become more apparent that leaders must act now.
To ignore the cost of living crisis is to turn your back on one of the most detrimental issues people face right now.
It’s not just how employees afford to commute to and from work, but how they govern their nutrition, and how they maintain the monthly gym or massage costs.
Of course, there’s definitely some overlap here between health and wellbeing and financial wellbeing fringe benefits.
However, financial wellbeing fringe benefits focus more on educating employees. It’s things like access to financial advisors in all avenues of savings, budgeting and investing.
It’s looking at opportunities to subsidise tuition and other learning and development opportunities, and offering exceptional retirement options.
The next twelve months will prove to be crucial for businesses in how they navigate the recession. As prices rise and salaries remain as they are, it’s down to leaders to seek out fringe benefits as a means to support employees.
Flexible working opportunities
Finally, our last of the top three fringe benefits is flexible working opportunities. In the aftermath of the pandemic, the Great Resignation and the war for talent were driven by a number of reasons; one of them being the rise of flexible working.
All of a sudden, businesses were split down the middle on whether to offer better flexible working opportunities or not. There were — and still are — many pros and cons to hybrid and remote working, but the general consensus was that it should remain in a post-pandemic world.
As businesses made their decision to stick or twist on flexible working arrangements, millions of people decided to jump ship and leave their employers. It’s now considered a big shift in work-life balance and is largely favoured by employees.
But it isn’t just hybrid and remote working that employers should consider. These fringe benefits include things like flexible start and finish times. Some employees have other commitments such as parenting.
With millennials fastly approaching the age at which they may start their own families, it’s important to consider this point. Especially as this generation will make up the majority of the workforce in the next couple of years.
Conclusion on 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 of fringe benefits for 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. Offering 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.
As we’re explored, fringe benefits are the game-changer lacking in a lot of businesses. Not only can they be an addition to salaries, but they can in many cases replace salary increases.
That’s not to say that employees should be poorly compensated, but it’s to demonstrate the true value that fringe benefits can offer to the workforce.
There are a couple of things to consider, however. There’s a right way to offer fringe benefits and a wrong way.
When incentives and perks are provided as a means to tick a box, they lead to unfavourable outcomes.
Employees not only neglect the fringe benefits available, but they openly resent employers for offering perks of little value.
The right way to offer incentives is to do so by following the points we’ve discussed in this guide. It’s about offering workplace benefits that support the individual needs of employees.
This starts by identifying what it is your people need, and then locating fringe benefits that support them; most importantly, their mental, physical and emotional wellbeing.
Similar read: Receiving employee benefits advice from your team
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.