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Fringe Benefits: Examples, Advantages, Disadvantages

Updated on · By Ahmad Nasrudin Tag: ,

Fringe benefits Examples Advantages Disadvantages
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What’s it: Fringe benefits are compensation provided to employees beyond salary or wages. Common examples are insurance, retirement plans, family leave, and gym facilities. Some companies may also provide non-general or specific benefits such as food subsidies and commuter allowances. All of this aims to keep employees satisfied and help attract new employees.

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Why are fringe benefits important?

There are several reasons why fringe benefits are important, and many companies offer them. First, it becomes a way to attract new employees. Many people look at not only the salary offered when applying for a job. However, they also look at the facilities and benefits offered by the company.

Thus, offering perks is important to attract more candidates to apply. And, the more candidates, the better the company’s chances of recruiting the best talent.

Second, the company offers fringe benefits to motivate existing employees. It is an alternative to other financial benefits such as performance-based bonuses and profit sharing.

The company expects employees to not only be satisfied by offering such facilities. But, they are also motivated to perform better. And motivated employees are important to increase productivity, grow the business, and develop competitiveness.

Third, another reason is to make employees loyal. They are satisfied and comfortable working in the company. Thus, companies can increase retention, reduce turnover and retain high-quality talent.

Employees may be reluctant to resign and move to another company. In addition, they may find it difficult to get equally generous benefits from other companies.

What are some examples of fringe benefits?

The types of fringe benefits can vary widely between companies. It can be general, where many companies offer it as an insurance benefit. Or, it can be specific, only in certain companies and not in other companies. For example, Google offers free meals for their employees’ lunch and dinner. In addition, the company also provides car wash, massage, and yoga.

In addition, several benefits are provided to all employees. However, others may only be available for certain positions such as top management, for example, car, house, and golf membership benefits.

Then, some benefits aim to encourage job satisfaction. Others may compensate employees for expenses related to their work, such as accommodation allowances for site visits.

The following are examples of fringe benefits:

  • Health insurance
  • Life insurance
  • Pension scheme
  • Tuition fee subsidies
  • School fee assistance
  • Below market loans
  • Company vehicle facilities for personal use
  • Gym and golf membership
  • Cell phone replacement allowance
  • Holiday and holiday allowances
  • Additional holiday allowance
  • Parking allowance
  • Transportation allowance
  • Meal allowances
  • Discounts on business products
  • Children’s education costs
  • Free child care facilities

What are the advantages of fringe benefits?

As explained above, fringe benefits are important and benefit both the company and employees.

Attract the best talent out there. People are often not only interested in the salary offered, but the additional perks offered by the company. Such facilities can save more money or make their lives more comfortable.

Motivate employees. They are satisfied and feel the company values ​​their contribution, motivating them to work harder and be more productive.

Increase retention. Fringe benefits can make employees feel at home in the company. As a result, they feel no need to leave because it may be difficult to find better or commensurate rewards at other companies. Finally, companies can retain skilled and experienced employees.

Reduce employee burden. Facilities such as transportation, insurance, and free accommodation allow employees to save money. So, they can use their salary for other needs.

Develop competence. Facilities such as tuition fees not only reduce the financial costs borne by employees. But, it also allows them to pursue education and develop better skills and knowledge. So, they can develop their careers and improve their performance.

Make employees more focused. For example, female employees can focus on their work because their children are safe by providing free child care facilities.

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What are the disadvantages of fringe benefits?

Additional cost. Providing allowances consumes costs. That can be significant if the company is too generous and has many employees. Then, if it doesn’t drive employee productivity higher, it could weigh on company profits. As a result, the cost increase exceeds the increase in revenue.

Dissatisfaction when removed. When experiencing financial difficulties, companies must take efficiency measures. For example, it required them to remove some perks.

Having become accustomed to these facilities and benefits, disappointment among employees towards the company has increased. As a result, it may worsen financial difficulties because employees are not eager to improve the business.

Just satisfying but not motivating. Some perks only contribute to satisfaction but do not lead to motivation. For example, insurance may be a basic employee need. Thus, providing it only increases satisfaction but does not encourage motivation.

According to Herzberg’s theory of motivation, we call such facilities hygiene factors. They only provide satisfaction, and if there is none, employees are dissatisfied. However, they do not directly lead to higher motivation.

In other cases, some employees may be more intrinsically motivated. Thus, such incentives do not motivate them. For example, they may be more motivated if the company provides them with opportunities for self-actualization through job autonomy and flexibility (see self-actualization needs in Maslow’s hierarchy of needs).

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