fringe benefits hrm

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FRINGE BENEFITS

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Page 1: Fringe Benefits Hrm

FRINGE BENEFITS

Page 2: Fringe Benefits Hrm

Definition:-

• Fringe benefit may be defined as

“Compensation in addition to direct wages or salaries, such as company car, house allowance, medical insurance, paid holidays, pension schemes, subsidized meals. Some fringe benefits are regarded part of a taxable income.

In simple words

“Any nonwage payment or benefit granted to employees by employers”

Page 3: Fringe Benefits Hrm

• Employers' payments for fringe benefits are included in employee-compensation costs and therefore are not usually taxed. If the cost of fringe benefits were paid directly as wages, the worker would pay taxes on this amount and therefore have less to spend when purchasing equivalent benefits independently

Page 4: Fringe Benefits Hrm

OBJECTIVES OF FRINGE BENEFITS

• The view point of employers is that fringe benefits form an important part of employee incentives to obtain their loyalty and retaining them. The important objectives of fringe benefits are:

• 1.To create and improve sound industrial relations

2.To boost up employee morale.3.To motivate the employees by

identifying and satisfying their unsatisfied needs.

4.To provide qualitative work environment and work life.

Page 5: Fringe Benefits Hrm

• To provide security to the employees against social risks like old age benefits and maternity benefits.

6.To protect the health of the employees and to provide safety to the employees against accidents.

7.To promote employee’s welfare by providing welfare measures like recreation facilities. 

•8.To create a sense of belongingness among employees and to retain them. Hence, fringe benefits are called golden hand-cuffs.

•9.To meet requirements of various legislations relating to fringe benefits.

Page 6: Fringe Benefits Hrm

Need for Extending Benefits to Employees(i)Rising prices and cost of living has brought about incessant demand for provision of extra benefit to the employees.

(ii)Employers too have found that fringe benefits present attractive areas of negotiation when large wage and salary increases are not feasible. (iii)As organizations have developed ore elaborate fringe benefits programs for their employees, greater pressure has been placed upon competing organizations to match these benefits in order to attract and keep employees.

(iv)Recognition that fringe benefits are non-taxable rewards has been major stimulus to their expansion.

Page 7: Fringe Benefits Hrm

(vi)The growing volume of labor legislation, particularly social security legislation, made it imperative for employers to share equally with their employees the cost of old age, survivor and disability benefits.

(vii)The growth and strength of trade unions has substantially influenced the growth of company benefits and services.

Page 8: Fringe Benefits Hrm

(ix)The management has increasingly realized its responsibility towards its employees and has come to the conclusion that the benefits of increase in productivity resulting from increasing industrialization should go, at least partly, to the employees who are responsible for it, so that they may be protected against the insecurity arising from unemployment, sickness, injury and old age. Company benefits-and-services programs are among some of the mechanisms which managers use to supply this security.

Page 9: Fringe Benefits Hrm

TYPES OF FRINGE BENEFITS

Organizations provide a variety of fringe benefits. The fringe benefits are classified under four heads as given here under:

Employment Security

Health Protection

Old Age and

Retirement

Personnel Identificati

on, Participatio

n and Stimulation

Page 10: Fringe Benefits Hrm

Employment Security :• Benefits under this head include unemployment, insurance,

technological adjustment pay, leave travel pay, overtime pay, level for negotiation, leave for maternity, leave for grievances, holidays, cost of living bonus, lay-off, retiring rooms, jobs to the sons/daughters of the employees and the like. 

Page 11: Fringe Benefits Hrm

Cont.…….• Physical and job security to the employee should also be

provided with a view to promoting security to the employee and his family members. The benefit of confirmation of the employee on the job creates a sense of job security. Further a minimum and continuous wage or salary gives a sense of security to the life.

Page 12: Fringe Benefits Hrm

Safety Health Protection• Benefits under this head include accident insurance,

disability insurance, health insurance, hospitalization, life insurance, medical care, sick benefits, sick leave, etc. 

Page 13: Fringe Benefits Hrm

Old Age and Retirement

• Benefits under this category include: deferred income plans, pension, gratuity, provident fund, old age assistance, old age counseling , medical benefits for retired employees, traveling concession to retired employees, jobs to sons/daughters of the deceased employee and the like.

Page 14: Fringe Benefits Hrm

Personnel Identification, Participation and Stimulation

• This category covers the following benefits: anniversary awards, attendance bonus, canteen, cooperative credit societies, educational facilities, housing, income tax aid, counseling, quality bonus, recreational programs, stress counseling, safety measures etc.

Page 15: Fringe Benefits Hrm

Other benefits are:-

• Payment for Time Not worked• Extra Pay for time Worked• Retrenchment Compensation• Lay-off Compensation

Page 16: Fringe Benefits Hrm

Payment for Time Not worked:• Benefits under this category include: sick leave

with pay, vacation pay, paid rest and relief time, paid lunch periods, grievance time, bargaining time, travel time etc.

Page 17: Fringe Benefits Hrm

Extra Pay for time Worked:• This category covers the benefits such as:

premium pay, incentive bonus, shift premium, old age insurance, profit sharing, unemployment compensation, Christmas bonus, Deewali or Pooja bonus, food cost subsidy, housing subsidy, recreation.

Page 18: Fringe Benefits Hrm

Retrenchment Compensation:

• The Industrial Disputes Act, 1947 provides for the payment of compensation in case of lay-off and retrenchment. The non-seasonal industrial establishments employing 50 or more workers have to give one month’s notice or one month’s wages to all the workers who are retrenched after one year’s continuous service. The compensation is paid at the rate of 15 days wage for every completed year of service with a maximum of 45 days wage in a year. Workers are eligible for compensation as stated above even in case of closing down of undertakings. 

Page 19: Fringe Benefits Hrm

Lay-off Compensation:• Layoff is the temporary suspension or permanent termination of

employment of an employee or (more commonly) a group of employees for business reasons, such as the decision that certain positions are no longer necessary or a business slow-down or interruption in work. Originally the term "layoff" referred exclusively to a temporary interruption in work, as when factory work cyclically falls off. However, in recent times the term can also refer to the permanent elimination of a position.

• In case of lay-off, employees are entitled to lay-off compensation at the rate to 50% of the total of the basic wage and dearness allowance for the period of their lay-off except for weekly holidays. Lay-off compensation can normally be paid up to 45 days in a year. 

Page 20: Fringe Benefits Hrm