What Is a Fringe Benefit?

by Al Bondigas - Updated September 26, 2017
A worker's fringe benefits can range from the standard to the imaginative.

When a company hires an employee, salary isn't the only way he is paid. Fringe benefits are a form of compensation that don't show up on the paycheck. Many of these benefits are taken for granted, though they might be the incentive that makes a prospective employee work for a certain company—or the thing that makes him go elsewhere for work.

What Are Fringe Benefits?

A company might offer several different kinds of benefits, ranging from health insurance and profit sharing to the smaller, truly "fringe" benefits. Some of the smaller benefits can be quite imaginative and can help build a cohesive work crew or induce the employee to spend part of his paycheck with the company. According to the Bureau of Labor Statistics, federally mandated benefits—Social Security, unemployment and workers' compensation—added $2.25 to an employee's base pay in 2008. Adding benefits such as retirement, paid leave and health insurance can hike that total to $8.64 per hour on top of the employee's wage.

Background of Fringe Benefits

Fringe benefits became popular during World War II when wage and price controls meant companies had to find other ways to compensate employees. Although prepaid group health care was used for Grand Coulee Dam workers in the 1930s, the idea became popular when California-based Kaiser Permanente became one of the first company sponsored health-care plans for Kaiser Shipyard workers in the 1940s.

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Big-ticket Benefits

Health insurance is one benefit many employees would gladly take a smaller wage to obtain. With the escalating cost of medical care, health insurance looms larger as an employee-attracting benefit. Retirement and profit-sharing—usually packaged as a 401(k) plan—also stand as attractive benefits, particularly if the company is financially solid enough to make profit sharing feasible. Year-end bonuses and company vehicles also serve as big-ticket, employee-attracting benefits.

Smaller Fringe Benefits

Companies might offer other benefits such as stock options, flexible hours or a uniform allowance. A retail operation might offer employee discounts, and restaurants might give price breaks on employee meals. Other fringe benefits can include company sponsored daycare, free lunches, gymnasiums or bowling teams.

Odd Benefits

Casinos and restaurants might offer a "shifter"—an after-work drink. This isn't such a bad deal for a casino if it allows its employees to gamble after work. Other fringe benefits offered to some casino employees include cash draws against their paychecks, which are often spent inside the casino.

About the Author

Al Bondigas is an award-winning newspaperman who started writing professionally in 1985. His print credits include the "Mohave Valley Daily News" and "The Mohave County Standard." Bondigas studied journalism at San Bernardino Valley College in California.

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