What Are Fringe Benefits and Why Are They Important?

What are Fringe Benefits?

One of the best ways to build a strong team and retain top talent is to offer competitive compensation packages. These packages typically include the essential base salary. However, to sweeten the pot, companies may offer additional perks and benefits to an employee for their service. These perks that go beyond the basic salary are called fringe benefits.

Some of these benefits, such as health insurance and maternity leave, are required by law, while others are optional.

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Why are Fringe Benefits Important?

The following are the top 5 reasons why fringe benefits are important:

1. Improves Employer Branding: Offering fringe benefits is an excellent way to differentiate your company in the competitive hiring market. It enhances your employer branding by showcasing that your company values its employees' overall well-being and professional development. This positive perception can attract job seekers who are seeking a supportive work culture.

2. Attracts Top Talent: Fringe benefits send a strong message that your company not only values its employees but also strives to reward and recognize their contributions appropriately. This can attract top talent who are looking for more than just a paycheck; they want to work for an employer who invests in their growth and provides meaningful perks.

3. Improves Employee Wellbeing: Fringe benefits contribute significantly to improving employee wellbeing. By offering perks like health insurance, wellness programs, or flexible work arrangements, companies can help ease the stress on employees. This, in turn, leads to a healthier and happier workforce, reducing sick leaves and increasing overall job satisfaction.

4. Increases Employee Productivity: When employees feel supported and appreciated through fringe benefits, they are more likely to be motivated, engaged, and productive at work. With reduced financial worries and access to meaningful perks, employees can focus better on their tasks, leading to enhanced productivity and job performance.

5. Ensures Legal Compliance: Some fringe benefits, such as health insurance or retirement plans, may be legally required. Offering these benefits ensures that your company remains compliant with legal regulations and avoids potential penalties or disputes. It also demonstrates your commitment to providing a fair and lawful work environment.

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Types of Fringe Benefits

There are two types of fringe benefits; mandatory benefits and optional benefits.

Mandatory fringe benefits are benefits that the law requires employers to provide. These are the essential benefits that your employees must receive, such as health insurance, parental leave, and pension. The specific benefits can vary depending on your location.

Related Article: Mandatory Employee Benefits in Nigeria

On the flip side, optional fringe benefits are the extra perks that you choose to offer. These can include things like gym memberships, stock options, company-sponsored holidays, housing assistance, food and groceries, gadgets, and learning and development programs.

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How to Provide Optional Fringe Benefits 

Before you provide fringe benefits, you need to understand what your company values and the kind of culture you want to create. It's also important to take a good look at your finances and know how much you can comfortably set aside for these benefits. Once you’ve figured those out, the next step is to gather insights from your employees.

Through surveys, discussions, and feedback sessions, you can gain valuable information about the specific benefits that would most effectively motivate and support your employees. This is an important step as it helps you maximize your employee benefits budget and reduce cases of unused benefits. 

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To wrap up

There’s a lot that goes into crafting effective compensation and benefits packages. To make this process easier, consider using a workforce benefits platform like Motherboard. 

With Motherboard, you can easily provide a range of benefits across categories like health & wellness, food & groceries, work-from-home essentials, and more to your employees. You can also tailor the perks to ensure that each employee gets something they find valuable. And if you plan on offering varied benefits based on factors such as job roles, seniority levels, or work arrangements (e.g., in-office vs. remote), Motherboard enables you to create different employee groups for targeted benefit allocation.

To learn more about how Motherboard can help streamline your benefits management, check out our website or register for a live demo to better understand the platform’s capabilities.

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