Question

Why do you think that fringe benefits are important enough to influence an employee's choice of employer? Have you (or someone you know) chosen to work for a particular employer because of the fringe benefits they offer?

Answer 1

Fringe benefits are the benefits given to employees by the employer beyond the regular wages. This may include pension benefits, educational assistance, childcare, company owned transport for personal use, etc. These fringe benefits can be taxable or non-taxable. Non-taxable fringe benefits are exempted from the employee’s as well as the employer’s taxable income and so benefit both, the employee as well as the employer. Non-taxable fringe benefits include achievement awards, accidental benefits, athletic facilities, educational assistance, meals, employer provided cell-phone etc. Taxable fringe benefits on the other hand are included in the employee's wages and are therefore tax deductible.

In today’s market, most of the companies offer similar pay scale as wages and so it becomes hard for them to attract valuable talent. This paves the way to introduce fringe benefits. The employers try to lure the employee by providing these additional benefits rendering the employee in a win-win situation, who as a result can choose the best benefits for them (assuming the 2 workplaces are similar in all other aspects). Moreover, if these benefits are non income tax deductible, it provides extra incentive to both the parties.

Fringe benefits, whether taxable or not, provide extra benefits to the employee as they are above the normal salary he receives. Therefore can be a material creiteria for employee's choice of employer assuming they are similar in other ways.