You are on page 1of 5

7/6/2016

EmployeebenefitWikipedia,thefreeencyclopedia

Employeebenefit
FromWikipedia,thefreeencyclopedia

Employeebenefitsand(especiallyinBritishEnglish)benefitsinkind(alsocalledfringebenefits,perquisites,
orperks)includevarioustypesofnonwagecompensationprovidedtoemployeesinadditiontotheirnormal
wagesorsalaries.[1]Ininstanceswhereanemployeeexchanges(cash)wagesforsomeotherformofbenefitis
generallyreferredtoasa'salarypackaging'or'salaryexchange'arrangement.Inmostcountries,mostkindsof
employeebenefitsaretaxabletoatleastsomedegree.
Examplesofthesebenefitsinclude:housing(employerprovidedoremployerpaid),groupinsurance(health,
dental,lifeetc.),disabilityincomeprotection,retirementbenefits,daycare,tuitionreimbursement,sickleave,
vacation(paidandnonpaid),socialsecurity,profitsharing,employerstudentloancontributions,andother
specializedbenefits.
Thepurposeofemployeebenefitsistoincreasetheeconomicsecurityofstaffmembers,andindoingso,improve
workerretentionacrosstheorganization.[2]Assuch,itisonecomponentofrewardmanagement.
Thetermperksisoftenusedcolloquiallytorefertothosebenefitsofamorediscretionarynature.Often,perksare
giventoemployeeswhoaredoingnotablywelland/orhaveseniority.Commonperksaretakehomevehicles,
hotelstays,freerefreshments,leisureactivitiesonworktime(golf,etc.),stationery,allowancesforlunch,and
whenmultiplechoicesexistfirstchoiceofsuchthingsasjobassignmentsandvacationscheduling.Theymay
alsobegivenfirstchanceatjobpromotionswhenvacanciesexist.

Contents
1
2
3
4
5
6
7
8

Canada
UnitedStates
UnitedKingdom
Fringebenefitstax
Disadvantages
Seealso
References
Externallinks

Canada
EmployeebenefitsinCanadausuallyrefertoemployersponsoredlife,disability,health,anddentalplans.Such
groupinsuranceplansareatopuptoexistingprovincialcoverage.Anemployerprovidedgroupinsuranceplanis
coordinatedwiththeprovincialplanintherespectiveprovinceorterritory,thereforeanemployeecoveredbysuch
aplanmustbecoveredbytheprovincialplanfirst.Thelife,accidentaldeathanddismembermentanddisability
insurancecomponentisanemployeebenefitonly.Someplansprovideaminimaldependentlifeinsurancebenefit
aswell.Thehealthcareplanmayincludeanyofthefollowing:hospitalroomupgrades(SemiPrivateorPrivate),
medicalservices/suppliesandequipment,travelmedical(60or90dayspertrip),registeredtherapistsand
practitioners(i.e.physiotherapists,acupuncturists,chiropractors,etc.),prescriptionrequiringdrugs,vision(eye
exams,contacts/lenses),andEmployeeAssistancePrograms.ThedentalplanusuallyincludesBasicDental
(cleanings,fillings,rootcanals),MajorDental(crowns,bridges,dentures)and/orOrthodontics(braces).
https://en.wikipedia.org/wiki/Employee_benefit

1/5

7/6/2016

EmployeebenefitWikipedia,thefreeencyclopedia

Otherthantheemployersponsoredhealthbenefitsdescribedabove,thenextmostcommonemployeebenefitsare
groupsavingsplans(GroupRRSPsandGroupProfitSharingPlans)whichhavetaxandgrowthadvantagesto
individualsavingplans.

UnitedStates
EmployeebenefitsintheUnitedStatesincluderelocationassistancemedical,prescription,visionanddental
planshealthanddependentcareflexiblespendingaccountsretirementbenefitplans(pension,401(k),403(b))
grouptermlifeandlongtermcareinsuranceplanslegalassistanceplansadoptionassistancechildcarebenefits
andtransportationbenefitsPaidtimeoff(PTO)intheformofvacationandsickpay.Benefitsmayalsoinclude
formalorinformalemployeediscountprogramsthatgrantworkersaccesstospecializedofferingsfromlocaland
regionalvendors(e.g.,moviesandthemeparktickets,wellnessprograms,discountedshopping,hotelsandresorts,
andsoon).[3]
The(ACA)AffordableCareActisanewlegislationthathasdrivenemployerstoimplementaffordablecoverages
totheiremployeesandmanyhavebeenabletofindemployeebenefitsatreducedcoststhroughtheuseof
(PEO)ProfessionalEmployerOrganizations.SeetheWikiarticlefor:[EmployerOrganization(https://en.wikipedi
a.org/w/index.php?title=Professional_employer_organization&gettingStartedReturn=true%7CProfessional)].
Navigatingemployeebenefitsisbecomingmoreandmorecomplexbecauseofchangestolegislationand
employmentlaws.FindingaPEOisoftenagreatwayforabusinesstomitigatetheirresponsibilitiesby"Co
Employing"itsemployeeswithaPEOcompany.Forexample,companieslikeWorkforceManagementAgency
Corporation(http://www.workforcemanagementagency.com)helpbusinessesfindaPEOthatmayoffersuitable
employeebenefitstotheirclientsbasedonunderwritingguidelines,companybudgets,andbenefitsstrategies.
Companieswhoofferthesetypesofworklifeperksseektoraiseemployeesatisfaction,corporateloyalty,and
workerretentionbyprovidingvaluablebenefitsthatgobeyondabasesalaryfigure.[3]Fringebenefitsarealso
thoughtofasthecostsofretainingemployeesotherthanbasesalary.[4]Theterm"fringebenefits"wascoinedby
theWarLaborBoardduringWorldWarIItodescribethevariousindirectbenefitswhichindustryhaddevisedto
attractandretainlaborwhendirectwageincreaseswereprohibited.
Somefringebenefits(forexample,accidentandhealthplans,andgrouptermlifeinsurancecoverageupto
US$50,000)maybeexcludedfromtheemployee'sgrossincomeand,therefore,arenotsubjecttofederalincome
taxintheUnitedStates.Somefunctionastaxshelters(forexample,flexiblespending,401(k),or403(b)accounts).
Thesebenefitratesoftenchangefromyeartoyearandaretypicallycalculatedusingfixedpercentagesthatvary
dependingontheemployeesclassification.
Normally,employerprovidedbenefitsaretaxdeductibletotheemployerandnontaxabletotheemployee.The
exceptiontothegeneralruleincludescertainexecutivebenefits(e.g.goldenhandshakeandgoldenparachute
plans)orthosethatexceedfederalorstatetaxexemptionstandards.
Americancorporationsmayalsooffercafeteriaplanstotheiremployees.Theseplansofferamenuandlevelof
benefitsforemployeestochoosefrom.Inmostinstances,theseplansarefundedbyboththeemployeesandbythe
employer(s).Theportionpaidbyemployeesisdeductedfromtheirgrosspaybeforefederalandstatetaxesare
applied.SomebenefitswouldstillbesubjecttotheFederalInsuranceContributionsActtax(FICA),suchas
401(k)[5]and403(b)contributionshowever,healthpremiums,somelifepremiums,andcontributionstoflexible
spendingaccountsareexemptfromFICA.
Ifcertainconditionsaremet,employerprovidedmealsandlodgingmaybeexcludedfromanemployee'sgross
income.Ifmealsarefurnished(1)bytheemployer(2)fortheemployer'sconvenienceand(3)providedonthe
businesspremisesoftheemployertheymaybeexcludedfromtheemployee'sgrossincomepersection119(a).In
addition,lodgingfurnishedbytheemployerforitsconvenienceonthebusinesspremiseoftheemployer(which
https://en.wikipedia.org/wiki/Employee_benefit

2/5

7/6/2016

EmployeebenefitWikipedia,thefreeencyclopedia

theemployeeisrequiredtoacceptasaconditionofemployment)isalsoexcludedfromgrossincome.Importantly,
section119(a)onlyappliestomealsorlodgingfurnished"inkind."Therefore,cashallowancesformealsor
lodgingreceivedbyanemployeeareincludedingrossincome.
EmployeebenefitsprovidedthroughERISA(EmployeeRetirementIncomeSecurityAct)arenotsubjecttostate
levelinsuranceregulationlikemostinsurancecontracts,butemployeebenefitproductsprovidedthroughinsurance
contractsareregulatedatthestatelevel.[6]However,ERISAdoesnotgenerallyapplytoplansbygovernmental
entities,churchesfortheiremployees,andsomeothersituations.[7]
UndertheObamacareorACAsEmployerSharedResponsibilityprovisions,certainemployers,knownas
applicablelargeemployersarerequiredtoofferminimumessentialcoveragethatisaffordabletotheirfulltime
employeesorelsemaketheemployersharedresponsibilitypaymenttotheIRS.[8]
PrivatefirmsintheUShavecomeupwithcertainunusualperquisites.[9]
IntheUnitedStatespaidtimeoff,intheformofvacationdaysorsickdays,isnotrequiredbyfederalorstate
law.[10]Despitethatfact,manyUnitedStatesbusinessesoffersomeformofpaidleave.IntheUnitedStates,86%
ofworkersatlargebusinessesand69%ofemployeesatsmallbusinessreceivepaidvacationdays.[11]

UnitedKingdom
IntheUK,EmployeeBenefitsarecategorisedbythreeterms:FlexibleBenefits(Flex)andFlexibleBenefits
Packages,VoluntaryBenefitsandCoreBenefits.
CoreBenefitsisthetermgiventobenefitswhichallstaffenjoy,suchaspension,lifeinsurance,incomeprotection,
andholiday.
Flexiblebenefits,oftencalleda"flexscheme",iswhereemployeesareallowedtochoosehowaproportionoftheir
remunerationispaidortheyaregivenabenefitsbudgetbytheiremployertospend.Currentlyaroundathirdof
UKemployersoperatesuchascheme.[12]Howflexiblebenefitsschemesarestructuredhasremainedfairly
consistentovertheyears,althoughthedefinitionofflexhaschangedquitealotsinceitfirstarrivedintheUKin
the1980s.Whenflexfirstemerged,itwasrunasaformalschemeforasetcontractperiod,throughwhich
employeescouldoptinandoutofaselectionofemployerpaidbenefits,selectemployeepaidbenefits,ortakethe
cash.InrecentyearsincreasingnumbersofUKcompanieshaveusedthetaxandnationalinsurancesavingsgained
throughtheimplementationofsalarysacrificebenefitstofundtheimplementationofflexiblebenefits.Inasalary
sacrificearrangementanemployeegivesuptherighttopartofthecashremunerationdueundertheircontractof
employment.Usuallythesacrificeismadeinreturnfortheemployer'sagreementtoprovidethemwithsomeform
ofnoncashbenefit.Themostpopulartypesofsalarysacrificebenefitsincludechildcarevouchersandpensions.
AnumberofexternalconsultanciesexistthatenableorganizationstomanageFlexpackagesandtheycentre
aroundtheprovisionofanIntranetorExtranetwebsitewhereemployeescanviewtheircurrentflexiblebenefit
statusandmakechangestotheirpackage.Adoptionofflexiblebenefitshasgrownconsiderably,with62%of
employersina2012surveyofferingaflexiblebenefitpackage,andafurther21%planningtodosointhe
future[13]Thishascoincidedwithincreasedemployeeaccesstotheinternetandstudiessuggestingthatemployee
engagementcanbeboostedbytheirsuccessfuladoption.[14]SuppliersofflexiblebenefitstechnologyintheUK
includeMercer,JardineLloydThompsonGroup,Staffcare,AonHewitt,ThomsonsOnlineBenefitsandVebnet.[15]
ThevaluationofThomsonsOnlineBenefitswasat"closeto100m"in2013.[16]

https://en.wikipedia.org/wiki/Employee_benefit

3/5

7/6/2016

EmployeebenefitWikipedia,thefreeencyclopedia

VoluntaryBenefitsisthenamegiventoacollectionofbenefitsthatemployeeschoosetooptinforandpayfor
personally,although,aswithflexplans,manyemployersmakeuseofsalarysacrificeschemeswheretheemployee
reducestheirsalaryinexchangefortheemployerpayingfortheperk.Thesetendtoincludebenefitssuchasthe
governmentbacked(andthereforetaxefficient)cycletowork,pensioncontributionsandchildcarevouchers
(providersincludeEdenred,EmployersForChildcareVouchers,Busybees,Sodexho,Fideliti,KiddiVouchers,Co
operativeEmployeeBenefitsandEarlyYearsVouchersLtd)andalsospeciallyarrangeddiscountsonretailand
leisurevouchers,gymmembershipanddiscountsatlocalshopsandrestaurants(providersincludeXexec).They
canberuninhouseorarrangedbyanexternalemployeebenefitsconsultant.

Fringebenefitstax
Inanumberofcountries(e.g.,Australia,NewZealandandPakistan)the'fringebenefits'aresubjecttotheFringe
BenefitsTax(FBT),whichappliestomost,althoughnotall,fringebenefits.InIndia,thefringebenefitstaxwas
abolishedin2009.[17]
IntheUnitedStates,employersponsoredhealthinsurancewasconsideredtaxableincomeuntil1954.[18]

Disadvantages
IntheUKthesebenefitsareoftentaxedattheindividual'snormaltaxrate,[19]whichcanproveexpensiveifthereis
nofinancialadvantagetotheindividualfromthebenefit.
TheUKsystemofstatepensionprovisionisdependentuponthepaymentofNationalInsuranceContributions
(NIC).SalaryexchangeschemeswillresultinreducedNICpaymentsandsoarealsoliabletoreducethestate
benefits,mostnotablythestatesecondpension.

Seealso
Benefitincidence
Profitsharing
Novatedlease

References
1."BLSInformation".Glossary.U.S.BureauofLaborStatisticsDivisionofInformationServices.February28,2008.
Retrieved20090505.
2.Abenity:WhatDoesItCostToReplaceAnEmployee?(http://www.abenity.com/celebrate/archives/3030)
3."WhatIsAnEmployeeDiscountProgram?",Abenity.
4."WhyYourTopTalentIsLeavingIn2014,AndWhatIt'llTakeToRetainThem".Forbes.Retrieved27January2015.
5.Taxtopics,IRS.
6.Ford,J(1995),"StateMandatedEmployeeBenefits:ConflictwithFederalLaw?",MonthlyLaborReview,"Questia".
7."HolidayPay".U.S.DepartmentofLabor.Retrieved27January2015.
8.IRS,EMployerSharedResponsibilityProvision(March14,2016)."IRS.GOV".March2,2016.RetrievedMarch14,
2016viairs.gov.
9.TimesofIndia(http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Search&Key=ETBG%2F2013%2
F08%2F20%2F18%2FAr01800.xml&CollName=ET_BANGALORE_ARCHIVE_2007&DOCID=542035&Keyword=%2
8%3Cmany%3E%3Cstem%3EChandu%3Cand%3E%3Cmany%3E%3Cstem%3EGopalakrishnan%29&skin=pastissues2
&AppName=2&ViewMode=GIF)
10."HolidayPay".http://www.dol.gov/dol/topic/wages/holiday.htm.Retrieved27January2015.Externallinkin|website=
(help)
11."10BenefitsBusinessesOfferEmployees".OhioUniversityMBAPrograms.Retrieved27January2015.
https://en.wikipedia.org/wiki/Employee_benefit

4/5

7/6/2016

EmployeebenefitWikipedia,thefreeencyclopedia

12.March7,2011authorEmployeeBenefitsmagazine(http://www.employeebenefits.co.uk/item/12353/23/5/3)
13.AonHewittBenefitsAdministrationSurvey2012(http://www.employeebenefits.co.uk/benefits/technologyandadministr
ation/buyersguidetoflexiblebenefitstechnology/101029.article)
14.PersonnelToday:Rewardandbenefitsofperksoverpayrisesforimprovingemployeeengagement(http://www.personnel
today.com/articles/2007/11/26/43403/rewardandbenefitsperformanceofperksoverpayrisesforimprovingemployeee
ngagement.html)
15.employeebenefits:Whichflextechnologyprovidershavethebiggestmarketshare?(http://www.employeebenefits.co.uk/b
enefits/technologyandadministration/buyersguidetoflexiblebenefitstechnology/101029.article)
16.MoneyMarketing:USprivateequityfirmtakesmajoritystakeinThomsonsOnlineBenefits(http://www.moneymarketin
g.co.uk/pensions/usprivateequityfirmtakesmajoritystakeinthomsonsonlinebenefits/1065202.article)
17."NewincometaxrulesonperkstoreplaceFBTnotified".TheHindu(Chennai,India).22December2009.
18.EmployerSponsoredHealthInsuranceandHealthReform(http://www.nber.org/aginghealth/2009no2/w14839.html)at
NationalBureauofEconomicResearch.
19.490(2008)EmployeeTravelAtaxandNICsguideforemployers(http://www.hmrc.gov.uk/helpsheets/490.pdf)

Externallinks
WebsiteforUKbasedEmployeeBenefitsmagazine,publishedbyCentaur(http://www.employeebenefits.co.
uk/)
FundamentalsofEmployeeBenefitPrograms(http://www.ebri.org/publications/books/index.cfm?fa=fundam
entals)(bookavailableonline),EmployeeBenefitResearchInstitute(EBRI),coversbenefitprogramsinthe
US
WebsitefortheEmployee(http://www.ebri.org/)
BenefitResearchInstitute,covershealthandretirementbenefitsintheUnitedStates(http://www.ebri.org/)
GuidetoEmployeeBenefits(http://unum.co.uk/employeebenefits/)
Retrievedfrom"https://en.wikipedia.org/w/index.php?title=Employee_benefit&oldid=727408347"
Categories: Employmentcompensation Employeerelations
Thispagewaslastmodifiedon28June2016,at20:06.
TextisavailableundertheCreativeCommonsAttributionShareAlikeLicenseadditionaltermsmayapply.
Byusingthissite,youagreetotheTermsofUseandPrivacyPolicy.Wikipediaisaregisteredtrademark
oftheWikimediaFoundation,Inc.,anonprofitorganization.

https://en.wikipedia.org/wiki/Employee_benefit

5/5