The Beginning of the Fringe Benefits Concept

The paternalistic concept of fringe benefit started as welfare work by employers among their employees
and their families. The early process gained the employees' loyalty to the company, cooperation and
employees' good will , and inspired them to work more efficiently.
Some companies then gave free meals to their workers provided them with family quarters near their
work area, other services. Some big corporations then provided housing facilities, hospitals, recreational
facilities and other amenities for the employees' use.
The Concept of Benefits
Benefits are anything that are not covered by regular salaries and wages. It is anything that contribute to
the improvement of the conditions of work, and that motivates the employees to do good work. Benefits
are additional compensations that the employees receive regularly at an interval stipulated in the company
policies and guidelines.
Benefits are granted to employees to assist them and facilities are provided so that they will enjoy their
stay in the company. The main purpose is to develop greater commitment and loyalty and to keep good
employees in the company roster.
The objectives of the company in granting fringe benefits are:
1. To provide additional protection and comfort to their employees and their families as they consider
them as members of the team.
2. To maintain and develop employees as an effective work force duly committed to their corporate
mission and vision.
3. To develop productive and happy employees and develop greater loyalty and commitment to motivate
them in the employment of the company.
4. Develop greater partnership in the development of quality products and services to their customers and
clients.
5. To develop satisfied employees and more concerned workers to avoid activism in the workplace that
will interfere with the production.
6. To develop partnership which labor unions and employees associations.
The Governing Philosophy in Granting Fringe Benefits
The company benefits should focus along the ff. principles:
1. Company benefits should be based on the financial conditions and the capability of management to pay
additional cost of operations, as benefits granted cannot be withdrawn when already granted.
2. Benefits granted should not interfere with company operations and managements has the prerogative to
control the same.
3. The benefits should be fair to all employees of equal rank and positions and should be capable of
uniform implementation.
4. The benefits must have mutual value to both employers and the employees concerned.
5. The employee must understand the costs of benefit implementation and they should work hard so that
the company will maintain its ability to pay the added fringes.
6. Benefits must be measured in terms of employees' services to the company.
a. Length of service
1. Employees who have one year of service are entitled to the mandatory leave of five (5) days per year
2. The employees enjoy an additional two-day leave for every year of service but not to exceed 15 days
thereafter. That is, if the employees serve the company for another five years then they can enjoy
maximum 15 days leave credit per year.
3. The employee may initially enjoy 5 days sick leave after 1 year of service, and then an additional leave
of 1 day per year of service until he enjoys the full 15 day leave.
4. Additional leave may be granted depending on the company's capability to pay.
b. Retirement Benefits:
1. Some companies pay retirement benefits outside of those given by the Social Security System. Usually
employees are paid 15 days for every year of service.
2. Other companies pay as much as 2 months in retirement benefits for every year of services. Others pay
more depending on their collective bargaining agreements.
3. Other companies provide pension plans, either participatory or non-participatory. That is meant to
relieve the company of paying hue amount of money when employees retire from employment.
c. Other Benefit Programs- Company insurance plans covering the employees and their dependents may
be given depending on the services of the employees.
7. Benefits programs should be a cooperative effort of top management and employees.

The Classification of Benefits

Benefits could be classified under the following:
1. Statutory benefits- are benefits mandated by law such as:
a. 13th month pay given half in June and half in December
b. 5 day incentive leave
c. Birthday leave
d. Maternity leave with pay for married women
e. Paternity leave with pay when husband's wife gives birth
f. Pag-ibig fund
g. Medicare fund
h. Social Security Benefits
i. Cost of living allowance
2. Company Benefits - These are benefits granted by the company outside of those mandated law. These
benefits could be through a collective bargaining agreement and those that are given unilaterally by
management.
a. Vacation leave with pay
b. Sick leave wit pay
c. Bereavement leave
d. Hospitalization plan
e. Sickness and Accident Insurance Plan
f. Life Insurance and Pension Plans
g. Christmas and mid-year Bonus
h. Housing equity assistance
i. Educational Plan
j. Recreational and Physical Fitness Facilities=
k. Legal Aid
l. Car plan
m. Company service and Transportation
n. Stock Option plan
o. Management Bonus
p. Emergency leave
q. Personal leave
r. Union leave
s. Production Sharing plan
t. Profit-sharing
Profit-sharing is an incentive plan under which an employer agrees to share with his personnel a specified
portion of the net profits of his business at the end of each fiscal period or over a given period. It is not a
pension or bonus. It provides payment of current or deferred sums based on the profitability of the
enterprise as a whole.
Purpose of Profit-Sharing
It is believed that employees would feel they have a stake in the company if they get a direct share in the
profits of the enterprise in which they work.
It aims to modify employees' attitudes to achieve greater employee efficiency, productivity and loyalty to
the firms and keener interest in its welfare.
Employers who subscribe to the concept of profit-sharing look upon their workers as partners or co-
workers of the enterprise.
Types of Plans
1. The Cash Plan - also known as the Current Distribution Plan. This provides for payment of the
employee's share in cash based on his salary or wage.
2. The Deferred Distribution Plan - this program establishes a trust fund to provide employees with future
payment.
3. The Purchase Plan - Under this plan, participating employees are permitted to purchase, often through
payroll, deductions, shares of company stock, either or less than prevailing market price or at par value.
Four Major Categories:
a. Economic and Financial Benefits
b. Recreational, Social and Athletic services
c. Health and Medical Services
d. Professional Services

Managing Benefits: Planning and Administration

Managing a fringe benefits program is an administrative and a financial problem to the employer. This
need to be handled very carefully as this may mean sour relations between management and the
employees. Careful planning of the benefits programs could develop healthy administrative relations
between workers and management.
Strategic Benefit Implementation
Management has to analyze the benefits payoff of any benefits management program. Employees expect
management to provide them benefits but, on the other hands, job performance remains the same.
Benevolent management on the other hand expects employees to contribute to the company's productivity
and profitability and the end game should be of mutual benefits to both employer and the employees.
1. Benefit Survey and Benchmarking - Benefits should be within the level of the industry in the
community and those of the competitors in business as any added cost could affect product-pricing
strategy.
2. Cost Control Strategy - In thinking about cost control strategy, several factors can be successful. It is
assumed that the larger the cost of benefits category, the greater the opportunity for savings.
3. Staffing Cost Strategy - Employers may change staffing practices to control benefits cost. Benefit costs
are fixed and spent per employee. The company may require the employees to work for more hours and
pay overtime premiums. The overtime premium should be computed against expenses for employees'
benefits.
4. The Demographic Composition Cost Strategy - The employer must also consider the demographic
factors such as age, sex, and status of their work. The benefits must be designed along the demographic
need of the human resources to be more relevant and appreciated.
5. Organization of Employees Cooperatives - Organizations of employee associations cooperatives will
greatly help unburden management of employees' loan and cash advances. This will also help employees
save part of their income and generate dividends as added incentives.
6. Communicating Benefits to Employees - Any strategic implementation of any program cannot take
root on employees' morale without their understanding fully the concepts and program of management in
granting of such benevolent gestures for their welfare.

Corporate Policy and Guidelines on

Benefits
Corporate Policy must follow the following guidelines:
1. It must specify who are covered by the policy.
2. It must relate to family and individual assistance to levels of need.
3. It must make the cost of work-related benefits as part of the cost production.
4. It must provide security in such forms as compensation during work- related illness and retirement
benefits.
5. It must promote healthy and safe work environment.
6. It must provide morale-building programs and develop employees' esprit de corps.
7. It must be of mutual benefits to both the employees and the employers.
Benefits Program Evaluation
Effective program management of employee benefits is an important means by which organizations
successfully compete. Benefits costs are substantial and continue to grow rapidly in some areas,
especially on employees' health care benefits. Effective evaluation of all benefits costs is necessary to be
able to compete in products and services especially in the global market.

Source:
https://prezi.com/jb1ws2nucpob/chapter-9/?frame=1c68ef2424748e7ece59ea808c9fbe2aff5a3103