What is fringe benefit?


Fringe benefits are those benefits, which are provided to the employee in addition to the normal compensation. For Example: when a company provides its employee to use vehicle to commute from and to work. They are called fringe because many years ago because they were insignificant part of the pay. However, now the situation has changed as it has become an important part of the employee package. They include retirement benefits, sick leave, vacation, reimbursement, social security, day care. Generally speaking, fringe benefits are not taxable for employees but are for employers. In Australia and New Zealand, the fringe benefits are subject to Fringe Benefits tax, where as in India it was abolished few years ago.

The Objectives of Fringe Benefits are:

  • To improve Industrial Relations
  • To motivate the employees
  • To promote employee welfare
  • To meet the requirements of various laws.


Fringe benefits are different in different countries. In New Zealand, common fringe benefits include:

Low interest loans, Free or discounted goods and services, subsidised transport, contribution to sick or accident benefits. In India, certain laws make fringe benefits compulsory on the part of the employer such as the Factories Act 1948 Sec (51) specifies that no adult should work in a factory for more than 48 hours in a week. An adult worker shall have weekly paid holidays, preferably Sunday. In the same way, it also specifies that workers who work during holidays should be offered double the normal rate of salary. The Employee State Insurance Act 1948 deals about the health benefits. Insured employees are entitled to get cash benefits for a maximum of 56 days in a year. Employee Benefits in Canada include transportation benefits, long term insurance plan, discounted shopping, hotels, resorts etc.

Generally Fringe benefits include the following:

  • Retirement Benefits
  • Canteen
  • Child care benefits
  • Life Insurance Coverage
  • Relocation Charges
  • Transportation Charges
  • Educational Assistance
  • Employee Stock Options
  • Discounts on the goods or services the employer sells
  • Housing
  • Profit sharing


Some images about fringe benefits: