Key takeaways
Why you can trust my advice
I’m a knowledgeable HR expert with experience administering employee benefits. I also hold an MA in Organizational Psychology and have a strong understanding of how employee benefits impact organizational concerns such as employee well-being, engagement, and retention.
What are fringe benefits?
Fringe benefits are a form of employee benefits and perks that are given to employees beyond their salary. They can range from more traditional employee benefits like health insurance to special perks like wellness stipends or tuition reimbursement.
Offering fringe benefits makes your company more competitive from a recruiting perspective, and can help improve long term employee retention. According to a 2024 survey by Metlife, employees are 69% more likely to intend to stay with an organization for the next year if they feel that their employer cares about their well-being. Offering fringe benefits such as health benefits, generous paid time off and leave options, wellness stipends, and educational support shows that you care about your team’s personal well-being and growth.
How do fringe benefits work?
Each fringe benefit works a bit differently from an administrative standpoint. Employees opt into fringe benefits during open enrollment, when they can sign up for a health insurance, commuter benefits, vision insurance, and dental insurance. Others, such as educational assistance or family leave, are provided on an as needed basis when a qualifying event occurs, such as an employee going back to school or expanding their family.
Fringe benefits are part of an employee’s overall compensation, and they do need to be taxed as such unless they fall under an exemption. There is an IRS tax guide available for employees handling fringe benefits.
Types of fringe benefits
Fringe benefits often fall into one of the following categories:
- Health and wellness
- Family and caregiving
- Financial planning
- Work-life balance
- Office perks and discounts
Health and wellness benefits
| Benefit | Description | Tax exemptions available? |
|---|---|---|
| Accident and health benefits | A range of benefits supporting employees’ health and accident recovery needs. | Yes |
| Disability insurance | Insurance that pays out in the event of short term or long term disability. | Yes |
| Employee assistance programs | A program that provides services and referrals to help employees through personal challenges such as substance use, finding dependent care, and legal issues. | Yes |
| Gym memberships | Discounted or free memberships to gyms or other athletic clubs, either directly or through reimbursements. | No |
| Health savings accounts | A health savings account (HSA) allows employees to set aside pre-tax dollars to spend on qualified healthcare expenses. | Yes |
| Medical leave | Paid or unpaid time off for eligible medical needs. Many employers are required to offer medical and caregiving leave under the FMLA, but paid time off can be added as an additional fringe benefit. | No (if paid, taxed as wages) |
| Menstrual and menopause leave | A form of leave that allows employees to take time off for menstrual or menopause symptoms. | No |
| Short-term and long-term disability insurance | Insurance plans designed to cover a portion of an employee’s salary if they become disabled and are unable to work for a period of time. | No |
| Sick leave | Paid time off for short absences related to illnesses or injuries. | No |
Family and caregiving benefits
| Benefit | Description | Tax exemptions available? |
|---|---|---|
| Adoption assistance | Financial assistance to help with the cost of adopting a child. | Yes |
| Dependent care assistance | Assistance in finding and/or paying for child care or elder care. | Yes |
| Parental leave | Paid or unpaid time off for families after the birth of a child, adoption, or foster placement. Many employers are required to offer this under the FMLA, but businesses can enhance this fringe benefit by offering it as paid time off. | No (if paid, taxed as wages) |
Financial and retirement benefits
| Benefit | Description | Tax exemptions available? |
|---|---|---|
| Flexible spending account (FSA) | A flexible spending account (FSA) allows employees to set aside pre-tax dollars to spend on qualified health and dependent care expenses. | Yes |
| Relocation allowances | Funds provided to help cover relocation costs such as temporary housing and movers when an employee needs to move for work. | No |
| Retirement plans | 401(k) to help employees save for retirement, optionally with employer matching. Or pension plans that will pay out after retirement. | Yes |
| Stock options | An opportunity for employees to purchase stock in a company for a set (often discounted) price. | No |
Work-life balance benefits
| Benefit | Description | Tax exemptions available? |
|---|---|---|
| Educational assistance | Assistance in pursuing higher education such as tuition discounts or reimbursement. | Yes |
| Vacation time | Paid time off for employees to take a vacation or use for personal time off. | No |
Office perks and discounts
| Benefit | Description | Tax exemptions available? |
|---|---|---|
| Commuter benefits | A program that allows employees to set aside pre-tax dollars to allocate towards covered transit and parking costs. | Yes (up to a monthly limit) |
| Employee discounts | Discounts on your company’s goods or services for employees. | Yes |
| Employer-provided cell phones | Cell phones paid for and provided by the company for use in work-related matters. | Yes (unless provided for personal use) |
| Employer-provided vehicles | Company vehicles provided by the employers for use in work-related travel. | Yes (unless provided for personal use) |
| Gift cards | Gift certificates to stores, restaurants or other establishments. | No |
| Meals | Meals provided to employees, such as catered office lunches or employee meals at food service establishments. | Yes |
Be sure to review IRS Publication 15-B for more details on available fringe benefit tax exemptions and consult an accountant for help in navigating tax concerns related to employee benefits.
Examples of fringe benefits
You can combine any of the above to create your fringe benefits package and even add your own unique offerings. Google, Starbucks, Microsoft, HubSpot, and Chewy are just a few companies with great examples of fringe benefits packages.
Offers food as a fringe benefit with an onsite cafe, snack stations and more. The company also takes a unique approach to commuter benefits with company shuttles that pick employees up and take them to work. Google’s offices tend to be located in high traffic areas like the San Francisco Bay Area, so offering commuting assistance is a good example of a company understanding the specific challenges of its employees and trying to alleviate a problem.
Starbucks
The coffee chain has partnered with Arizona State University to offer employees free access to online college classes and degree programs. This is a different take on the fringe benefit of tuition reimbursement or assistance, which often only covers a portion of tuition.
Microsoft
This major software company goes above and beyond in offering extensive family focused fringe benefits that include:
- Paid leave for new parents.
- Family caregiver leave.
- Adoption assistance.
- Parenting classes.
- Family support programs.
- Subsidized and discounted childcare.
- Back-up care for children, adults, and elders.
HubSpot
HubSpot supports employee development with fringe benefits such as tuition reimbursement and employee development benefits designed to offset the cost of career development. Since HubSpot does offer products around professional development through HubSpot Academy, this is a great example of matching your fringe benefits to your overall brand.
Chewy
Chewy is an online retailer focused on pet products, so of course, they’ve crafted their fringe benefits around pets too. The company offers pawternity leave to give employees time off to bond with new pets and provide employee discounts on Chewy’s products so employees can get everything they need for their furry friends. This is a fun example of linking your employer brand and fringe perks with your overall brand.
How to choose the right fringe benefits for your organization
Companies, especially small businesses, don’t need to offer every fringe benefit listed above. Instead, try to tailor your fringe benefits package to your company culture and organizational goals. For example, companies with a culture that encourages and values self-improvement and continuous learning may want to offer assistance to allow employees to further their education with advanced degrees or certificates. Meanwhile companies that prioritize self-care may choose wellness stipends.
It’s also helpful to consider your employee population. If you have a lot of parents on staff, dependent care benefits would be an impactful fringe benefit to offer. If you’re not sure what will be most meaningful to your specific employee group, ask them.
Poll employees on benefits during your employee satisfaction and include a field where employees can write in what benefits they’d most like to see added. You can make a free Google Survey or use a more comprehensive employee engagement platform like Culture Amp to gauge employee opinions.
