Employee Fringe Benefits: 26 Examples and Guide To How They Work

Fringe theater, fringe science, fashion fringes—what’s one thing they all have in common? All these fringes exist beyond the mainstream. Continuing the theme, fringe benefits are far from the staple offerings you’ll find in a standard compensation package. These are the extra details your employees need to stay loyal and productive while working for your company. 

Our guide explores fringe benefits in depth, including the advantages of offering them, examples of what does and doesn’t count as a fringe benefit, and a look at employment taxes, too. 

What are fringe benefits?

Fringe benefits are a form of compensation that employers offer their employees in addition to regular salary. These other benefits can be monetary or non-monetary, ranging from health insurance and paid time off to gym memberships and company cars. The IRS generally considers fringe benefits taxable income, although some exceptions exist. 

The history of fringe benefits

The concept of fringe benefits developed during the Second World War due to government-imposed wage controls at the time. Forced to cut back on employee hours and pay, employers sought alternative ways to attract and retain workers by offering benefits like paid leave and health coverage. The trend continued and expanded post-war, and companies began to offer more diverse benefits at a time when the labor movement was advocating for better working conditions and compensation packages. 

In today’s work landscape, fringe benefits now include remote work options, wellness programs, and tuition reimbursement, reflecting the changing priorities and lifestyles of the modern employee. While only 5% of an employee’s pay packet comprised fringe benefits in the 1950s, current Bureau of Labor Statistics data reveals this has climbed to a third of an employee’s total compensation in 2023. 

What counts as a fringe benefit?

The list of fringe benefits you could offer in your organization is extensive but might include some of the following: 

Health insurance 

Healthcare coverage is one of the most common fringe benefits, including medical, dental, and vision coverage for employees and their dependents. Companies may provide health insurance in various ways, from comprehensive to HSA-eligible high-deductible plans. Some employers also contribute toward premiums or offer flexible spending accounts to help with out-of-pocket expenses. 

Retirement plans 

Retirement planning, such as 401(k)s and pensions, are also considered fringe benefits. These employer-sponsored plans allow employees to save for their future and may include matching contributions from the company.

Paid Time Off (PTO) 

PTO encompasses vacation days, sick leave, and personal time such as mental health days. Companies may offer a set number of PTO days per year or operate under a more flexible policy where employees can take as much time off as they need, within reason. 

Parental leave 

Maternity, paternity, and adoption leave are considered fringe benefits in many organizations. While the Family and Medical Leave Act (FMLA) mandates 12 weeks of unpaid time off for eligible employees, some companies offer paid parental leave as part of their benefits package. This can include a set number of weeks at full or partial pay.

Life and disability insurance 

Health and life insurance provides a financial safety net for the employee’s family in the event of their death, while short-term or long-term disability insurance offers income replacement if an employee cannot work due to illness or injury.

Tuition reimbursement 

Tuition reimbursement supports employees’ continued education and professional development by covering the expense of courses, certifications, or degree programs related to the employee’s job or career advancement within the company. 

Employee Assistance Programs (EAPs) 

Employee Assistance Programs offer confidential support to employees dealing with personal or work-related issues affecting their job performance, health, or well-being. These programs often cover counseling services, legal or financial advice, and referrals to specialized professionals.

Flexible working arrangements

Flexible working arrangements, such as remote work, flextime, compressed workweeks, or job sharing, allow employees to adjust their working hours or location to better suit their personal needs. 

Wellness programs 

Wellness initiatives are designed to improve employee health and well-being and might include fitness challenges, health screenings, nutritional advice, or stress management resources.

Childcare assistance 

Working parents can access on-site childcare facilities, subsidies for external childcare services, or flexible working hours to accommodate their responsibilities.

Transportation benefits 

Transportation or commuter benefits help employees cover the cost of getting to and from work. The benefits might include access to carpooling programs, transit subsidies for public transportation, parking expenses, and more. 

Employee discounts 

Some companies offer reduced prices on their own products or services, while others partner with other businesses for discounted rates. 

Stock options and equity 

Stock options and equity allow employees to purchase shares in the company, often at a discounted rate. This aligns employees’ interests with company performance and can serve as a long-term retention incentive. 

Profit sharing 

Profit-sharing plans distribute a portion of the company’s profits back to its employees, such as cash bonuses or retirement saving contributions. 

Relocation assistance 

Employees taking advantage of internal mobility opportunities can benefit from relocation assistance to cover the cost and logistics of moving for work. Depending on the location, the benefit might include moving expenses, temporary housing, accommodation support, language lessons, and school-finding services. 

Food and meals 

Food and meal benefits might include free or subsidized meals at work, grocery delivery services, or meal stipends.

Cell and internet stipend 

A cell phone or work from home stipend supports distributed team members with the cost of using their personal devices and internet to complete their work. 

Adoption assistance

Adoption assistance provides financial aid and resources to employees adopting a child. Often, this will be offered as part of a family forming or parental leave package. 

Concierge services 

Concierge services help employees with personal tasks, such as dry cleaning, grocery shopping, or booking appointments. This alleviates stress and frees up time for employees both during and after their workday. 

Mental health days

Mental health days are critical for mental wellness, allowing employees to rest, reset, and return to work more productive and engaged.

Sabbatical leave

Unlike PTO, a sabbatical is an extended break from work typically used for personal development, further education, or travel. Employees may become eligible when they have reached a particular service anniversary. 

Employee recognition programs

Employee recognition programs acknowledge and reward employees for their hard work and achievements. Different elements like peer recognition, employee awards, and challenges can boost morale, productivity, and overall employee satisfaction.

Pet care

Pet ownership expenses are alleviated with fringe benefits, including pet insurance, pet-friendly workplaces, or care services such as dog walking, home boarding, or pet-sitting. 

Employee referral bonuses

Employees who refer successful candidates for open vacancies may receive a referral bonus. This benefit encourages employees to source high-quality talent for the company. 

Gym or fitness facilities

Gym or fitness facilities encourage employee wellness by providing on-site workout facilities or subsidizing gym memberships to boost employee health and productivity while reducing stress.

Ergonomic workstations

Using ergonomic workstations contributes to employees’ overall health and well-being, potentially reducing time lost to discomfort or injury. The benefit may include adjustable desks, chairs, keyboards, and other equipment to minimize strain and prioritize safety. 

What isn’t a fringe benefit?

Looking at the list above, you’d be forgiven for thinking that just about anything can be a fringe benefit. But there are some notable exceptions, such as the following, which aren’t classed as fringe benefits:  

• Standard salary or wages are the basic pay an employee receives for their work, not including any extra benefits. 
• Overtime pay is additional compensation for hours worked beyond the standard workweek, according to labor laws. 
• Comp time is time off given in place of overtime pay. 
• Mandatory employment benefits include Social Security contributions, workers’ compensation insurance, and unemployment coverage.
• Work tools and equipment necessary for the employee to perform their role, such as software, hardware, or safety gear. 
• Severance pay is money paid to employees after termination as a one-time payment due to separation.
• One-time gifts or rewards of nominal value, like a holiday gift, are not usually considered fringe benefits. 
• Compensation for injury or illness is payment made under workers’ compensation law for injuries or sickness. 
• Professional development training sessions are required for maintaining job qualifications.

Why should employers offer fringe benefits to employees?

Let’s address the elephant in the room: Fringe benefits cost money. If your budget is tight, you may be tempted to cut corners on the number or quality of fringe benefits you offer. But before you make any drastic decisions, here’s why an investment in fringe benefits offers tangible advantages for employers and employees alike. 

5 benefits to employees 

• Employees gain financial security: Benefits like employee assistance programs offer financial protection and peace of mind, reducing health-related stress and financial uncertainties.
• Employees feel valued: When employees feel valued through benefits like recognition programs, team-building activities, and other perks, it enhances their job satisfaction and morale. MetLife data reveals that 60% of employees state their benefits make them feel cared for. 
• Employees improve their work-life balance: Perks like flexible working hours, remote work options, and paid time off help employees balance their professional and personal lives, improving overall satisfaction and well-being.
• Employees enjoy personalized benefits: Using lifestyle spending accounts, employees can select the best mix of fringe benefits to suit their needs. You might take this one step further by offering personalized recommendations desired by 54% of employees, according to MetLife. 
• Employees grow professionally: Tuition reimbursement and professional development programs allow employees to advance their skills and career prospects, fostering long-term career growth.

4 benefits to employers 

• Employees exhibit company loyalty: Employees are likely to feel more loyal and committed to an employer that invests in their well-being and acknowledges their needs beyond just a salary.
• Prospective employees are inspired to join you: The right benefits mix can attract or dissuade candidates from joining your ranks. 55% of candidates indicate they’ve turned down job offers due to unsatisfactory benefits packages. Similarly, recruiters who deploy chatbots mention that their most frequent queries include those about benefits packages. 
• Employees are more engaged and productive: 59% of employees say the benefits they receive make them more engaged at work, according to MetLife. When employees are healthier, less stressed, and more engaged, they tend to be more productive, which directly impacts the company’s bottom line. 
• Employees are physically and mentally healthy: Benefits such as gym memberships, wellness programs, and mental health support contribute to employees’ physical and mental well-being. After Pacific Bell Telephone Company instituted a wellness program, it achieved a $2 million annual reduction in absenteeism costs and a $4.7 million decrease in disability leave expenses. 

Are fringe benefits taxable?

The IRS tends to recognize fringe benefits as taxable wages, except for a few exceptions listed in the Employer’s Tax Guide to Fringe Benefits 2024. 

Note: The following fringe categories have special exclusion rules applied, meaning that part of or the entire benefit or stipend value may be tax-free. We always encourage you to research and obtain financial or legal counsel when planning your fringe benefits.  

• Accident and health benefits
• Achievement awards
• Adoption assistance
• Athletic facilities
• De minimis (minimal) benefits
• Dependent care assistance
• Educational assistance
• Employee discounts
• Employee stock options
• Employer-provided cell phones
• Group-term life insurance coverage
• Health savings accounts (HSAs)
• Lodging on your business premises
• Meals
• No-additional-cost services
• Retirement planning services
• Transportation (commuting) benefits
• Tuition reduction
• Working conditions benefits

Other fringe benefit regulations 

While fringe benefits provide immense value to employees, it’s also important to understand that not all individuals working for a company are eligible for these benefits, including: 

• Freelancers and independent contractors: As self-employed individuals offering services under a contract, they’re responsible for their own benefits and taxes.
• Temporary or part-time employees: Some companies may exclude temporary or part-time workers from receiving certain fringe benefits, particularly if they work less than a specific number of hours per week.
• Interns: Depending on the nature of the internship (paid or unpaid, full-time or part-time), interns may not be entitled to the same fringe benefits as full-time employees.

How to set up fringe benefits in Benepass

Still trying to decide which fringe benefits to offer your employees? With Benepass, there’s no need to decide. Instead, empower your workers to choose the most appropriate fringe benefits for their needs with our Benepass Lifestyle Spending Account. Here’s how it works: 

1. You’ll define your lifestyle pillars, such as wellness, professional development, food, mental health, and more, so your employees can choose their optional fringe benefits.  
2. We’ll code your unique benefits policy template into Benepass. 
3. We’ll connect your payroll system to automate enrollment for your employees. 
4. You’ll invite your employees to join Benepass and start enjoying their new fringe benefits from day one. 

Here’s how some people use their LSA: 

• Rob has hired a leadership coach to offer training on how to become a better manager. 
• Joe pays for an Equinox membership, allowing him to take fitness classes and work with a personal trainer. 
• Jackie uses her LSA to subsidize her child’s daycare costs so she can work in the office.  
• Daphne has subscribed to Talkspace, which allows her to meet with a therapist once a week.  

Ready to take your fringe benefits to the next level? Take a free Benepass demo to see our flexible platform in action, or contact sales@getbenepass.com with any questions.