Compensation Management

Fringe Benefits Meaning and Types of Fringe Benefits

Fringe Benefits Meaning – Fringe benefits are also called as employee benefits. These benefits are supplemental compensation which employee receives from his employer, aside from their direct wages or incentive pay. These are not substitutes for wages or salaries. These benefits represent labour costs over and above straight-time earning. They are granted to employees to provide them with facilities and assistance and are either voluntarily granted by the company or a part of the collective bargaining agreement or required by law.

They are given to employees regardless of differences in individual performance. Their costs go into overhead charges which must be included as part of the expenses in producing goods and services. Employee benefits are available to all employees based on their membership in the organisation.

Types of Fringe Benefits

' Types of Fringe Benefits ' ' Fringe Benefits '

(1) Payment for Time not Worked

(i) Hours of Work – Section 51 of the Factories Act, 1948 specifies that no adult worker shall be required to work in a factory for more than 48 hours in any week. Section 54 of the Act restricts the working hours to 9 in any day. In some organisations, the number of working hours is less than the legal requirements.

(ii) Paid Holidays – According to the Factories Act, 1948, an adult worker shall have a weekly paid holiday, preferably Sunday. When a worker is deprived of weekly holidays, he is eligible for compensatory holidays of the same number in the same month. Some organisations allow the workers to have two days as paid holidays in a week.

(iii) Shift Premium – Companies operating second and third shifts, pay a premium to the workers who are required to work during the odd hours shift.

(iv) Holiday Pay – Generally organisations offer double the normal rate of the salary to those workers, who work on paid holidays.

(v) Paid Vacation – Workers in manufacturing, mining and plantations who worked for 240 days during a calendar year are eligible for paid vacation at the rate of one day for every 20 days worked in case of adult workers and at the rate of one day for every 15 days worked in case of child workers.

(2) Employee Security

Physical and job security to the employee should also be provided with a view to promoting security to the employee and his family members. The benefits of confirmation of the employee on the job create a sense of job security. Further a minimum and continuous wage or salary gives a sense of security to the life. The Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965, provide income security to the employees. Some other benefits are as follows –

(i) Retrenchment Compensation – The Industrial Disputes Act, 1947 provides for the payment of compensation in case of layoff and retrenchment. The non-seasonal industrial establishments employing 50 or more workers have to give one month’s notice or one month’s wages to all the workers who are retrenched after one year’s continuous service. The compensation is paid at the rate of 15 days wage for every completed year of service with a maximum of 45 days wage in a year. Workers are eligible for compensation even in case of closing down of undertakings.

(ii) Layoff Compensation – In case of layoff, employees are entitled to layoff compensation at the rate of 50% of the total of the basic wage and dearness allowance for the period of their layoff except for weekly holidays. Layoff compensation can normally be paid upto 45 days in a year.

(3) Safety and Health Provisions

Employee’s safety and health should be taken care of in order to protect the employee against accidents, unhealthy working conditions and to protect the worker’s productive capacity. In India, the Factories Act, 1948, stipulated certain requirements regarding working conditions with a view to provide safe working environment. These provisions relate to cleanliness, disposal of waste and effluents, ventilation and temperature, dust and fumes, artificial humidification, over- crowding, lighting, drinking water, latrine, urinals and spittoons.

Provisions relating to safety measures include fencing of machinery, work on or near machinery in motion, employment of young persons on dangerous machines, striking gear and devices for cutting off power, self-acting machines, casing of new machiner prohibition of employment of women and children near cotton openers, hoists and lifts, lifting machines, chains, ropes and lifting tackles, revolving machinery, pressure plant, floors, excessive weight, protection of eyes, precautions against dangerous fumes, explosive or inflammable, dust, gas, etc. Precautions in case of fire, power to require specifications of defective parts or test of stability, safety of buildings and machinery, etc.

(4) Welfare and Recreational Facilities

(i) Canteens – Perhaps no employee benefits have received as much attention in recent years as that of canteens. Some organisations have statutory obligation to provide such facilities as Section 46 of the Factories Act, 1948 imposes a statutory obligation to employees to provide canteens in factories employing more than 250 workers. Others have provided such facilities voluntarily. Foodstuffs are supplied at subsidised prices in these canteens. Some companies provide lunch rooms when canteen facilities are not available.

(ii) Consumer Societies – Most of the large organisations located far from the towns and which provide housing facilities near the organisation set-up the consumer store in the employees’ colonies and supply all the necessary goods at fair prices.

(iii) Credit Societies – The objective of setting-up of these societies is to encourage thrift and provide loan facilities at reasonable terms and conditions, primarily to employees. Some organisations encourage employees to form cooperative credit societies with a view to fostering self-help rather than depending upon moneylenders, whereas some organisations provide loans to employees directly.

(iv) Housing – Of all the requirements of the workers, decent and cheap housing accommodation is of great significance. The problem of housing is one of the main causes for fatigue and worry among employees and this comes in the way of discharging their duties effectively. Most of the organisations are located very far from towns where housing facilities are not available. Hence, most of the organisations built quarters nearer to factory and provided cheap and decent housing facilities to their employees, whilst a few organisations provide and/or arrange for housing loans to employees and encourage them to construct houses.

(v) Legal Aid – Organisations also provide assistance or aid regarding legal matters to employees as and when necessary through company lawyers or other lawyers.

(vi) Employee Counselling – Organisations provide counselling service to the employee regarding their personal problems through professional counsellors. Employee counselling reduces absenteeism, turnover, tardiness, etc.

(vii) Welfare Organisations – Some large organisations set-up welfare organisations with a view to provide all types of welfare facilities at one centre and appoint welfare officers to provide the welfare benefits continuously and effectively to all employee fairly.

(viii) Holiday Homes – As a measure of staff welfare and in pursuance of government’s policy, a few large organisations established holiday homes at a number of hill stations, health resorts and other centre with low charges of accommodation, so as to encourage employee use this facility for rest and recuperation in pleasant environment.

(ix) Educational Facilities – Organisations provide educational facilities not only to the employees but also to their family members. Educational facilities include reimbursement of fee, setting-up of schools, colleges, hostels, providing grants-in-aid to the other schools where a considerable number of students are from the children of employees. Further, the organisations provide reading rooms and libraries for the benefit of employees.

(x) Transportation – Companies provide conveyance facilities to their employees from the place of their residence to the place of work as most of the industries are located outside town and all employees may not get quarter facility.

(xi) Parties and Picnics – Companies provide these facilities with a view to inculcating a sense of associations, belongingness, openness, and freedom among employees. These activities help employees to understand others better.

(xii) Miscellaneous – Organisations provide other benefits like organising games, sports with awards, setting-up of clubs, community services activities, Christmas gifts, Deewali, Pongal and Pooja gifts, birthday gifts, leave travel concession and awards, productivity/performance awards, etc.

(5) Old Age and Retirement Benefits

These are the benefits provided to the employees after retirement and during the old age with a view to create a feeling of security about the old age. Various old age and retirement benefits are as follows-

  • Employees’s Provident Funds
  • Deposit – Linked Insurance
  • Gratuity
  • Medical Benefits, and
  • Pension

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