Benefit is a generic word and used to describe a substantial elements of compensation which is unique and provided to the employee in non-cash form (there are some exception) and known as fringe benefits and services, other terms like perquisites perks, allowances etc. , are also used. There is a distinction between benefits and services. Benefit applies to those items for which a direct monitory value to the employees, can be ascertained, as in the case of pension, insurance, holiday pay, etc. Services applies to such items as companies newspaper, companies holiday homes, etc. , for which direct money value cannot be readily established by the employee. Perks is something in addition to the payment; car fuel etc. Allowance could be sum of money given at regular interval to cover some special circumstances like canteen allowance, clothing allowance, etc.
Benefits and Services are indirect compensation (as against direct compensation on critical job factors and performance) because they are usually extended as condition of employment or with intention of inducement or motivation and are not directly related to performance. Fringe benefits are suppose to be benefit at the fringes, or edge of the main pay. Now this has been replaced by simple benefits which forms a substantial part of the total compensation.
Employee benefits and services include any benefits that the employee receives in addition
to direct remuneration.
"Fringes embrace a broad range of benefits and services that employees receive as part of their total compensation package—pay or direct compensation—is based on critical job factors and performance. Benefits and services, however, are indirect compensation because they are usually extended as a condition of employment and are not directly related to performance."
Employee benefits are elements of remuneration given in addition to the various forms of cash pay. They provide a quantifiable value for individual employees, which may be deferred or contingent like a pension scheme, insurance cover or sick pay, or may provide
an immediate benefit like a company car. Employee benefits also include elements, which are not strictly remuneration, such as annual holidays. The terms 'fringe benefits' and perks (perquisites) are sometimes used derogatively, but
should be reserved for those employee benefits which are not fundamentally catering for personal security and personal needs.
The objectives of the employee benefits policies and practices of an organisation might be:
to increase the commitment of employees to the organization;
to provide for the actual or perceived personal needs of employees, including those
concerning security, financial assistance and thus, provision of assets in addition to
pay, such as company cars and petrol;
to demonstrate that the company cars for the needs of its employees;
to ensure that an attractive and competitive total remuneration package is provided
which both attracts and retains high-quality staff;
to provide a tax-efficient method of remuneration which reduces tax liabilities
compared with those related to equivalent cash payments.
Note that these objectives do not include 'to motivate employees'. This is because benefits seldom have a direct and immediate effect on performance unless they are awarded as
an incentive; for example, presenting a sales representative with a superior car (e.g. a BMW) for a year if he or she meets a particularly demanding target. Benefits can, however, create more favourable attitudes toward the company leading to increased long-term commitment and better performance.
Why fringe Benefits?
1. Altruistic/Paternalistic consideration
2. Statutory requirements
3. Concern for well being
4. Damage and hazard of industrial working
5. Tax-planning consideration
6. Competitive consideration
7. Concern for quality of work-life
8. Mitigate fatigue and monotony
9. Discourage labour unrest
10. Reduce attrition
11. Build companies image
12. Attract, retain and motivate employees
Goals for Benefits
Benefits should be looked at as part of the overall compensation strategy of the organisation. For instance, an organisation can choose to compete for employees by providing base compensation, variable pay, or benefits, or perhaps all three. Which approach is chosen depends on many factors, such as the competition, organisational life cycle, and corporate strategy. For example, a new firm may choose to have lower base pay, and use high variable incentives to attract new employees, but keep the cost of benefits as low as possible for a while. Or an organisation that hires predominately younger female employees might choose a family-friendly set of benefits including on-site child care to attract good employees.
Employee benefits can be further classified under these seven major groups:
(1) Disability income continuation,
(2) Loss-of-job income continuation,
(3) Deferred income,
(4) Spouse or family income continuation,
(5) Health and accident protection,
(6) Property and liability protection, and
(7) A special group of benefits and services called perquisites.

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