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Employee benefits cover a wide range of possibilities, and there are several ways to classify them, but one of the most important benefits as traditionally classified is called "fringe benefits."
Some employers have tended to overlook fringe benefits in recent years, and others may have them but not yet streamlined them for maximum employee engagement and ideal tax status. Here is some help in using fringe benefits to boost employee satisfaction and attract new talent!
How Exactly Do You Define "Fringe Benefits?"
Fringe benefits are given to employees in addition to regular monetary compensation. They may be offered to all employees or only to those who qualify based on how long they have worked for you, how much experience they have, how productive they are, or other non-discriminatory factors.
Although all employee benefits could be considered "fringe" in some sense, most people tend to distinguish fringe benefits from things like health insurance, life insurance, scheduling flexibility, or free daycare.
Benefits most typically thought of as "fringe" today include use of a company car with gas expenses covered, free flights on company airplanes or discounted commercial flights, paid vacations, free memberships in social clubs or a local gym, tickets to entertainment/sports events, employee discounts on goods/services produced by your company, and special stock or investment opportunities.
How Do Fringe Benefits Relate To Taxes?
The IRS considers basically any employee benefit beyond basic compensation "fringe" for taxation purposes. However, health and life insurance will not raise an employee's taxes. Most other benefits must be reported as income by employees to the IRS unless specifically exempted.
The fair market value - how much the employee would have paid for the benefit if he/she had bought it retail, is used to value fringe benefits. The portion that the employer paid is the benefit, while the portion the employee paid is just a personal expense.
The IRS has a list of fringe benefits that are excluded from taxation. These include health insurance, a health savings account (HSA,) accident insurance, life insurance, awards for performance, use of a gym or sports facility, commuting assistance, tuition assistance, employee discounts, stock options, free meals, and retirement-planning services.
There are many complex details involved with qualifying for an exemption, but needless to say - employees will appreciate getting fringe benefits even more if they are not taxes for them!
Another thing to keep in mind is that some benefits may be only partially taxable based upon usage. So if a company-provided laptop is used 50% for work purposes but 50% for personal purposes - then it would be taxable only at 50% of its fair market value.
And there are many other details and provisos that become relevant when you offer your employees fringe benefits, which is why it is essential to rely on an experienced employee benefits consultant when formulating your overall approach. For help in formulating your fringe and other employee benefits for 2020 and beyond, contact Summerlin Benefits Consulting today!