What Are Fringe Benefits for Employees?
23 January 2025
We’re in a tight labour market, the National Minimum Wage and employer National Insurance Contributions are rising, and experts predict another cost-of-living crisis could be on the way. What you offer your employees matters. Budgets are getting tighter, but employees still need financial support to stretch their salaries further. Fringe benefits help your business remain attractive to top talent, retain employees, and offer your people more for less. Read on to explore the role of fringe benefits for employees in today’s climate.
What Are Fringe Benefits for Employees?
Fringe benefits for employees are the monetary and non-monetary extras - the workplace perks you offer when people join you. Monetary fringe benefits include bonuses, sales incentives, employee rewards, and more. Non-monetary fringe benefits cover anything from a free lunch to a healthcare scheme - anything offered to employees in addition to their salary. While these are non-monetary because no money has exchanged hands, they provide additional value and make life more affordable.
Core Benefits Vs Fringe Benefits
Unlike fringe benefits, core benefits are a legal requirement.
Core benefits include:
- Paid holiday: In the UK, the minimum paid holiday entitlement is 28 days for full-time employees.
- Sick leave: There are statutory laws around sick pay that cover the amount employees are entitled to and for how long.
- Pension scheme: UK law requires employers to auto-enrol any eligible employee onto a company pension scheme. There are rules and caveats, which you can find on Government websites.
Core benefits are set in employment law, but employers can choose to enhance them.
How Fringe Benefits Work
Some fringe benefits can be contractual. Performance bonuses, for example, may be written into your contract, but the amount given will vary each time.
Other fringe benefits aren’t contractual. They’re part of an Employee Value Proposition (EVP) but aren’t guaranteed. An employer could offer an employee discount scheme or a cashback-earning prepaid card when you join them, then change provider or remove the scheme altogether during employment. The same is true of a private healthcare plan, which employees must opt into if they choose.
It’s not an ideal scenario. As we explore during this blog, fringe benefits support business goals in many ways, including attracting and retaining employees.
Likewise, employees don’t have to use their employer's fringe benefits, such as a discounted gym membership scheme. In this case, the employer has a contract with a provider that offers access to gym discounts, but it’s up to employees whether they want to take advantage of this, as they’ll have to pay for the membership.
Types of Fringe Benefits
Since fringe benefits are anything offered beyond the contracted salary, many different types exist. A company car or phone is a fringe benefit, but so is free parking, food and drink. All these examples save employees money because they don’t need to pay for things they’d typically need to cover as part of their working day.
Other fringe benefits make everyday living more affordable. An Employee Discounts Platform opens employees up to extensive discounts they can use to reduce the price of their weekly food shop, dining out, weekends away, wellbeing days, and even holidays. Then, of course, there are other fringe benefits for employees that put extra money in their bank account - like a bonus or incentive.
What Fringe Benefits are Taxable?
Tax is complex as there are various stipulations, so we always recommend checking your situation with an advisor or tax expert.
In our blog, ‘What are the Benefits of Employee Gym Membership Schemes?’, we explore the different ways an employer can offer gym memberships to their workforce.
If you provide employees with an employer-funded gym membership as a fringe benefit, you must process a P11D form. The membership cost would be taxed as earnings or as a Benefit in Kind (BIK). You can read more about this in the blog mentioned above. With our Discounted Gym Membership scheme, there’s no additional tax to pay because the employee pays for the membership via the discounted arrangement the employer has entered into.
If an employer pays for an employee’s private health plan, they’re covering the entire cost of the scheme, for which the employee will have to pay tax. As for bonuses, they’re usually processed through payroll and added to employees' regular salaries, which incur taxes.
Our Pluxee Card is an alternative way to deliver cash bonuses to your employees, loading them directly onto their card as funds to spend instead of processing the payment through payroll. However, as a monetary fringe benefit, this is also subject to tax.
Who Pays Fringe Benefits Tax?
Employers are responsible for reporting on their fringe benefits usage, but the employees will cover the tax bill. There may be some exceptions. For example, if you issue employee rewards via an eVoucher or load funds onto a prepaid rewards card, you can swallow the tax instead of passing it on to the employee.
It may add to business costs but will ensure the reward makes a more lasting impression on the employee.
Why Fringe Benefits Positively Impact Employers and Employees
Head over to our blog, ‘Everything you need to know about employee benefits,’ for a comprehensive guide to fringe benefits for employees and how they enhance mental, financial, and physical wellbeing.
Motivate Employee Performance
Fringe benefits linked to performance, such as bonuses and ad hoc employee rewards, are commonly used to fuel success. Rewards-based fringe benefits motivate employee performance, be it to meet goals on targets or champion certain behaviours.
Attract Top Talent
When potential employees spot your job advert, they review more than just the salary. They’re looking at the extras. The monetary and non-monetary fringe benefits that give them more and set you apart from other employers. Employees weigh the benefits on offer when considering their next career move.
Increase Employee Retention
Just as a substantial EVP can attract new talent, it can also boost employee retention. Retaining employees should be a top priority, given the high recruitment costs. When your fringe benefits package significantly stretches employees’ salaries, they’ll think twice before taking a new opportunity - especially if the benefits offered elsewhere don’t compare.
Support Employee Wellbeing
Fringe benefits like our Employee Discounts Platform and Pluxee Card enhance financial wellbeing, making life more affordable and enjoyable. Our Employee Assistance Programme provides accredited and confidential mental health support, and our digital healthcare platform, Online GP, speeds up access to Advanced Clinical Practitioners and GPs.
Boost Employee Engagement
A comprehensive EVP package and an inclusive reward and recognition strategy powered by fringe benefits make employees feel valued. When workplace perks make life more enjoyable, work becomes more than a place to be - a place to belong. Happiness and loyalty boost employee engagement, which helps your bottom line.
Reduce Absenteeism
Improving employee health and wellbeing creates a more resilient workforce that is less likely to be absent due to illness. Disengaged employees also increase your absenteeism rates, so by improving employee engagement, you’re also positively impacting your absenteeism rate.
How to Encourage Employees to Use Fringe Benefits
Our exclusive research found that offering employees fringe benefits isn’t enough to make a difference or tip the balance in your favour. We can’t just assume that all employees know what benefits are available. We have to make them accessible and help employees understand how they can make life that bit brighter.
Here are some top tips for making fringe benefits for employees impactful:
- Launch Events: When you add something new to your employee benefits package, shout about it! Make a splash and get employees engaged from day one with a launch event.
- Super Users: Train benefits super users who can show their colleagues the value they bring to their lives. They can also help others navigate your offering and find the benefits that meet their needs.
- Ongoing Communications: Keep the momentum going post-launch by regularly reminding employees of the benefits available and how to access them.
- Marketing Support: Partner with a fringe benefits provider who offers ongoing marketing support, including competitions and giveaways, to keep engagement high.
- User Experience: Centralising your fringe benefits in an all-in-one platform makes them more accessible and user-friendly, which will encourage employees to log on. Consider platforms that have an app so employees can access their perks on the go.
- Lead by Example: Leaders and managers ought to be the best advocates of your fringe benefits, actively engaging with them and promoting the difference they can make.
Partnerships that Deliver a Return on Investment
Fringe benefits are an investment in your people, and they must engage with them for you to see a return. On paper, an attractive EVP will help you acquire top talent, but if your employees don’t use the benefits, they won’t experience how they can improve their lives. That means you won’t see improvements like better financial wellbeing or reduced absenteeism.
When you partner with Pluxee UK, we work with you to ensure your employees get the best experience when they use their benefits, helping you make an impact so your people and business can thrive.
Sources: Gov.uk
