What are fringe benefits?

24 July 2019

These are additional benefits to your workforce away from their standard wage. Think of a company car or healthcare benefits and they’re common examples. But why should your business consider including them as part of your various employee benefits? Our guide explains how they work, why employees find them a major perk, and the advantages they can provide your business. As this topic involves taxable value requirements, you can contact our tax advice line for immediate assistance with company perks.

Advantages of fringe benefits for your business

First off, they bring in new talent—if you’re advertising for a role, they’re a proven way to win over talented candidates. For your existing workforce, they also work as a way to motivate staff. It’s something for them to work towards, or acts as a reward for hard work. As such, it can improve the retention rates of your business as you reward employees and provide them with reasons to stay. And what do fringe benefits include? The variety is up to you, but most tend to focus on improvements to health, disability, or life insurances—financial perks and training assistance are also common. What, then, should you look to provide your staff? A few fringe benefits examples include:

  • Company car.
  • Dental insurance.
  • Medical insurance.
  • Housing allowance.
  • Educational assistance.
  • Sick pay.
  • Free meals.
  • Discounts on your products or services.

You can, of course, include others specific to your industry that employees may find of significant benefit. But transportation fringe benefits are one of the most famous examples—the company car is iconic in the business world. The benefits of fringe benefits to employees are one of the main reasons your business should consider including them. They provide considerable advantages in overall company wellbeing. So, how do fringe benefits motivate employees?

  • Morale boosts—their hard work receives a reward.
  • Improvements to working life.
  • Financial benefits.
  • Health and lifestyle advantages.

While a competitive wage is what employees like receiving above other considerations, fringe benefits can add an extra incentive to stay with your business.

How are fringe benefits taxed?

Employees pay tax on fringe benefits, whether that’s medical insurance or a company car. They’ll pay tax on non-cash benefits through their tax code issued by the HMRC, in contrast to any non-cash benefits where they pay tax through PAYE as normal. Some fringe benefits may also mean they also pay National Insurance in addition to tax. As an employer, you’ll pay class 1A National Insurance on your staff’s fringe benefits. That means you’ll need to pay HMRC with what you owe no later than the 23rd of October for all the fringe benefits you have given all your staff in the proceeding tax year. Remember, there are also fringe benefits that are free from tax for employees, plus National Insurance for you the employer. These include:

  • Cycle to work schemes.
  • Low emission cars.
  • Some auto-enrolment of pension schemes.

As a business, you may wish to learn how to calculate fringe benefits. By this, we mean how to work out the tax and National Insurance liability for you and your staff on non-cash benefits to enter on P11D forms at the end of each tax year—before the 6th July deadline. The following will help you with completing form P11D (a form that you’d need to provide to your staff by law if you offer them fringe benefits). These forms aren’t essential, but you can use them to fill out the P11D.

Need help with your taxable fringe benefits?

We’ll talk you through how to apply perks to your business, as well as how to work out any of the tax requirements. Get in touch today: 0808 198 7941.

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