What are fringe benefits and why your company should offer them?

employee benefits package

Most employers offer their staff a number of benefits in addition to their salary – whether it’s simply an extra day off for your birthday or private healthcare.

These perks are also known as fringe benefits. As long as they meet government regulations, they’re tax-exempt for the employer. However, the employee must include the fair value of these perks in their taxable annual income – even if it is one of their relatives benefiting from it.

Candidate attraction

Employee benefits attract a wider talent pool and can be used to lure the best candidates away from your competitors. In fact, you can use fringe benefits to help find candidates whose values perfectly align with your own. So, if your company deeply values minimising your environmental impact, a cycle-to-work scheme could be the way to go. Alternatively, you may place emphasis on wellbeing in the workplace – in which case health insurance or a free counselling service may be a better option for you. Not only does this benefit employers and entice talent, but it can work wonders if you’re trying to promote your approach to CSR.

An employer may ask their new recruit to choose from a pool of benefits when they accept the job role – so you may even be able to access specialist services or negotiate the terms you’re agreeing to. 72 per cent of employees claimed that the ability to customise their benefits package influenced their loyalty to the company – a sought after trait in today’s job market.


Sometimes an employer may offer a lower salary than their competitors, but a more attractive range of fringe benefits. Typically, these scenarios tend to involve childcare vouchers or pension contributions – which are tax-exempt in most cases. From an employer’s perspective, there are no hidden costs here and all parties will benefit from tax-exemption.

However, some benefits are totally tax-free and others are only free of national insurance contributions. Generally, an employee should only pay tax on the initial amount that the employer has paid to provide the services – for example £1,000 on healthcare insurance or £700 to purchase a new laptop.

It tends to get more complicated when company cars and private fuel usage are involved. In some circumstances, the value of your company car will be reduced– so it’s worth reading up on what you’re entitled to. Similarly, social benefits can seem confusing at first. For example, you wouldn’t need to pay tax on regular health checks – but any medical treatment or insurance would be taxable. A full breakdown can be found online.

Improved performance and retention

Once you’ve secured your new recruit, fringe benefits have been said to higher employee satisfaction and even improve attendance. The most popular benefits tend to be health insurance, flexible working and longer holidays. But employees also value team building events, free fitness classes and unlimited drinks and snacks in the office.

Even if an employee does not immediately benefit from particular benefits when they join the company, it can show dedication to long-term commitment too. Many employees look for the security of having childcare and pension plans in place, and it helps them to visualise their future with the company. Happy employees lead to company loyalty – which in turns results in a productive, thriving business.

Lucy EvansAbout the author

Lucy Evans is an Executive Recruitment Consultant specialising within the Wealth Management industry. She works for Heat Recruitment, a specialist recruitment agency based in Bristol operating across the UK that specialise in EngineeringInformation TechnologyInsuranceFinancial Services and the Legal sector. They place candidates in both permanent and contract roles.

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