A business can offer many things as fringe benefits, so it's a good idea to occasionally review the possibilities to see whether you might be missing something that could help you attract and retain the best employees.
Many discussions today about compensation and benefits seem to revolve around attracting and retaining millennials. In many respects, millennial employees are more attracted to amenities and benefits outside of traditional salary. This can include such items as extra vacation time, supplementary training, flexible schedules, and access to the technology they expect to help them do their jobs. Even having the right workspace can make a huge difference. These factors can work to build loyalty from your employees, especially those millennials.
Many of these fringe benefits are relatively easy for a company to implement and are a tax deductible expense. Despite being deductible expenses, they also typically do not result in an increased tax liability to the employee. Broad categories of benefits that are generally deductible as business expenses by the employer and are tax free to the employees include:
- Working-condition fringe benefits: These are expenses that, if employees had paid them, they could have deducted on their personal returns. Examples include employer-paid subscriptions to business periodicals or websites and employer expenditures for on-the-job training.
- De Minimis fringe benefits: Included here is any employer-provided property or service that has a value so small in relation to the frequency with which it's provided that accounting for it is "unreasonable or administratively impractical," according to the IRS. Some examples of these items are group meals; occasional coffee, doughnuts, or soft drinks; permission to make occasional local telephone calls; occasional use of photocopier if employer sufficiently controls its use and maintains its use for business purposes to be greater than 85%; occasional tickets for sporting events; holiday and birthday gifts with a low fair market value; occasional meal and transportation allowances when overtime is required; flowers, fruits, etc. provided under circumstances such as illness or family crisis; and occasional parties or picnics for employees and their guests.
- Flexible Vacation Plans: Many employers are now offering unlimited vacation time. An employee is able to take extended vacation as long as their work gets done. This unique benefit, originally used by tech companies and startups to help with employee retention, is gradually spreading throughout the workplace.
As noted, these programs and benefits are being widely used to promote employee retention, which is critical to the long-term success of your business.