When prospective employees read through job descriptions, salary isn’t their only concern. Although wages are a significant factor, these extra forms of compensation (otherwise known as “fringe benefits”) are just as enticing for job-seekers who value professional development and work-life balance.
With a compelling list of fringe benefits, businesses can distinguish themselves from competitors during the hiring process and increase
employee retention rates. Find out what fringe benefits are and how to use them effectively to maintain a competitive advantage.
What are fringe benefits?
Fringe benefits encompass any compensation in addition to an employee’s regular
salary or hourly wage. They supplement wages and aim to improve an employee’s well-being, beyond
financial compensation. Examples range from traditional health insurance and retirement plans to more specialized benefits, like meal stipends or gym memberships.
Examples of legally required fringe benefits for employees
Although not every fringe benefit is required, some are legally mandated at the state or federal level to provide employees with a baseline of protection.
Workers’ compensation coverage. Medical and wage benefits for employees injured while on the job.
Unemployment insurance benefits. Temporary income for eligible employees who lose their jobs through no fault of their own.
Employer-provided health insurance. Applicable Large Employers (ALEs) — any business with more than 50 full-time employees — must offer minimum essential coverage, per the
Affordable Care Act (ACA).
Why offer fringe benefits?
Many businesses offer fringe benefits beyond the legally required protections to increase the appeal of their compensation packages. These added perks provide numerous advantages for employers, often outweighing their
cost.
Help attract talent. Robust and unique fringe benefits help companies stand out from industry competitors and draw in highly qualified candidates. These perks can be a key differentiator in a crowded job market.
Increase employee retention. Comprehensive benefits give employees more reasons to stay, helping reduce turnover. Offerings like retirement plans and professional development opportunities increase loyalty and make switching jobs less appealing.
Improve employee morale and productivity. When employees feel supported through benefits like life insurance or parental leave, they’re more likely to stay engaged and motivated. The value and security that fringe benefits provide often encourage higher performance and a more positive
employee experience.
Support employee well-being. Many fringe benefits directly address employees’ physical, mental, and financial health. From health insurance to Earned Wage Access, these offerings can support employee well-being and may contribute to a more focused, present workforce.
How do fringe benefits work?
Employers have flexibility in how they design fringe benefits, allowing them to align compensation packages with their overall goals and budgets. They’re typically outlined in an employee’s total compensation package and eligibility can vary based on employment type (e.g. full-time, part-time, or contract workers).
Employers can
administer these benefits directly, but they can also partner with third-party providers, depending on the offering. Some benefits (e.g. retirement plans and health insurance) may require employees to make contributions or wait for enrollment periods to sign up. For others, like some wellness perks, employees can enroll in at any time.
Tax treatment of fringe benefits
Many examples of fringe benefits aren’t considered taxable income — particularly those related to healthcare and educational assistance. Others, like retirement plans and
employee stock options, are tax-free until employees withdraw or exercise them.
However, any perk without a specific exemption is a taxable fringe benefit. The value of these benefits, such as bonus pay and gym memberships, is called imputed income. It’s added to employees’ gross income and reported on their W-2 forms. Employers are responsible for calculating and withholding applicable imputed income and transparently listing these expenses on payroll stubs so employees know their total tax liability.
Employers should consult the latest version of the IRS’s
Publication 15-B to distinguish taxable versus non-taxable fringe benefits. Many companies work with licensed tax professionals to stay up-to-date on IRS tax policies and follow the proper handling and reporting standards.
What is included in fringe benefits?
For ease of organization, employers often group fringe benefits into broad categories, such as health,
financial wellness, and professional development. Each type of fringe benefit addresses a different aspect of an employee’s professional or personal life and comes with unique tax implications.
Health and wellness benefits
Health insurance. Covers medical expenses for employees and sometimes their dependents. When provided under a qualifying employer-sponsored plan, these plans aren’t taxable to the employee.
Dental and vision coverage. Supplements health insurance with routine and specialized dental or eye care. It’s not a taxable fringe benefit when offered as a group health plan.
Wellness and mental health programs. Includes benefits like gym memberships, meditation app subscriptions, or smoking cessation programs to promote a healthy lifestyle. Some offerings may be taxable if they have a personal benefit component (e.g., cash incentives or paid memberships). However, non-cash health-related programs aren’t taxable if they meet IRS criteria.
Vaccination and flu shot clinics. Employer-provided immunizations may be offered onsite. They aren’t taxable when provided for preventative health purposes.
Flexible spending accounts (FSAs). Employees can set aside pre-tax dollars for medical or dependent care. FSAs generally aren’t taxable when used for qualified expenses.
Health savings accounts (HSAs). Pre-tax savings accounts that pay for qualified medical expenses, often paired with high-deductible health plans. They aren’t taxable when employer contributions meet IRS requirements.
Financial wellness benefits
Earned Wage Access. Platforms like EarnIn offer
Earned Wage Access (EWA), allowing employees to access their pay the same day they work – up to $150/day, with a max of $750 per pay period
– starting at just $2.99 per transfer.
With EarnIn, employers run payroll as usual, including all applicable taxes and deductions. On payday, EarnIn simply deducts the amount the employee accessed early directly from their bank account.
Retirement savings plans. Employer-sponsored plans are those where employees contribute pre-tax earnings toward retirement. Employers might match contributions to drive retention. Traditional plans aren’t taxable at the time of contribution, but withdrawals are taxed as regular income after retirement.
Bonuses and incentives. Monetary rewards for special events or company milestones, such as achieving a major performance target, are considered bonuses. These are taxed as regular income.
Student loan repayment assistance. Employer contributions toward an employee’s student loan debt are another common benefit. Under current federal law, this is a non-taxable fringe benefit, up to
$5,250 annually through December 31, 2025.
Financial counseling or planning services. Offering access to financial advisors or tools for managing debt, budgeting, and investments is another perk employers can offer. These services may be taxed unless provided as part of a qualified employee assistance program (EAP).
Professional development
Education assistance and tuition reimbursement. Employers can support employee growth by reimbursing them for education-related expenses, such as tuition and books. These expenses are tax-free, up to $5,250 per year under
IRS Section 127. However, there’s no cap if the courses qualify as a
working condition fringe benefit.
Professional training and certification programs. Seminars, industry certifications, or licensing required for the employee’s job or career advancement. The training usually isn’t taxable if it’s job-related and doesn’t qualify the employee for a new trade or business.
Workshops and mentorship programs. In-house or external workshops and structured mentorships that help with knowledge transfer and skill building. These benefits generally aren’t taxable, especially if they’re job-related and improve current performance.
A fringe benefit that supports financial flexibility
Employee expectations around compensation are shifting. Beyond the legally required benefits, more employees are seeking resources to support their health, career growth, work-life balance, and financial wellness. Investing in thoughtful fringe benefits can help support morale, encourage retention, and foster a sense of loyalty over time.
EarnIn partners with employers to offer financial wellness benefits that may help ease financial stress and empower employees. With EarnIn’s
on-demand pay, employees have flexible access to their earned wages to cover everyday costs and life’s unexpected expenses. They can get up to $150 per day, with a max of $750 between payday,
in minutes starting at$2.99 per transfer.
EarnIn also offers tools to help employees build better financial habits, including
Credit Monitoring to keep track of their credit scores and Bill Reminders,
which send them alerts when bills are coming up to help avoid late fees. These benefits are available with no integration and at no cost to employers.
Discover how fringe benefits from
EarnIn can support financial wellness and offer added flexibility.
Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.
This Blog was sponsored by EarnIn. While the author received compensation, the information shared is grounded in independent research and intended to provide helpful and accurate guidance to readers.
EarnIn is a financial technology company, not a bank. Banking services are provided by our bank partners on certain products other than Cash Out.
A pay period is the time between your paychecks, such as weekly, biweekly, or monthly. EarnIn determines your daily and pay period limits (“Daily Max” and “Pay Period Max”) based on your income and financial risk factors as outlined in the Cash Out Maxes section of our Cash Out User Agreement. EarnIn reserves the right to adjust the Daily Max and Pay Period Max at its discretion. Your actual Daily Max will be displayed in your EarnIn account before each Cash Out. EarnIn does not charge interest on Cash Outs or mandatory fees for standard transfers, which usually take 1–2 business days. For faster transfers, you can choose the Lightning Speed option and pay a fee to receive funds within 30 minutes. Lightning Speed is not available in all states. Restrictions and terms apply; see the
Lightning Speed Fee Table and
Cash Out User Agreement for details and eligibility requirements. Tips are optional and do not affect the quality or availability of services.
Lightning Speed is an optional service that allows you to expedite the transfer of funds for a fee. Depending on the product, the fee may be charged by EarnIn or its banking partner. Lightning Speed is not available in all states. Restrictions and terms apply. See the
Lightning Speed Fee Table and
Cash Out User Agreement for details.
Calculated on the VantageScore® 3.0 model. Your VantageScore 3.0 from Experian® indicates your credit risk level and is not used by all lenders, so don’t be surprised if your lender uses a score that’s different from your VantageScore 3.0.
Learn more.
The Bill Reminder service is offered by EarnIn, based on information derived from your linked bank account. You can turn off Bill Reminder at any time by adjusting your settings within your EarnIn account.
