Employee benefits represent an important recruiting, retention and employee engagement tool for businesses. They include non-wage compensation given for what the Internal Revenue Service calls "performance of services." In its January 2012 Taxable Fringe Benefit Guide, the IRS calls benefits that are eligible for special tax treatment "fringe benefits," noting that the tax code uses the terms fringe benefits and employee benefits to represent remuneration paid to employees in addition to their salary and wages.
Most employees associate the word "benefits" with paid time off, health insurance and retirement plans such as 401(k)s. The U.S. Department of Labor classifies "fringe benefits" as contributions an employer pays to a third party or trustee for pension, life insurance and health insurance plans. The IRS views vacation time, accident plans and assistance for education, dependent care and adoption as "employee benefits." Other forms of traditional benefits commonly featured in employee benefit packages include relocation assistance, legal aid and discounts for merchandise or admission to theme parks and resorts.
Non-traditional benefits give employers another way to reward staff. Parking privileges, time off for volunteer work, casual dress codes and flexible schedules, for example, represent potential employee morale boosters. Telecommuting and on-site daycare promote work-life balance, which translates into job satisfaction and productivity. Fitness facilities, cafeterias and dry-cleaning service can give a company a competitive edge for attracting top talent.
Working Condition Benefits
The IRS classifies property and services that employers provide to help employees do their jobs as "working condition benefits." These represent business-related items that an employee could claim as unreimbursed employee expenses on his federal income tax if he, not the company, paid for them. Examples of working condition benefits include use of a company car, subscriptions to business magazines, laptops, business trip expenses and training seminars.
De Minimis Benefits
One category of benefits employers and employees find attractive is the "de minimis," or minimal, benefit. The IRS defines this as property or a service whose minimal value makes recordkeeping impractical. This employee-appreciation oriented benefit takes many forms. Annual company picnics, non-cash holiday gifts, use of photocopying machines, tickets to sporting events and personal use of a company-provided cellphone represent common de minimis benefits. Use of cash equivalents such as gift and credit cards as well as cash -- excluding meal money or taxi fare given once in a while -- do not fall under the de minimus category. Neither do benefits such as club or gym dues and the use of a company boat or home.
- Internal Revenue Service: Publication 15-B Employer’s Tax Guide to Fringe Benefits
- Internal Revenue Service: Taxable Fringe Benefit Guide
- ThomasNet: Fringe Benefits: Unique Employee Perks
- U.S. Department of Labor: Wage and Hour Division; Davis-Bacon and Related Acts Frequently Asked Questions
- Internal Revenue Service: Publication 535 Business
- The New York State Society of CPAs: The CPA Journal Online; Working-Condition Fringe Benefits
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