Page 176 - DMGT406_HUMAN_RESOURCE_MANAGEMENT

Unit 10: Compensation and Benefits

Need for Extending Fringe Benefits Notes

During the World War II, certain non-monetary benefits were extended to employees as means
of neutralizing the effect of inflationary conditions. These benefits which include housing,
health, education, recreation, credit, canteen, etc. have been increased from time to time, as a
result of the demands and pressures from trade unions. It has been recognized that these benefits
help employees in meeting some of their life's contingencies and to meet the social obligation
of employers.
The main features of fringe benefits are:
1. They are supplementary forms of compensation.
2. They are paid to all employees based on the membership in the organisation.

3. They are indirect compensation because they are usually extended as a condition of
employment and are not directly related to performance.
4. They help raise the living conditions of employees.

5. They are statutory or voluntary. Provident fund is a statutory benefit, whereas
transportation is a voluntary benefit.

Need for Fringe Benefit

1. To Satisfy Employee Demands: Workers demand more and variety of fringe benefits
rather than pay hike because of reduction in tax burden on the part of employees.
2. To Satisfy Trade Union Demands: If one trade union succeeds in getting one benefit, the
other union persuades management to provide the new fringe benefit. Thus, competition
among the trade union results in more varied benefits.
3. To Improve Human Relations: Fringe benefits satisfy the worker's economic, social and
psychological needs. Most of the fringe benefits satisfy and remove economic problems of
the workers. Some social security benefits provide post-retirement relief to the workers,
thus satisfying his psychological needs. There are others like, credit facilities, canteen,
recreational facilities, customer stores which provide social benefits.
4. To Improve Organizational Commitment: It improves morale and motivates the employees
to give the best to the organisation. It increases organizational commitment and loyalty
to the organization in the long run.

5. To Provide Social Security: The employer has to provide various benefits like safety
measures, compensation in case of involvement of workers in accidents, medical facilities
etc. with a view to provide security to his employees against various contingencies.
Objectives of Fringe Benefits

1. To create and improve sound industrial relations.
2. To motivate employees by identifying and satisfying their unsatisfied needs.
3. To provide security to the employees against social risks like old age benefits and maternity
benefits.
4. To protect the health of the employee and to provide safety to the employees against
accidents.

5. To promote employees' welfare.

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