Fringe Benefits: Why They Matter

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You want to stay competitive, but need to watch the bottom line. Employee benefits are an easy target, but here's how you weigh the costs vs. the risks.


  • 1. Fringe Benefits:Why They Matter

2. Stay CompetitiveYou must stay competitive and find a balance betweenemployee retention and backlog. Focus on indirect costs andwhat can be done to reduce them and/or make them variable. 3. Cut the Fringe?This is the challenge. Doyou look to the fringebenefits for quick costreductions? Do you doublethe cost to the employeefor health benefits, forexample?Consider first what could be theresult? Would it ultimately cost yousome key personnel? 4. Fringe Rate What Does it Cost?Fringe benefits are accounted for in the fringe rate(total cost of fringe benefits/wages), a multiplier usedto calculate the total cost of labor.Fringe rates within the BBRS-supported companiesrange from 30 percent to 100 percent (depending onthe employees wages and benefits elected), with anaverage rate of about 45 percent, so for every $1 oflabor, there is a total cost of $1.45 to include fringebenefits. 5. Fringe Benefits What are They?Fringe benefits are costs paid byemployers on behalf of theiremployees in addition to normal wagesand salaries 6. Required: Payroll Taxes Social Security Medicare Federal Unemployment State Unemployment Workers Compensation 7. Company-Paid Benefits Medical/Dental/Vision Long-Term Disability Short-Term Disability Life Insurance 401(k) Match Profit Sharing Paid Time Off HolidaysMedical/Dental/Vision and retirement benefits makeup about 60 percent of the fringe rate and are thevariables that can make the most significant impacton the fringe rate, by increasing or decreasing thebenefit. 8. Optional Company Offerings Company Offerings Flexible Spending Account Discount ProgramsOptional, but valued by employees 9. Cost vs. Value A great fringe benefit package typically comes with asignificant price tag, but is a key factor in attractingand retaining personnel. Some of the most frequently leveraged benefits toretain high-performing employees were healthcare and retirement benefits, according to a 2013report from the Society for Human ResourceManagement (SHRM). 10. Reference materials One in five (20 percent) organizations reportedleveraging their benefits program to retainemployees, according to State of Employee Benefitsin the WorkplaceLeveraging Benefits to RetainEmployees - See more at: (


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