Fringe pay: What is it and how do you provide it?

To attract and retain the best talent, you need to go above and beyond with your compensation offer. And fringe pay is one such component of a competitive package.

But what exactly is fringe pay, and how does it work? In this article, we’ll answer these questions, and provide some ways you can offer fringe pay to your employees. 

What is fringe pay?

Fringe pay is the extra compensation you — the employer — offer on top of each employee’s regular salary. It is designed to help you attract top talent, boost employee morale, and improve overall workplace satisfaction.

While it doesn’t include base salary, commissions, bonuses, or other cash compensation, fringe pay does include a range of benefits, such as healthcare, retirement plans, flexible working arrangements, free meals, and discounts on products or services.

Learn more about fringe benefits here.

Examples of fringe pay

Fringe pay can be broken down into two categories: mandatory and optional.

Mandatory fringe pay

Mandatory fringe pay covers the benefits that you are required to provide by law. Depending on where your employee is based, these can include:

• Health insurance

• Unemployment insurance

• Social insurance

• Other industry-specific requirements (e.g., workers' compensation insurance)

Optional fringe pay

Optional fringe pay is where you can differentiate your compensation package, as what you offer is up to you. Again, depending on where your employees are based, optional fringe pay can cover:

• Paid time off

• Retirement plans and contributions

• Commuter benefits (e.g., transit passes or parking subsidies)

• Wellness programs (e.g., gym memberships, athletic facilities, or mental health support)

• Family stipends (e.g., child care assistance or parental leave support)

• Free or subsidized food (e.g., in-office snacks, catered lunches, or food delivery vouchers)

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How to provide fringe pay

If you want to start providing fringe pay to your people, you can do so in several ways. The most common is to work with your HR and finance teams to analyze and create a fringe pay budget, and then put together a competitive package. Depending on the benefit, you’ll also need to find and partner with external providers who manage and deliver the benefits.

Of course, this can be a lot of work. And if you have team members in multiple locations, it can be a huge legal and logistical headache. You need to adhere to different regulations, manage multiple vendors in multiple locations, and meet the cultural expectations of all your different people.

To mitigate all of this, you can:

Use an EOR 

Most employer of record (EOR) providers not only streamline HR tasks, but can also help you manage fringe pay. Remote, for instance, makes this entire process quick and simple; just cherry pick the fringe benefits you want to offer to each employee based on their location, and we handle the rest.

We make sure everything is equitable, locally-tailored, and fully compliant, and we can provide support and guidance on which benefits are the most relevant if you’re hiring in a new market. Learn more about Remote’s benefits process.

Use a PEO

It’s also possible to work with a professional employment organization (PEO) to provide and manage fringe benefits. Like EORs, a PEO can handle the setup, management, and ongoing administration of your benefits program. 

However, this typically comes at a higher cost than other options. Always remember to weigh the costs against the time and resources you'd save. 

Is fringe pay taxable?

This depends on the rules of your employees’ countries, but, in general, fringe pay is subject to withholding and employment taxes. 

As the employer, you are typically responsible for withholding and reporting taxes on these benefits. All taxable income, including fringe benefits, must be reported on each employee's yearly tax forms.

Remote can assist you in this and ensure that you are fully compliant, and withholding and submitting the right amounts.

What is a typical fringe rate?

There is no standard fringe benefit rate; rather, this depends on your budget and compensation plan. However, a 2022 Bureau of Labor Statistics report shows that, in the US, average fringe benefit rates range from 22% to 32.7% of an employee's total compensation.

Ultimately, the value of your fringe benefits depends on your company size, industry, and location, as well as the specific perks you want to offer.

Managing fringe pay with Remote

If you’re unsure of where to begin, Remote can make managing fringe pay quick and easy. We can guide you on which fringe benefits to offer, and provide support with any questions you may have.

Through our EOR service, you can tailor an equitable, competitive benefits package for all your team members, no matter where they are based. We ensure everything is compliant and aligned with local expectations, saving you time, resources, and a whole host of headaches.

To learn more about how it works and how we can help, speak to one of our friendly experts today.

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