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What are fringe benefits?

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Fringe benefits also referred to as non-mandatory benefits are types of compensation that are given in addition to the employee’s salary

These types of benefits are commonly referred to as perks and can act as incentives for people to join the company.

Examples of fringe benefits include:

How are fringe benefits taxed?

Fringe benefits are often considered taxable income and must be reported on an employee’s tax return. Please note that this is not the case in all countries. In the U.K, the benefits change tax codes for the next year unless they are deducted at source in the current tax year. In this case, filing is not required as the benefits are taxed via salary.

The way each fringe benefit is taxed depends on factors like the benefit itself, how it’s provided, and the country and state where the employee is based.

In the US, employers are required to report the value of their fringe benefits in their annual W-2 form, which is used to calculate the employee’s tax liability. They may also be required to withhold taxes on certain types of fringe benefits, like bonuses.

What are exempt fringe benefits?

When a fringe benefit is exempt, it means it’s excluded or partially excluded from an employee’s taxable income. Retirement plans and health insurance are both types of fringe benefits that tend to be excluded from being taxed, for example — and in some cases, they can even reduce tax.

Managing fringe benefits with a global workforce

Tax requirements on fringe benefits is a complicated subject in any country. And that’s doubly true when you’re dealing with fringe benefits in multiple countries all at once.

A global payroll solution that make use of local in-country partners  can ensure that the process remains smooth and that human error is kept at bay. The benefits of using a single global payroll provider can include::

  • Expertise on complex regulatory and tax requirements in multiple countries
  • An automated process for accurately classifying and reporting fringe benefits
  • An ability to design benefit packages that are both cost effective and appealing to the employee
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