Direct Compensation and Fringe Benefits
Fringe benefits refer to those elements of the total compensation package which are apart from the monetary payment made to an employee by the employer (Schuler and Jackson, 1996). These can include "employer's contribution to social security, workers compensation, unemployment compensation, health, life and dental insurance, private pension plans and cafeteria style benefits plan. " (Brookshire and Smith, 2008 p. 69)
Unionized organizations have often been faced with the problem of choosing between fringe benefits and direct compensation. But over the years, this trend has also been witnessed in non-unionized organizations where employees demand more monetary compensation as opposed to fringe benefits believing that the latter do not matter as much as the former. This has had companies in a quandary: should they let go of fringe benefits when some employees do not seem to value them?
The answer is an emphatic" No" in my view. This is because contributions made by the employers towards things like social security and insurance tend to be far more critical than money when it comes to an emergency. A family member gets sick and needs to be taken to the hospital. At this critical hour, what will be immensely important is not how much money a person has and what he can pay but how good his insurance plan is. Normally employers provided medical insurance would far exceed the coverage than an individually purchased plan and hence these contributions are vital and cannot be replaced with direct compensation.
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