What are fringe benefits?

Fringe benefits are no longer “nice to have” perks. They’ve become a strategic method companies use to hire the best talent. Employers use these offerings beyond base salary and wages to show their appreciation and support for employees. 

Understanding fringe benefits is key to creating strong hiring, retention, and total compensation strategies. According to MetLife’s 2025 Employee Benefit Trends Study, 89% of employees think their employers could increase trust by improving their benefits package. Additionally, more than half of employees want more affordable benefits, and 28% want more personalization. Employers must evolve their benefits to meet these rising expectations.

Whether you’re building a benefits package from scratch or evaluating your current program, knowing how fringe benefits work helps you foster an engaged workforce. This guide breaks down what fringe benefits are, provides common examples, and outlines why they’re an essential tool for People Ops teams.

What are fringe benefits?

Fringe benefits are nonwage compensation employers offer alongside regular salary. Instead of direct cash pay, these benefits include value-added perks or coverage that enhance a total rewards or compensation package.

Common benefits include health insurance, retirement plans, paid time off (PTO), and lifestyle or wellness perks. They play a crucial role in supplementing wages and supporting employee well-being. 

Fringe benefits aren’t tied directly to hours worked or salary. Instead, they’re usually offered on a regular basis, such as a yearly stipend or a monthly coverage. Providing these benefits shows that the employer cares about fairness, which helps companies attract top talent and increase retention.

8 examples of fringe benefits to consider

Fringe benefits that matter the most vary by industry, company size, and workforce location. For example, an employer with a traditional office environment will have a markedly different benefits package from one with a hybrid, 100% off-site, or distributed workforce. 

No matter the mix, these benefits shape employees’ sense of security at work beyond their paycheck. Here are some examples of commonly offered fringe benefits.

1. Health, dental, and vision insurance

Health insurance is one of the most widely expected fringe benefits—82% of employees rank it as their most important benefit and 93% put it in their top three. Many employers provide coverage beyond medical to cover the cost of dental, vision, and mental health services. This broader approach to coverage and strong health benefits support employee well-being and reduce absenteeism.

2. Retirement plans, pension or 401(k) matching

Retirement benefits are popular because they help employees build long-term financial stability. One of the most common options is a 401(k) plan, particularly one with a matching employer contribution. For example, an employer might match up to 4% of an employee’s pretax contribution to their 401(k), essentially investing in the employee’s future. Over time, employer contribution toward employees’ pension goes a long way in growing employees’ retirement funds.

3. PTO

PTO differs from vacation because it also includes sick leave, personal time, and paid holidays. It gives employees time to rest, recharge and manage personal responsibilities, avoiding burnout. This work-life balance makes a real difference in reducing turnover: One study found that offering PTO lowered the odds of an employee quitting by 35%.

4. Commuter, transportation or transit benefits

For employees who regularly commute to the office, some employers offer transit passes, parking stipends, or other travel-related reimbursements. Compensating employees for their commute boosts motivation and job satisfaction, as traveling to work can be costly. Covering some of the expense takes the burden off employees, making them feel more positive about their workplace.

5. Flexible work arrangements

Flexible schedules, hybrid work structures, and work-from-home provisions have become essential to meet employee demand and serve increasingly distributed teams. These benefits give employees more control over their day and reduce stress of daily commuting. 

In addition to flexible hours and the option to work from home, some employers also offer co-working allowances. They provide home office stipends or reimbursements to make off-site work more comfortable for employees.

6. Professional development and education support

Many employers support the continued professional development and career growth of their employees via perks like tuition reimbursement, access to coaching/mentorship programs, and support to obtain certifications. Employers who invest in employee development see 11% more profitability and double retention.

7. Wellness and lifestyle perks

Wellness perks help maintain employees’ physical and mental health beyond standard insurance. Examples include gym memberships, wellness stipends, and mindfulness programs. When employees have access to such physical and mental health resources, they tend to be healthier and more engaged in the long term.

8. Childcare, dependent care, or family support benefits

Family-focused fringe benefits include childcare subsidies, enhanced parental leave policies, and family planning support. They help employees manage responsibilities outside of work without worrying about time or cost. Many employees see these benefits as a reason to stay and grow with an employer, as they show that the employer recognizes family needs and commitments.

Are fringe benefits taxable?

The tax treatment of fringe benefits varies across countries. In the United States, fringe benefits are generally treated as part of an employee’s gross income and are taxable. When a benefit is taxable, it’s subject to federal withholding tax, Social Security, and Medicare taxes. State and local taxes may also apply.

However, the IRS exempts some fringe benefits from taxes. These include employer-provided health insurance, qualified retirement plan contributions, some commuter benefits, and certain dependent care or educational assistance programs.

If your organization operates internationally, you’ll have to navigate a patchwork of jurisdictional tax laws to stay compliant across borders. Proper classification in every country you do business is important, as misreporting fringe benefits leads to compliance issues, triggering fines and penalties.

Why offer fringe benefits to your team?

The advantages of employee benefits extend to both employers and employees. Competitive fringe benefits in the total rewards package strengthen your overall compensation strategy while supporting employee well-being, retention, and long-term business growth.

Here are some of the top advantages of fringe benefits:

• Attract top talent: In tight labor markets, competitive fringe benefits can tip the scale for candidates evaluating positions with similar salaries. In addition to compensation, nearly half of job seekers prioritize factors such as career growth and work-life balance when searching for work.
• Improve employee retention: Employees are more likely to stay with a company when fringe benefits support them inside and outside of work. When a benefits package aligns with employees’ needs, they feel more valued, increasing their likelihood to stay with an organization.
• Boost productivity and engagement: Employees who feel looked after are more productive and highly engaged. Teams with high engagement levels report 78% less absenteeism, 21% lower turnover, and 14% higher productivity.
• Ensure employees’ financial security: Employee benefits with a financial impact—such as health insurance, 401(k)s, transportation passes and reimbursements—stabilize employee finances beyond wages and salary. Rising living costs make it challenging for employees to cover an unexpected expense out of pocket. Covering day-to-day, big ticket, and long-term expenses offers vital financial support.
• Strengthen company culture: Employees who receive comprehensive fringe benefits feel more connected to the organization. If an employee feels their employer cares about their well-being, they’re five times more likely to promote their company as a good place to work. 

Offer globally competitive fringe benefits with Oyster

Fringe benefits go beyond wages and compensation. Perks like health insurance, PTO, and employee discounts make employees feel valued, keeping them engaged and increasing productivity. 

But delivering equitable, localized fringe benefits can be complex. Especially with distributed teams, it’s difficult to balance compliance, cost, and employee expectations across multiple countries.

Oyster solves this problem. Oyster’s Employer of Record enables companies to offer country-specific fringe benefits packages, including health coverage, paid leave, and wellness perks—without setting up local entities.

Explore Oyster’s Total Rewards to build a compliant, compelling global benefits strategy that supports employee well-being and improves retention at scale.