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<ul><li> METAS ADVENTIST COLLEGE SECOND SEMESTER MBA HUMAN RESOURCE MANAGEMENT PROJECT FRINGE BENEFIT PREPARED BY: KAREENA BHATIA : GB054 SUBMITTED TO: DR. S. ELIAH DATE: 28th APRIL 2014 </li> <li> Definition of 'Fringe Benefits' A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are met. Any employee who receives taxable fringe benefits will have to include the fair market value of the benefit in their taxable income for the year, which will be subject to tax withholdings, and social security benefits payments. Fringe benefits commonly include health insurance, group term life coverage, education reimbursement, childcare and assistance reimbursement, cafeteria plans, employee discounts, personal use of a company owned vehicle and other similar benefits. The fringe benefits tax (FBT) was the tax applied to most, although not all, fringe benefits in India. A new tax was imposed on employers by India's Finance Act 2005 was introduced for the financial year commencing April 1, 2005. The fringe benefit tax was temporarily suspended in the 2009 Union budget of India by Finance Minister Pranab Mukherjee. The following items were covered: Employer's expenses on entertainment, travel, employee welfare and accommodation. The definition of fringe benefits that have become taxable has been significantly extended. The law provides an exact list of taxable items. Employer's provision of employee transportation to work or a cash allowances for this purpose. Employer's contributions to an approved retirement plan (called a superannuation fund). Employee stock option plans (ESOPs) have also been brought under fringe benefits tax from the fiscal year 200708. </li> <li> 1. Salary packaging Fringe benefits are usually substituted for cash salary and wages because the fringe benefits are either free from tax, or attract less tax that the equivalent cash salary and wages. If salary is sacrificed into superannuation (see Salary sacrifice), the employer superannuation contribution is not a fringe benefit as long as it is made for the employee (and not, for example, for the employees spouse) and to a complying superannuation fund. 2. Fringe benefits general A fringe benefit is a benefit provided to an employee (or an associate of an employee, such as a spouse) by the employee's employer, an associate of the employer (eg a related company) or by a third party under an arrangement with the employer. To be a fringe benefit, the benefit: must be 'provided' to the employee (or to someone related to the employee) the employer must do something, or allow something to be done, that results in the employee receiving the benefit, and must be 'in respect of employment' a benefit provided for another reason, eg for family reasons (the employee being related to the employer), would not satisfy this. A fringe benefit is a form of pay for the performance of services. For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. Although generally voluntary, some of the most important fringe benefits have actually come to be expected from employees. These major types of fringe benefits include health insurance, retirement plans and paid time off. Information regarding these benefits is covered in the Health Insurance, Retirement Plans and Leave and Time Off sections. Fringe benefits covered in this section include: </li> <li> Flexible Hours Transportation Benefits Bonuses Severance Adoption Assistance Childcare Assistance Educational Assistance Employee Assistance Programs (EAPs) Life Insurance Long-Term Care Insurance Company Vehicles Chart of Tax Treatment of Various Types of Fringe Benefits Flexible Hours To stay competitive and thrive in todays marketplace, small businesses need to use every tool available at their disposal. Fortunately, modern technology provides many such tools. One of the most important is the ability of your workforce to work a non-traditional schedule. Flexible hours, also called flextime or telecommuting, are schedules in which employees spend a portion of their workday onsite, and the rest from home or another location. For example, a flextime schedule might require an employee to work onsite from 9:30 am- 2:30 pm, and complete his or her work for the day from somewhere else. Transportation Benefits Transportation (Commuting) Benefits This section discusses exclusion rules that apply to benefits you provide to your employees for their personal transportation, such as commuting to and from work. These rules apply to the following transportation benefits: </li> <li> De minimis transportation benefits. Qualified transportation benefits. Special rules that apply to demonstrator cars and qualified nonpersonal-use vehicles are discussed under Working Condition Benefits. Bonuses In addition to a base salary, some employers pay an annual bonus to employees, often at the end of the calendar year. Bonuses can be tied to employee performance, such as a formal employee performance review. In this sense, the bonus is used as a reward of employees quality of work, rather than hours or other quantities of work that employers use to pay base wages. Employers are generally not obligated to provide employees bonuses, so long as they meet the minimum wage and overtime requirements of the federal Fair Labor Standards Act (FLSA) and any applicable State wage and hour laws. As far as non-exempt employees are concerned, the FLSA, with some exceptions, requires bonus payments to be included as part of an employee's regular rate of pay in computing overtime. Severance Employee reductions and terminations are an unfortunate result of economic downturns. Even in good economic times, however, businesses of every size carefully assess their operational structures and may sometimes decide to reduce their workforce. When employers are forced to issue layoffs, they sometimes provide these laid-off employees severance pay and related benefits. What is Severance? Severance is typically a cash payment- similar to temporarily continued wages- made to employees who lose their jobs. Severance pay eases the employees transition to being unemployed and, in the ideal world, briefly replaces lost wages until an individual finds new employment. </li> <li> Adoption Assistance Employers may choose to provide financial benefits to employees for the purpose of covering all or part of the cost of adopting a child. Some of the advantages to providing an adoption assistance program include improving employee productivity, Educational Assistance An educational assistance program is a benefit that pays for the job-related education of one or more of your employees. These policies allow employees to improve their knowledge and skills in a field that they can apply to your business. Thus, educational assistance can be mutually beneficial to both employers and employees. Generally, the longer the relationship between the employee and employer, the more educational investment in the employee will pay off. Employee Assistance Program (EAP) An Employee Assistance Program (EAP) can provide support services both on a company-wide basis as well as to individual employees and family members experiencing personal issues and challenges. The structure and operation of an employee assistance program will vary with the needs of each individual company. EAP Objectives Improve productivity and functioning of the employee population Help employees to identify and resolve personal issues which may affect job performance including: o Health o Marital o Family o Financial o Alcohol and drug abuse o Stress </li> <li> EAP Basic Components The following is a summary of basic service components that may be included in an Employee Assistance Program: Identifying and assessing employee problems and concerns that may affect job performance. Establish procedures to determine when to provide short-term problem resolution services and when to make a referral to professional and/or community resources. Provide crisis intervention services to employees and eligible family members. Develop programs and services that support a drug-free workplace. Monitor each employees case as well as follow-up services. Consult to companies regarding the availability of health benefits covering medical and behavioral problems, including alcoholism, drug abuse, and mental and emotional disorders. EAP Policy When developing an Employee Assistance Program, it is prudent to develop a written policy that defines the program's relationship to the company as well as reinforces stringent confidentiality standards. The policy should also define the scope of services provided. It is also important to establish basic guidelines to evaluate the effectiveness of your program. Choosing an EAP Counselor If you are considering developing an EAP for your company, it would be prudent to consider an outside consulting service with specific experience in serving organizations of your size. Be sure to evaluate the expertise and background of the EAP counselors who will be supporting your firm. Also, identify if there are any conflicts of interest which could include a counselor who has worked for your company in some capacity or may have family who are or have been employed by your company. Other Types of Employer-Provided Insurance In addition to health insurance, employers may offer employees, their spouses and dependents a number of other types of insurance benefits. These include: </li> <li> Life Insurance Long-Term Care Insurance Disability Insurance Accident Insurance Other Types of Employer-Provided Insurance In addition to health insurance, employers may offer employees, their spouses and dependents a number of other types of insurance benefits. These include: Life Insurance Long-Term Care Insurance Disability Insurance Accident Insurance Company Vehicles To ensure adequate transportation to and from work and other business destinations, some employers provide their employees company-owned or leased vehicles. Generally, if a business owner believes that providing an employee with a car or truck will add productivity or security to business operations, the owner may decide that purchasing or leasing a vehicle is worth the costs. Tax Treatment of Various Types of Fringe Benefits for 2010 The following chart comes from the IRS publication, 15-B. It provides a helpful summary of various types of fringe benefits and related tax treatments. </li> <li> Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare Federal Unemployment (FUTA) Accident and health benefits Exempt1,2, except for long-term care benefits provided through a flexible spending or similar arrangement. Exempt, except for certain payments to S corporation employees who are 2% shareholders. Exempt Achievement awards Exempt1 up to $1,600 for qualified plan awards ($400 for nonqualified awards). Adoption assistance Exempt1,3 Taxable Taxable Athletic facilities Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children and the facility is operated by the employer on premises owned or leased by the employer. De minimis (minimal) benefits Exempt Exempt Exempt Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return). Educational assistance Exempt up to $5,250 of benefits each year. See Educational Assistance </li> <li> Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare Federal Unemployment (FUTA) Employee discounts Exempt3 up to certain limits. See Employee Discounts Employee stock options See Employee Stock Options Group-term life insurance coverage Exempt Exempt1,4 up to cost of $50,000 of coverage. (Special rules apply to former employees.) Exempt Health savings accounts (HSAs) Exempt for qualified individuals up to the HSA contribution limits. See Health Savings Accounts Lodging on your business premises Exempt1 if furnished for your convenience as a condition of employment. Meals Exempt if furnished on your business premises for your convenience. Exempt if de minimis. Moving expense reimbursements Exempt1 if expenses would be deductible if the employee had paid them. </li> <li> Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare Federal Unemployment (FUTA) No-additional-cost services Exempt3 Exempt3 Exempt3 Retirement planning services Exempt5 Exempt5 Exempt5 Transportation (commuting) benefits Exempt1 up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($230), qualified parking ($230), or qualified bicycle commuting reimbursement6 ($20). Transportation (Commuting) Benefits Exempt if de minimis. Tuition reduction Exempt3 if for undergraduate education (or graduate education if the employee performs teaching or research activities). Volunteer firefighter and emergency medical responder benefits Exempt Exempt Exempt Working condition benefits Exempt Exempt Exempt </li> <li> Treatment Under Employment Taxes Type of Fringe Benefit Income Tax Withholding Social Security and Medicare Federal Unemployment (FUTA) 1 Exemption does not apply to S corporation employees who are 2% shareholders. 2 Exemption does not apply to certain highly compensated employees under a self- insured plan that favors those employees. 3 Exemption does not apply to certain highly compensated employees under a program that favors those employees. 4 Exemption does not apply to certain key employees under a plan that favors those employees. 5 Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services. 6 If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit pass, or qualified parking benefits in that same month. Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay, unless the law specifically excludes it. The Fringe Benefits Guide of the Internal Revenue Code sets forth a number of tax exclusions identified by the IRS as applied to fringe bene...</li></ul>

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