A perquisite, commonly referred to as a “perk,” is any privilege granted to employees in addition to their basic wages and salaries. Perquisites can include ordinary employee benefits like health insurance and pensions but are more often associated with special privileges granted to executives, such as automobiles, resort vacations, club memberships, and use of corporate aircraft.
Types of Perquisites
Ordinary Employee Benefits
These are standard perks provided to regular employees and typically include:
- Health Insurance: Medical, dental, and vision insurance coverage.
- Pensions: Retirement plans, such as 401(k) or pension schemes.
- Paid Time Off: Vacation days, sick leave, personal days.
Executive Perks
These are special privileges often reserved for high-level executives:
- Automobiles and Limos: Company-provided cars or limousines for personal or business use.
- Club Memberships: Corporate memberships in exclusive clubs, such as golf or country clubs.
- Resort Vacations: Paid vacations at luxury resorts.
- Reserved Parking Spaces: Priority or reserved parking close to the workplace.
- Corporate Aircraft: Access to private jets or aircraft for travel.
Special Considerations
Tax Implications
Many perks come with tax implications. The Internal Revenue Service (IRS) often requires that the value of certain perquisites be reported as taxable income. For instance, the personal use of a company car or corporate aircraft is often taxable.
Equity and Fairness
Providing exclusive perks to executives can lead to perceptions of inequity and may affect employee morale. Organizations must carefully consider the implications of offering such benefits.
Examples of Perquisites
- Company-provided automobile: An executive is assigned a luxury car for both corporate and personal use, with all expenses covered by the company.
- Private club membership: A CEO receives a membership to an exclusive golf club as part of their compensation package.
- Reserved parking space: An executive has a designated parking spot right next to the building entrance.
Historical Context
The practice of offering perquisites dates back to ancient times when feudal lords would grant lands or titles to their vassals as a reward for their service. In the modern corporate world, perks evolved as a way to attract and retain top talent.
Applicability
In Corporate Settings
Perks are widely used in corporate settings to attract and retain top-level executives, where competition for talent is fierce.
In Small and Medium Enterprises (SMEs)
SMEs also offer perks, though often more modest than those in large corporations. These can include flexible work hours, casual dress codes, or company-sponsored social events.
Comparisons
Perquisites vs. Fringe Benefits
- Fringe Benefits: Similar to perquisites but often considered as more standardized and legally required benefits, including health insurance and retirement plans.
- Perquisites: More exclusive and luxurious benefits typically offered beyond standard fringe benefits, particularly targeted at executives.
Perquisites vs. Salaries
- Salaries: Direct compensation for the work performed by an employee, taxable as ordinary income.
- Perquisites: Supplemental and often non-cash benefits, sometimes leading to tax implications.
Related Terms with Definitions
- Fringe Benefits: Additional benefits supplementing an employee’s salary, such as health insurance, paid time off, and retirement plans.
- Compensation Package: The complete pay and benefits package, including salary, bonuses, and perks offered to an employee.
- Taxable Benefits: Benefits provided by an employer that are considered income and subject to taxation.
FAQs
Are all perquisites taxable?
How do perquisites affect employee behavior?
Do small companies offer perquisites?
References
- IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits.
- Cappelli, P., & Tavis, A. (2018). “The Performance Management Revolution”. Harvard Business Review.
Summary
Perquisites, or perks, are privileges granted to employees beyond their basic wages and salaries. They range from ordinary benefits like health insurance to exclusive executive perks such as automobiles and club memberships. Understanding the types, implications, and strategic use of these perks can help organizations effectively attract and retain top talent.
