Chapter 4 Applications of the economic way of thinking domes

Chapter 4: Applications of the economic way of thinking: domestic government and management policies A. Optimum Fringe Benefits 1. Briefly explain how offering fringe benefits for employees can generate profits for firms. Why do some firms not offer fringe benefits? (9) 2. Use the concept of \"optimum fringe benefits\" to assess the wisdom of Congress mandating that employers offer some specific fringe benefit (day care for children of employees, say) free of charge.(6)

Solution

A.
1.
Fringe benefits offered to the employees, act as incentives to them and it brings additional motivation to the employees to deliver their best performance. Further, such benefits increase employee engagement and reduce the employee turnover. So, not only the productivity and output increases, but also the overhead cost involved in recruitment and training process comes down. So, the firms get benefitted also when they offer the fringe benefits.
There are different reasons that some firms don’t give fringe benefits to the employees. Some of the reasons are as follows:
A.   Firms follow the scientific management approach where less importance is given upon the employee motivation.
B.   Firms focus upon the welfare of the community, rather profitability.
C.   Firm incurs losses and are unable to provide fringe benefits.
D.   Firms are family run business where the members share the profit.

2.
The congress mandated optimum fringe benefits, identifies that the employers incur the cost of offering fringe benefits that is less than the employers getting the benefits due to the additional productivity. On a similar note, an employee gets it free of cost so that its contribution towards the organization, increases due to lower turnover rates and higher engagement level. So, the concept of optimum fringe benefits helps the employers to increase the profitability and makes them charge nothing to the employees. It also contributes to healthy and diversified workplace.
For example, a free day care facility at work, makes women employees feel comfortable and they can work for a longer period of time. Besides, it promotes diversity at work.