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This area is a list of visitor's feedback, in the form of a question or discussion on the various manufacturing cost factors listed on Downtime Central. Items hear may be discussed further in our manufacturing discussion group.

Question by:

Brian S. - A Process Controller in the discrete industry. USA



In the calculation you use 30% fringe benefits. Could you define fringe benefits for me please? thank you

DTC Reply:

This magic number (30%) is a used by most accountants probably do to their schooling. In line with the TDC methodology, we would recommend a real number be calculated, as the true percentage varies from industry to industry, company to company. (The current average for 2000, is 27.4%.) Then based on this true number you can categorize the way that best suites your company.

The most common fringe benefits being health, insurance, and pension. Others ways of categorizing are workers' compensation, paid vacations, sick leave, various employee taxes such as social security, and all other non-cash fringe benefits. In the manufacturing industry, it is pretty cut N dry, but other employment could include membership to the country club, company car, etc.

Example: Wage and Salaries (72%), Legally Required Benefits (8%), Paid Leave (7%), Insurance (6%), Retirement (4%), Supplemental Pay (3%).

Many fringe benefits are not taxed in the same manner as wages, this should be taken into account when deriving the magic number (percentage). Fringe benefits have increased over time do to the employer and employee tax advantages. For companies/corporations with a large number of employees, this is yet another metric to seek financial opportunity.

Fringe benefits also have non-tangible values also. With the increased focus on and cost of training these days, offering fringe benefits is more profitable to an employer as a tool to lower turner over rates thereby protecting their training investment.

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