Cost implications of fringe benefits on the profitability of SMEs in the Cape Metropole

Abstract

Small and Medium Enterprises have increasingly been faced with challenges when it comes to compensating their employees, which stem from inadequate capital funding. Therefore, the profitability of Small and Medium Enterprises in the Cape Metropole is adversely influenced due to the unequal distribution of fringe benefits amongst employees. The purpose of this study was to ascertain the impact of fringe benefits on Small and Medium Enterprises operating in the Cape Metropole. Data was collected from a sample of 100 participants, from 10 Small and Medium Enterprises operating within the Cape Metropole. A self-administered questionnaire was used as the data collection instrument to gather data from respondents. The primary data collected were analysed using descriptive statistics. Results of the study revealed that fringe benefits do affect the profitability of the business, as those perks reduce company profits due to higher incentives and remuneration. As a result, employee benefits are viewed as an equal burden for the employer. However, when there is a lack of fringe benefits within the organisation, the organisation’s performance may be affected. The study therefore recommends that Small and Medium Enterprises implement fringe benefits appropriately in order to foster a better working environments towards achieving the overall company objectives.