How Employee Benefits Affect Employee Behavior?

Subject: Employee Management
Pages: 3
Words: 705
Reading time:
3 min

When a firm wants to attract, retain and motivate workers, employee benefits are one of the major factors that can achieve such because it is but a nature of any person to work harder if they know they can get something good out of their venture. Fact remains that benefits contribute highly in attracting, retaining, and motivating employees. For example, employees have come to expect that benefits will help them maintain economic security. Social Security contributions, pensions, and retirement savings plans help employees prepare for their retirement.

Insurance plans help to protect employees from unexpected costs such as hospital bills. In this way, employees should want to do better in their job because they are expecting something in return for their future. The variety of possible benefits also helps employers tailor their compensation to the kinds of employees they need. Different employees look for different types of benefits.

Employers need to examine their benefits package regularly to see whether they meet the needs of today. At the same time, benefits packages are more complex than pay structures, so benefits are harder for employees to understand and appreciate. Even if employers spend large sums on benefits, if employees do not understand how to use them or why they are valuable, the cost of the benefits will be largely wasted. Employers need to communicate effectively so that the benefits succeed in motivating employees.

Why do organizations pay a growing share of indirect compensation in the form of benefits? It would be simpler to pay all compensation in cash and let employees buy their own insurance and contribute to their own savings plans. That arrangement would also give employees greater control over what their compensation buys. However, several forces have made benefits a significant part of compensation packages. One is that laws require employers to provide certain benefits, such as contributions to Social Security and unemployment insurance. Also, tax laws can make benefits favorable.

For example, employees do not pay income taxes on most benefits they receive, but they pay income taxes on cash compensation. Therefore, an employee who receives a $2,000 raise “takes home” less than the full $2,000, but an employee who receives an additional $2,000 worth of benefits receives the full benefits. Another cost advantage of paying benefits is that employers, especially large ones, often can get a better deal on insurance or other programs than employees can obtain on their own. Finally, some employers assemble creative benefits packages that set them apart in the competition for talent. In this case, indirect benefits would be more advantageous to workers than paying them directly in cash.

However, shifts in balances regarding benefits will still be evident when considering the types of employees present in the firm. This is why, it is important that employers should also consider that the value employees place on various benefits is likely to differ from one employee to another. At a broad level, basic demographic factors such as age and sex can influence the kinds of benefits employees want. An older workforce is more likely to be concerned about (and use) medical coverage, life insurance, and pensions.

A workforce with a high percentage of women of childbearing age may care more about disability or family leave. Young, unmarried men and women often place more value on pay than on benefits. However, these are only general observations; organizations should check which considerations apply to their own employees and identify more specific needs and differences. One approach is to use surveys to ask employees about the kinds of benefits they value.

The survey should be carefully worded not to raise employees’ expectations by seeming to promise all the benefits asked about at no cost to the employee. The choice of benefits may influence current employees’ satisfaction and may also affect the organization’s recruiting, in terms of both the ease of recruiting and the kinds of employees attracted to the organization. Thus, organizations need to consider the signals sent by their benefits package as they set goals for benefits and select benefits to offer.