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One can define benefits as any type of compensation that an employee receives from their workplace that does not include a cash transaction. These may range from standard packages that include medical dental and life insurance to more involved packages and add benefits such as, retirement accounts (IRA, 401K), country club or fitness club memberships, store discounts, free meals, and credit unions. Some companies offer benefits to both full and part time employees while other companies only offer benefits to employees who work more than 30 hours per week.
Mathis and Jackson suggest that employee benefits can have a powerful influence on employee performance and job satisfaction. If a company does not provide benefits at all, employees tend to become unmotivated and production may fall. If the wrong kind is offered this is also a problem. However, the right benefits package can inspire employees to increase their productivity as well as their level of job-satisfaction.
Understanding how employee benefits influence employee job satisfaction and motivation is critical developing an understanding which benefits are more likely to be found desirable by employees. This will be effective in helping employers to determine which types of benefits packages employees will find attractive and how to make changes to current benefits packages that will increase employee motivation and job satisfaction.
Research Question/ Purpose of Study
The purpose of this study is twofold. First, the study will consider focus on the general concept that employee benefits can either increase or reduce job satisfaction. Second, the study will focus on which benefits are more likely to increase or reduce job satisfaction in the employees participating in the study.
- What benefits do employees prefer?
- Do employees prefer traditional benefits plans, or flexible benefits plans?
- Are employees likely to prefer benefits that meet their needs, or benefits that meet what they want (e.g. health insurance vs. vacation time)?
- Does the level of benefits, and employee satisfaction with benefits affect motivation in terms of productivity and job satisfaction?
There is little evidence in the research to suggest that any of these is solely representative of how and why employees prefer certain benefits, or are motivated to higher levels of job performance for any one specific reason. For example, a person is demographic and personality traits may indicate that they will choose one type of benefits over others but other variables in their lives (health, family) may lead them to choose something entirely different. This is other main reason human resources professionals categorize different types of benefits such as; traditional and flexible benefits plans.
Jackson, Schuler, and Werner suggest that employee preferences for specific types of benefits are determined by many variables include the demographics and location of the organization. Determining which benefits employees find desirable is done through a variety of means including, employee surveys, monitoring employee benefit usage (e.g., how many times they use their health insurance in comparison to their flexible work time), and through comparing benefits use within the organization to how benefits are utilized by other organizations. Two organizations may serve an identical purpose and yet have entirely different benefits packages due to employee differences.
Jackson, Schuler, and Werner state that there are two primary types of benefits packages, traditional, and flexible benefits, each of which is more suited to specific types of employees. Traditional benefits include standard benefits such as, vacation time health, life, and disability insurance, retirement pensions, and education benefits. Flexible benefits plans include traditional benefits and may include other benefits such as, flexible work scheduled, stock options, health and wellbeing options such as, fitness center memberships, and family friendly benefits such as onsite daycare. Traditional benefits give employees standard benefits that are commonly expected in an employment setting. In contrast, flexible benefits include a wider variety of benefits and allow employees to choose benefits plans that are more suited to their personal needs and wants.
Bohlander and Snell argue that flexible benefits plans are more suited to modern workforces due to the diversity of the modern workplace. In many cases, this type of benefits package may be less expensive for employers as it allows them to tailor benefits to the needs of employees rather than purchasing standardized packages that include benefits an employee may not utilize. Flexible plans allow employers to meet employee benefit preferences rather than asking them to accept benefits they may not need or want.
Sadri and Bowen suggest that employee benefits preferences can be assessed using Maslow's Hierarchy of Needs. Maslow's theory argues that there are certain needs that people prioritize over others. For example, people must have physiological and safety needs met before psychological and social needs. This means that employees are more likely to prioritize health and wellbeing benefits such as, healthcare, salary, and retirement accounts ahead of benefits such as, childcare, vacation time, and health club memberships. Sadri and Bowen further argue that using Maslow's Hierarchy allows employers to design benefits that more completely meet employee needs.
There are some issues over the debate about traditional vs. flexible benefits as well as the use of Maslow's theory to design benefits packages. First, these arguments do not take into account the aforementioned issues of culture, demographics, and geographic location. For example, some nations provide for employees medical, dental, and vision care, thus, eliminating the need for employers to provide these things are part of the employee benefits package. Another variable in determining whether or not employees will prefer is demographics. Therefore, Maslow's hierarchy seems ill suited towards determining what employees will prefer since it claims that all human beings have the same basic hierarchy of needs regardless of age, gender, culture, or educational level.
Hsin-Hsi claims that, the design of compensation and benefits packages is critical in determining employee levels of satisfaction and can influence employee performance and turnover. One argument Hsin-Hsi makes is that this is even more critical for small and medium sized businesses since these companies may not have as much to spend on employee benefits as larger companies. This makes sense in light of the fact that small and medium sized may find fringe benefits such as, flexible time, fitness center memberships, and vacation time may be more effective for employers who cannot afford to purchase large health benefit plans, or provide retirement pensions for employees. The main issue with the results of this study is that this study was conducted in Taiwan. Demographic and cultural variables inevitably influence the results of this study in that Taiwanese culture although influenced by Western culture has specific cultural and demographic differences that may make the results of this study more likely to occur in a Taiwanese population than in an American population.
One of the main suggestions made in the literature is that employees find some types or categories of benefits more useful or satisfying than other categories of benefits. One argument is that employees prefer benefits that help them to maintain a balance between their career/job, and their home life. Morrison and Thurnell conducted a survey of 121 construction workers as well as a previous study that work-life benefits such as, flexible work schedules, vacation time, and personal and family leave are more important to employees than benefits such as, stock options, or health insurance.
There are many issues with this hypothesis. First, a preference for work-life benefits may result from differences between the culture of New Zealand and the United States, or may be related to the study taking place in the construction industry, a notoriously demanding and high stress field of employment. A further research study of 336 participants conducted in New Zealand by Jeremy Hayman supports the idea that the preference for work-life benefits may in fact, be cultural as his study demonstrated higher levels of employee job satisfaction at jobs that provided work-life benefits than was seen with other types of benefits.
There may be several reasons for this preference in the New Zealand studies including, the lack of need for employer provided medical, dental, and vision coverage due to nationalized healthcare. Employees do not need employers to provide these benefits for them and therefore may look more towards benefits that are helpful in leading healthier satisfying lives. While this cannot be determined based solely on two studies, these studies do indicate that some cultural or national differences exist in what types of benefits employees may prefer.
Another determinant in employee benefit preference may be employee personality. Lawton and Chernyshenko hypothesized that individual variables influenced which benefits employees preferred. A study of 229 participants revealed that preferences for education and health and wellbeing benefits were such as, college reimbursement, or fitness center membership were based on employee personality characteristics such as, extroversion whereas, family based benefit preferences such as, family leave time were based on demographic variables including, age and number of people in household.
Research by Steyn also supports the idea that personality and demographic variables influence what types of benefits employees prefer. In a study of employees from South Africa and Ghana, working for a mining company, Steyn found that employees in Ghana gained more job satisfaction from access to fringe benefits of their jobs while South African employees demonstrated higher rates of job satisfaction from core compensation benefits such as, salary.
These studies show that various factors influence employee benefit preferences. Factors such as, culture, geographic location, marital and family status, and age influence what types of benefits employees prefer. Some employees will prefer traditional benefits while others will prefer flexible benefits. Some employees may prefer benefits such as, educational reimbursement or stock options while others want health insurance and vacation time. There appear to be many different variables that contribute to how and why employees favor certain types of benefits over others. The fact that employees choose to prioritize or favor certain benefits over others indicates that it may not be quite so simple for employers to discern how to choose an employee benefits package as the textbooks make it out to be.
Employers must account for employee preferences in benefits when designing benefits programs for several reasons. First, and foremost because it is not cost-effective for employers to purchase benefits for employees that employees will not use. Second, employees may seek out jobs with specific benefits they desire based on their personalities, demographic characteristics, and geographic location. Third, employees are motivated to work harder, longer, and to produce better quality work if they have a benefits and compensation package that they find desirable or that meets their individual needs.
One proposal is that benefits are a type of social exchange. The value of the benefits to an employee is determined using one of two factors, money (e.g. if I had to pay for these what would I spend?) and personal value (is this useful to me personally?). Weatherington and Jones propose that how employee benefit preference is determined according to social exchange theory is benefit based meaning that benefits are assigned different types of value based on what they are. For example, stock options would clearly have monetary value for all employees while membership in a health club or onsite daycare for children might be assigned a different value to individual employees.
This model or proposal actually makes sense given the idea that benefit preferences are determined by variables such as, personality and demographic. Obviously, a person without children will not place as much of a personal or monetary value on childcare or family related benefits so jobs that offer this type of benefit will not be as attractive as jobs offering benefits more focused on the needs of employees without children. This leads into the question of how different types of employee benefits work to motivate employees.
Determining why and how employee benefits motivate workers to increase the quality of their work, and their productivity is based around four central claims. First, is the idea that benefits motivate employees by providing them with long term rewards for working hard. Second, is the idea that compensation is an extrinsic reward while some types of benefits are intrinsic rewards. For example, receiving money for work each week is an extrinsic reward (compensation), while having a health club benefit is an intrinsic reward for someone who enjoys being physically fit. Finally, one must determine if the employees see the benefit as a need (covers physiological or safety needs under Maslow), or a want (fulfills a psychological or social want under Maslow).
Ghazanfar et al. argues that employees that are satisfied with their benefits packages are more likely to be motivated at work. This can include satisfaction with pay, or with non-wage compensation. Ghazanfar et al. argue that non-wage compensation is often more motivating for employees than salary. It is correlated to issues of extrinsic vs. intrinsic motivation. Salary is an extrinsic motivator while some benefits such as, vacation time are intrinsic rewards. Many employers view benefits as part of how they motivate employees to work harder for less pay. Ghazanfar et al. suggest that employees may be motivated to work for companies that pay less money if those companies offer a strong benefits package in lieu of monetary compensation.
According to the Society for Human Resource Management, employee benefits are one of the main variables that motivate employees, and that increase job satisfaction. An employee who has access to a good benefits package is typically more willing to do a good job than an employee with poor benefits or no benefits. In a survey of U.S., employees 53% of those surveyed stated that benefits are more important when job-seeking. Health care was the most desirable benefit in the U.S. (64%) while paid time off ranked second (53%). Family friendly benefits were the lowest ranked in the SHRM survey with only 25% of respondents saying that family friendly benefits were more desirable than other benefits.
A second national survey, this time of Federal Employees indicated that health retirement and other traditional benefits were rated more highly than family friendly benefits such as, childcare and family leave time (U.S. Office of Personnel). The study looked at responses from 850 federal employees at the national level. Seventy-five percent of the participants rated health insurance as being the most important benefit for federal employees while the least important benefits were health and wellness benefits like health club memberships. The study demonstrated an increase in the number of employees who thought that the ability to telecommute to work was a desired benefit from previous studies.
Overall, the literature seems to indicate that traditional benefits packages are still seen as more desirable by employees than flexible or family friendly benefits. The only time this seems to differ is in cases where the research has been conducted in nations where medical care and retirement pensions are provided by the government. In this case family-friendly and health and wellbeing based benefits such as, childcare, or fitness club memberships seem to be more popular. The primary difficulty with available literature is that there seems to be limited literature on the topics that are being looked at in this study. What is available appears to be older than 2002, which creates problems with the reliability and validity of the research as well as access to full journal articles in this area.
These preferences have many pre-determining factors including, demographics, and geography, culture, and personality traits. Some groups will prefer one type of benefit to others. For example, younger workers may prefer financially based benefits such as, tuition reimbursement or company stock options. The research also seems to indicate the employees may be more attracted to what benefits a company is offering them than how much they will be paid per year. Finally, research on what type of benefits employees choose seems to indicate that it takes time for employees to accept or come to prefer benefits that are family friendly or health and wellbeing based since companies often introduce these as methods to reduce costs and employees may be resistant to these changes.
The literature also illustrates that idea that benefits can motivate an employee to be more productive, to have better attendance, and to have higher levels of job satisfaction than simply being offered a high salary. Good benefits plans may help to create happy workers who work harder than they would for a larger paycheck. The research also argues that less traditional benefits may be more motivating to a diverse workforce. Therefore, it can be extrapolated from the literature review that employees who have access to the type of benefits they prefer whether traditional benefits, or the more family friendly and health and wellbeing based benefits typically found in flexible benefits plans, will be more motivated at work.
The literature review is somewhat limited in scope due to the limited number of studies available on the selected topic. While there were studies that looked at employee benefit preferences this was incorporated into larger studies such as, the SHRM study or the U.S Personnel Office study. There were several smaller studies available on how benefits affect employee motivation but even these were rather limited in size and scope. The other critical issue with the literature review is that much of the research in this area was not conducted in the United States but in New Zealand, and in African and Asian nations. This influences the results of the literature review because in some cases where health, dental, and vision care are provided by the government, studies on employee benefits will not be as focused on traditional benefits as these are provided by the government. Therefore, some of the studies are more skewed towards supporting the idea that employees prefer family friendly and health and wellbeing based benefits in the workplace.
This however, may be beneficial in that it provides a more complete picture of how demographics, culture, and geography influence the types of benefits employees prefer. It clearly illustrates that idea that different variables are going to affect how employees view benefits depending on where they live, and what types of benefits are covered by other organizations where they live. It is necessary to recognize the influence of these variables on the potential results of this study since this indicates that the study may not demonstrate results that are similar to previous studies conducted in the same area.
There are several reasons why this study may be significant. First, while previous literature has included benefit preferences as part of the study the researcher was unable to find any studies that specifically looked at the role of employee preferred type of benefits in motivating employees and increasing job satisfaction. This study may help to illustrate how this process occurs and why benefits are more powerful motivators for employees than monetary compensation tends to be.
Another significant aspect of this study is that it may be effective in helping to develop a model or method for employers wishing to design or develop a benefits and compensation plan that is most effective for employees in specific workplaces. This may be more cost-effective for employers than purchasing traditional or flexible plans, which may include, benefits that employees will not use and do not wish to pay for.
The research indicates that employees may prefer needs based benefits such as, retirement pensions and health insurance to family friendly and health and wellbeing based benefits. However, this study may show that younger employees may prefer non-traditional family friendly and health and wellbeing based benefits over benefits that are more traditional. This is primarily related to studies that indicate that younger employees are more likely to prefer less traditional benefits than older employees. Despite this research being based in New Zealand, these benefits may also be perceived as more rewarding with a U.S. based participant group.
Finally, this study may be significant in the area of employee benefits because it differs in scope from the larger studies discussed in the literature review. While the larger studies have focused on overall employee understanding of, preference for, and participation in employee benefits programs overall, this study focuses more on specific factors such as employee preferences and motivation. Other studies have looked at these variables or issues but not these specific variables alone. Typically, they are included with other variables and as part of a much larger study. Therefore, it may provide significant results to look at these two variables on their own without the potential for interference from other variables included in the same study.
There are three main assumptions that this study is based on. The first assumption is that employee benefits have an influence on employee job satisfaction. Second, some employee benefits are more likely to produce higher levels of job satisfaction than other types of benefits. Finally, employers can use this information to tailor specific benefit plans to their individual workplaces.
These assumptions are based on the results of the literature review that has provided data that suggests that the type of benefits an employee prefers influences variables such as, employee job satisfaction, and employee motivation. The literature review also creates the assumption that various factors influence benefit type preference including demographic variables, geographic variables, and personality traits of employees.
Finally, assumptions are also based on the idea that the researcher will be able to find participants who work in an employment setting where benefits are offered. The assumption that employees gain job satisfaction from benefits is based on previous research as discussed by Mathis and Jackson.
There are limitations to this study. First, the researcher may have limited access to research participants who have full time employment (typically a requirement for having employee benefits). This may reduce the validity of the study since the study will have to be conducted with part time employees or college students. Second, the amount of time available to conduct this study is limited, which may reduce the researcher's ability to collect data from a large pool of participants.
A significant limitation has been the lack of available research specifically focused on this area of study as well as the fact that much of the current research was conducted in countries that have nationalize healthcare. This has lent itself to research results contrary to results illustrated in U.S. based literature indicating that employees prefer to work for employees who provide healthcare to family-friendly or health and wellbeing based benefits as indicated in the literature from nations such as, New Zealand and South Africa.
These limitations can be accounted for when analyzing the study however, if the desired population is unavailable there is little to be done to accommodate for this issues. While the listed requirements for participants are ideal, it is unlikely that the researcher will be able to find 200 people who are employed full-time with benefits who are willing to participant in this study. The research study will also take into account the idea that different variables including, demographic categories (age, gender, sexual preference, religion, and social class), geographic location, and personality of employees may influence the results of this study.
While it is clear that not all limitations can be accounted for within the survey itself, care will be taken during analysis to ensure that each of the contributing variables is accounted for when looking at potential results. It is not predicted that this will have a negative influence on the results of the study since.
This study is a mixed methods (qualitative and quantitative) study including a survey and interviews. The basis of the study is employee benefit preferences, job satisfaction, and workplace motivation. The survey method was chosen for the primary and quantitative research method because surveys are easy to distribute and people are typically more willing to fill out a short survey than they are to participate in focus groups or role playing exercises due to time constraints. Interviews were chosen as a means of representing manager perceptions on how employee benefit type preferences, as well as the ability of a good benefits package to increase motivation and job satisfaction, shapes benefits policy within their organizations.
It is suggested that mixed methods research can be effective in business and human resources because it provides the researcher with both subjective and objective data. Surveys are specifically effective in gathering demographic data and data to answer specific questions while interviews can be effective in helping to gather information about attitudes that are more subjective and opinions.
Participants will be drawn from a pool of full time employees working in local businesses in the town where the researcher resides. If the researcher is unable to find enough participants within the full-time employee category part-time employees working in businesses that offer benefits to part-time employees will also be included. The sample will be representative of the local population in terms of age, race, ethnicity, and gender. An estimated sample-size of at least 200 will be necessary in order for the study to be both reliable and valid. Participant selection will be as random as possible given the requirements for the sample.
It is thought that including these demographic variables in a study about employee benefits will allow for diverse results that may give some indicator as to what types of benefits employees prefer and how this influences employee job satisfaction and motivation in a workplace setting.
It is necessary that employees work at least part-time in a place that offers benefits to all employees as this will ensure that results are not biased by employees who do not have access to employee benefits or who are choosing not to accept existing employee benefits.
A second group of managers and HR specialists will be interviewed in order to gather qualitative data on how they perceive employee benefit type preferences, the effects of benefits on job satisfaction, and motivation of employees, and how this influences the design of employee benefits programs at their organization. The sample of managers, and HR specialists will include at least 10 professionals and interview questions will focus on their experience designing benefit programs with attention to employee preferences.
By utilizing random selection processes and choosing both employees and managers as part of this studies it is hoped that some of the limitations of the study such as, the smaller size the study and the limitations of the literature review can be limited in their potential for creating biased results.
A 20-item survey will be developed for this study. The first section will contain multiple-choice questions that focus on demographics of the participant group (age, gender, race, job, years in job, benefits [yes/no]). The second section of the survey will use Likert Scale questions that ask participants for information with benefits. The scale will range from zero (Very dissatisfied) to six (Very Satisfied). If a specific, benefit does not apply to a participant than they will be instructed to leave it blank. The researcher will also ask participants to participate in a short structured interview in order to determine what employees like/dislike about their current employee benefits.
Attempts were made to find a previously existing survey template however, none of the existing survey templates was deemed to be suitable for the purposes of this study since many of them were included in studies in the literature review that either exceeded the scope of the study, or were only loosely related to the scope of the study.
While there were templates that could be edited this was complicated and after analyzing existing templates it has been determined that creating a new survey will be less consuming although it will not have the benefits of already having been tested for reliability as existing templates have been. One possible option is that this survey will be created using an online site like Survey Monkey rather than created in print format. The survey will be pre-tested using students and professors in the Business Department.
The design for this study is mixed methods. The qualitative method used will be structured interviews each of which will take approximately 10 minutes. The quantitative method for this study will be the survey method. This is also estimated to take 10 minutes for participants to complete. The independent variable for this study are employee benefits. The dependent variable is employee job satisfaction.
The first part of the procedure involves having participants complete the survey. They will be told they will be completing a survey on employee benefits. They will be informed that no personal information will be revealed about specific participants including, place or work or employment status. After the completion of the survey, participants will be pulled aside by research associates for a 10 minute structured interview that will look at the issue of benefits and job satisfaction in a more in-depth manner.
As participants will only be completing a survey it is not necessary for participants to complete an Informed Consent form, the informational packet that will be provided with the survey should be adequate for meeting the schools ethical guidelines as participants will not actually be undergoing any type of "treatment" or participating in experimental activities that could harm them.
After the completion of the study participants will be informed as to the true nature of the study and made aware that once results are available they will have access to the completed reports. Employers will also be provided with the completed report if they ask.
There will be two levels of analysis in this study. Demographic data will be analyzed using basic descriptive statistics. Data from the Likert Scales will be analyzed using either a T-Test for Single Variables test or an Oneway ANOVA. A contextual analysis will be conducted with the data collected from the interviews. The data will be analyzed using SPSS.
The predicted result of this study is that employees will value some benefits more than others will. In other words, higher levels of jobs satisfaction will be achieved if certain benefits are kept in place in comparison to others. While it is not yet hypothesized, which benefit will be more valued than others this can be developed later.
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