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Employee Benefits and Services

Management is concerned with attracting and keeping employees, whose
performance meets at least minimum levels of acceptability and at keeping
absenteeism and turnover to tolerable levels
The provision of benefits and services can be and are important in maintain
the employees and reducing the turnover and absenteeism low.
The purpose of such benefits is to retain people in the organization and
stimulate them to greater effort and higher performance.
They foster loyalty and act as a security base for the employee.
Employee benefits and services

Any benefits that the employee receives in addition to direct remuneration

Fringes embrace a broad range of benefits and services that employees receive
as part of their total package. It is based on critical job factors and
performance. Benefits and services however are indirect compensation
because they are usually extended as a condition of employment and are not
directly related to performance

*fringe benefits are also called welfare expenses, wage supplements sub wages
or social charges, etc

Benefits and compensation provided to the employees
usually depend on the conditions of employment and
other factors like security, safety, health, welfare and
recreation of employees

These benefit programs must be managed carefully to
enhance recruitment and to boost the morale of the

Why Organizations Provide Benefits
Employee demand: To meet rising prices and increased
cost of living employees demand various types of benefits
Example: Variable dearness allowance, Enhanced HRA

o Trade union demands: The growth and strength of trade
unions has substantial influence on the benefits and
services a company offers

Employers preferences: Employers prefer to give benefits
to employees as it enhances employees morale and works
as an effective motivational tool provided it is within the
accepted norms and limits

Factors influencing the decision to set up a particular employee
benefit and service program
Ability to pay
Needs of the employees
Bargaining strength of the trade union
Tax consideration
Social responsibility
The reaction of employees

Coverage of Benefits
1. Payment for time not worked

(a) Vacation
(b) Holidays
(c) Sick leave
(d) Miscellaneous types of non-working plans
(e) Shifts premium

2. Employee Security
1. Severance pay
2. Lay-off
3. Guaranteed annual wage
4. Supplementary unemployment benefits
5. Retrenchment compensation

3. Safety benefits

4. Health Benefits
(a) Medical benefit or insurance
(b) Managed care
Health maintenance organization
Preferred-provider organization

5. Maternity benefit

6. Dependent benefit

7. Insurance benefits
(a) Life insurance
(b) Vision insurance
(c) Dental insurance

8. Welfare and recreational facilities
(a) Educational assistance
(b) Legal assistance
(c)Housing facilities
(d) Financial services
(e) Employee assistance programs
9. Old age and retirement benefits
(a) Provident fund
(b) Pension
(c)Deposit linked insurance
(d) Medical benefit
(e) Gratuity
(f) Retirement counseling

Employee services
In addition to fringe benefits, organizations also provide
services that employees find desirable.
These services are provided at low or no cost to the
These are provided at the discretion of the management
with consultation with the trade unions.

These services include

Services related to type of work performed- includes subsidies for the purchase
and upkeep of work clothing and uniform.
Eating facilities
Transportation facilities
Child care facilities
Housing services
Financial and legal services
Recreational, cultural and social programs
Educational services
Medical services
Outplacement services
Flexible time
Cafeteria service

Fringe benefits in India
When a study was conducted , it was revealed that
19,60,981 companies pay little over 2148.3 million in
wages and fringe benefits per year in India.
The fringe benefits were high in mining and plantation
industries low and very low in manufacturing sector.

The quantum of the bonus varied sector to sector
A. Payments for time not worked
B. Statutory fringe benefits
C. Voluntary benefits

Problems raised by benefit programs
Charge of Paternalism = When too many benefits & services are offered to
employees , a feeling develops that employers are playing the role of parents
and workers are looked upon as children.

Excessive Expenditure = Its a very costly affair and involves a great deal of
paper work

Maintenance of least productive worker = With increase in benefits and
services employees ,particularly when they are not very productive ,tend to
stick to their jobs and are not interested in changing them.

Neglect of other personnel functions = Due to excessive concern from
management they stop emphasizing on other aspects of personnel programs
which can develop a concern among the employees .
Administration of benefits and services
Organizations have seldom established objectives, systematic plans and
standards to determine the variability of the program
Lack of employee participation
Managers take little interest in benefits program and trade unions are almost
hostile to schemes
Employees have little awareness about such programs
These problems can be avoided if following steps are taken:
- To establish benefit objectives
- To assess environmental factors
- To assess competitiveness
- To communicate benefit information
- To control benefit costs and evaluation