It’s no secret compensation is a key element in job satisfaction. Part of that compensation is employee benefits, which makes up 38% of an employer’s total compensation cost. That’s a major financial commitment for companies.
These benefits can influence employees across the entire company. Despite its importance, employee benefits research has been fragmented, making it unclear how benefits impact individual employee outcomes.
Culverhouse School of Business Professor of Management Michael T. Ford was part of a research team that addressed this using social exchange theory (which explains how relationships are built on mutual give-and-take) and conducted a meta-analysis of various studies on employee benefit experiences. The research appeared in the Journal of Applied Psychology.
They examined how the availability, use, and employee perception of benefits influence attitudes, well-being, and commitment to the organization. The analysis included 134 studies with a total of 260,604 participants, offering valuable insights into how benefits impact employees.
Here are some of the key findings:
The availability and employee perception of benefits significantly influence job satisfaction, commitment, and well-being. The extent to which employees use benefits does not strongly impact these outcomes. Benefit availability and how employees view those benefits were more important.
“You might think an employee would likely react more positively when they use a benefit because they are actually getting something out of it,” Ford said. “However, the availability and quality of the benefits experienced by the employee correlates to their intent to stay, their commitment and satisfaction about as much as pay itself.”
The way employees evaluate their benefits partially affects their feelings of support from the organization. This, in turn, influences their job satisfaction and commitment.
Different benefits have different impacts. Training benefits, for example, are more strongly linked to job satisfaction, commitment and engagement, whereas healthcare and retirement benefits are more closely associated with employees’ decisions to stay or leave a company.
Since how employees feel about their benefits matters more than just having them available, companies should ensure clear communication about the value of their benefits packages.
Organizations should also consider their objectives when designing benefits, ensuring they contribute to employee retention, satisfaction, and well-being. Benefits should be seen as part of a comprehensive approach to employee relations, alongside salary and working conditions.
Because employee benefits are a major component of compensation and significantly affect job satisfaction, commitment, and well-being, organizations should pay close attention to how employees perceive these benefits. By doing so, companies can enhance employee experiences and strengthen their workforce relationships.
Contact the Author
Edwin Stanton, eastanton@ua.edu