Employee Benefits: Meaning, Benefits, Objective and Other Details (2024)

Read this article to learn about the meaning, features, objectives, principles and problems of employee benefits.

Meaning of Employee Benefits:

In addition to compensation in the form of wages and salaries, organisations provide workers with various services and programmes known as employee benefits. Previously these services and programmes were known as fringe benefits. Now these have become part of compensation package hence the word fringe in now not used and not appropriate even. Nowadays employee benefits are regarded as an important tool to retain employees and to improve the bottom-line of the organisation.

Benefit programmes play a vital role to maintaining an employee’s standard of living when he suffers from health problem. The organisations that provide these benefits to their employees have improved image of caring employer. These benefits are the advantages that accrue to an employee apart from salary. They are not related to performance. According to co*ckman, “employee benefits are those benefits which are supplied by an employer to or for the benefits of an employee, and which are not in the form of wages, salaries and time rated payments.”

According to C.B. Mamoria, employee benefits are, “primarily a means in the direction of ensuring, maintaining and increasing the income of the employee. It is a benefit which supplements to a worker’s ordinary wages and which are of value to them and their families in so far as it materially increases their retirement.”

Characteristic Features of Employee Benefits:

(1) Employee benefits are those payments which are paid to him in addition to the wages and salary he receives.

(2) These benefits are not given to the worker for any specific performance of the jobs but they offered boosting his interests in work and make the job more productive for him.

(3) Employee benefits represent labour cost. Whatever benefits are offered to the employees in kind or in money terms account for cost.

(4) These benefits are offered to employees irrespective of their merit. Merit or non merit is not the criterion for these benefits.

(5) Benefit given by the employer is meant for all the employees and not a specific group of employees.

(6) This is a positive cost incurred by an employer to finance employee benefit.

Common Employee Benefits:

Following are some of the benefits offered by employers to employees:

(1) Free lunch or lunch at subsidized rates offered to the employees.

(2) Free medical facilities to the employee and the members of his family.

(3) Employees are insured for life against accidents or illness. In India there is a provision for this under Employees State Insurance Act.

(4) Provisions for retirement benefits such as provident Fund, gratuity, pension etc.

(5) Leave Travel Allowance scheme is implemented by many govt. and non govt. organisation counts for paid holidays to the employees.

(6) Maternity leave for 90 days is given to female employees.

(7) Free education to the children of employees by providing educational allowance to the employees. Scholarships to the meritorious students of the employees are also given. Free transport service is provided to the school and college going students of the employees by the employers. This service is also provided to the employees for attending their duties in the office or factories. This service is provided freely in some companies and or at subsidized rates in other organisations.

(8) Housing accommodation is yet another benefit provided to the employees at subsidized rates.

(9) In some organisations where highly qualified employees are required, for their education study leave is granted. This is also a paid leave. In some cases company sponsors the employee for higher studies and bears all the expenses of his education.

(10) Subscriptions for professional association is also borne by the employers.

(11) Recreational facilities are also provided by the employers.

Objectives of Employee Benefits and Service Programmes:

It is necessary to ensure the commitment and sense of belonging to the organisation of the employees. This is being attained by the organisations through floating some novel schemes for the benefit of the employees.

The following objectives are achieved through benefit and service programmes:

(1) To attract and retain the best employees in the organisation.

(2) To fulfill the needs of the employees which he himself cannot provide such as protection against accidents and hazards?

(3) To provide employees with such benefits which are prevailing in similar organisations.

(4) Special privileges are provided to the employees for holding a special position in the organisation.

(5) Some benefits are provided at the behest of the unions first to maintain good harmonious industrial relations.

(6) Some special allowance provided to the employees to enhance their standard of living so as to increase their quality of working life.

(7) Providing benefits to the employees enhances the image of the organisation in the eyes of the people in general and the consumers in particular.

(8) By providing benefits to its employees the organisation fulfill their social commitment as contained in the Article 43 of the Indian constitution which states, “— All workers should be given a living wage, conditions of work ensuring decent standard of life and fuller enjoyment to ensure social and cultural opportunities.”

(9) Benefits protect precious human resources during bad phases of life or period of contingencies of life. These benefits keep the human resources in ideal conditions which in turn increase the output. This is must for increase in growth of economy of the country.

(10) The benefit by way of spending on the training and development of the employees and for improving the working conditions are provided.

(11) Special allowances are given to supplement their regular income so that they can participate in social and cultural activities.

Principles of Benefits:

The principles underlying benefits are as under:

(1) Benefits and services must be provided with the genuine intention of promotion of employee welfare and these benefits should not be considered as a matter of charity.

(2) Benefits must be adored by the employees and should satisfy their need.

(3) The basis of benefits must be broad so that large number of employees should be covered by them.

(4) Cost effectiveness should be taken into account while floating scheme of benefit.

(5) Employees must be aware of the use of these benefits.

(6) Effective planning for providing benefits should be effected.

(7) Before deciding upon any benefit the union should be taken into confidence and its suggestion thereof should be taken into consideration. This facilitates smooth functioning of the scheme.

(8) A quotation from Peter Drucker throws light on principles of benefits. He said, “Larger part of industrial growth is obtained not from more capital investment but from improvements in men. We get from men pretty much what we invest in them.”

Guidelines for Effective Benefit Programme:

Following are some of the useful tips to make benefit programme more effective.

(1) Benefit programme should be treated as a worthy tool of Human Resource Management.

(2) Benefit programme should accommodate future. It should be taken up as policy of the organisation.

(3) Benefit programme should now be competitive as the labour is globally mobile.

(4) Beneficiary of the programme should be individual employee rather than group.

Problems in Adoption and Administration:

Several problem crops up in adoption and administration of benefit plans. Some of them can be listed as under.

1. Feeling of Rightful Claim:

The organisations adopt several benefit progammes for the welfare of their employees on humanisation grounds. But employees considered them as their right. If some programme is withdrawn the employees start agitating for its continuity. The organisations face severe problems in dealing with such attitude of the employees.

2. Pressure from Trade Unions:

Most of the organisation succumbs to the pressure from unions for implementation of certain programmes. In such cases programmes are designed with fixing objectives of the programmes or setting goals. Such programmes become burdensome and are not cost effective.

3. Apathy of Employees:

Benefit programmes meant for all employees but those cannot afford the benefits feel apathetic about them. e.g.: the old women and who can’t conceive feel that maternity benefit is useless and irrelevant.

4. Over Emphasis on Benefit Programme:

Some organisation overemphasize the implementation and administration of benefit programmes. In this exercise managers neglect other HR functions. This sometimes leads to development of feeling of insecurity among employees and their productivity decrease.

5. No Cost Benefit Analysis:

Organisations have to incur huge amount on benefits but they ignore the advantages accrue to them. This is because before implementation of these schemes cost benefit analysis is not made. Each benefit programme should motivate employees for more work and increased productivity.

For avoiding lapses on the part of management of benefit programmes there should be mechanism of evaluation and control which is possible if benefit objectives are set, environmental factors and competitiveness of the programmes are properly assessed. These benefits provide monetary gains to the employees who help in retaining the employees and prevent labour unrest.