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The Impact of flexible benefit plans on employee satisfaction Essay


In today’s day and age, compensation packages have evolved to include perks and benefits that were unheard of a generation ago. With the world progressing and people’s wants and needs shifting, in order to stay competitive in order to attract, retain and motivate the kind of people who are committed to the success of an organization, it may necessitate a complete flexible compensation system. “Rethink, redesign and rebuild.” This is what came by 2010 World Economic Forum in Switzerland, employers also need a program that help increase productivity and reduce costs but traditional programs don’t reward employees for cutting costs or increasing profits, flexible benefit plans, have responded to this need. Over the last 35 years, flexible benefit plans have gradually appeared in response to this growing diversity in the North American workforce, Canada, Europe and Asia.

Research results suggest that employee motivation is enhanced in the presence of a flexible benefit plan and that flexible benefit plans may increase employee satisfaction. Advocates have also argued that these plans can help firms increase employee understanding of benefits and unify benefit programs, more frequently mentioned is the argument that these plans can help firms contain costs. Employees who were satisfied with the benefits they received were more likely to be committed to the organization. Studies show that the absence of adequate benefits and efficiency reward program for employees contributes to his dissatisfaction. However, the employees must understand how their involvement and attitudes affects the company’s profits. On the other hand, employers are more concerned with the impact benefits may have on their company and its profitability.

≠Employees’ benefits

In an organization perspective, compensation is often viewed as an important human resource management function where it emphasizes planning, organizing, and controlling various types of pay systems. Indirect financial compensation which is called benefit; it can be defined as all employers provided reward and services, other than wage or salaries. According to and Under the traditional benefits plan, all employees are given the same fixed bundle of benefits that is usually decided by the firms without employees’ involvement and output; these benefits suppose to meet the perceived needs. However in today’s day and age, compensation needs to update its packages. Studies also have shown that many variables such as age, sex, marital status, number of dependents, and years of services, can influence employee preferences for certain rewards, according to demographic variables, satisfaction and organizational commitment are also varies from person to person.

Studies have also shown that the more progressive organization needs the more flexible structure. New approaches is more consideration to this change is flexible benefits plan, Cafeteria plans provide a “menu”, or choice of benefits from which employees select As define flexible benefit plans as those that offer employees a choice between qualified (nontaxable) benefits and cash. FBPs have been on the increase in organizations to give employees more say over the conditions of their job, and to make the benefits better suited to the diversity of life-styles of their employees.

≠Employees’ benefits satisfaction

Pay satisfaction and attitudes towards benefits have emerged as popular variables for use in organizational research. Research has shown that to influence employee attitudes is the perception of the benefits offered by organization, pay and benefits and which in turn leads to strong organizational performance. As also and found that the compensation schemes may influence employees’ motivation, job attitudes, and behaviors and thus influence job satisfaction, productivity, staff retention and maintain competition. The logic underlying employer strategies to voluntarily provide benefits suggests that benefit offerings are associated with employee benefit satisfaction, which in turn is associated with attitudes and behaviors that serve the employer’s interests. Benefit satisfaction is important because of its potential links with other important constructs such as organizational commitment and organizational citizenship behaviors; pay satisfaction has been shown to be related to behavioral outcomes such as absenteeism and turnover.

Thus, an understanding of benefit satisfaction may lead to an increased understanding of other important employee attitudes and behaviors. This relationship between the benefits and employee satisfaction incorporates contributions from two-factor theory, need theories, intrinsic motivation theories and equity theory, hence its strength. Thus based on social exchange, is that when employees are satisfied with benefits provided to them, they are committed to the employer, remain with the employer, and perform their jobs well, which in turn leads to strong organizational performance. ≠Employee’ benefits and organization commitment:

One of the challenges facing modern organizations involves maintaining employee commitment in the current business environment. Findings suggested that mandatory and fringe benefits and also family-responsive benefits were having significant and positive relationship with organizational commitment. Studies have found that in general benefits facilitate organizational attachment by increasing organizational commitment, also lowering intentions to turnover. Employees’ perceptions about their benefits are related to job satisfaction and organizational commitment, Theory suggests two ways in which benefits might influence commitment and turnover.

As used data collected in a national survey of over 1500 US workers to examine the relationship between the availability of family responsive benefits and affective organizational commitment, they found a positive correlation between the availability of such benefits and commitment, even for those who would not benefit directly, they also argue that organizations that offer such benefits are perceived by employees as showing greater care and concern, and as being fair in their dealings with employees.

≠Flexible benefits plan and employee satisfaction

Give the employees the ability to select compensations package they prefer from groups of benefits established by the employers improving the ability of employee to make its own decision. Flexible plan may enhance satisfaction by making employees more aware of the nature and value of them benefits, employees are often unfamiliar with the value of their benefits packages, either in absolute terms or relative to the benefits received by others Flexible benefits plans promote an ethical organizational climate because the traditional plan ensures fairness by providing all employees with the same benefits while the flexible plan ensures quality of work life by providing employees with choices plan. Different in age, education, tenure, salary level and degree of family responsibility were also related to benefits satisfaction.

Thus, the perceived value of benefits from flexible plans should be higher compared to those in traditional plans as individuals choose only those benefits that they think they will utilize. One of few studies that directly involved flexible benefits examined the impact that adopting a FBP has on benefits satisfaction, they found that benefits satisfaction and understanding of benefits increased after the implementation of the flexible benefits plan. They maintain that the benefits satisfaction is a multidimensional construct comprising facets that reflect benefits coverage, adequacy and knowledge. The flexible plan should enhance ethics more as alternatives are made available to employees to overcome the constraints faced in the traditional plan. A cafeteria- style benefits plan is also expected to solve many problems because employees are often given flex points spend on the benefits that they want, the opportunity to choose benefits options makes the value of each option salient to employees. Current research linking flexible benefits with benefits satisfaction have shown inconclusive results.

As they found that when employees are allowed to participate in their organization’s decision-making processes, they often developed positive attitudes toward the organization, as well as they are committed to the employer, remain with the employer, and perform their jobs well, this in turn leads to strong organization performance. But the research that established that is a few. The reason about the positive relationship between the FBP and satisfaction is that the perception of FBP enhances distributive justice perception based on need because these plans address each individual employee’s specific need, whereby employees can choose benefits that are particularly relevant to their personal circumstance. In general, perceptions of organizational justice affect a number of attitudes, such as organizational commitment and intentions to quit found that flexible benefits enhanced employee’ feelings of commitment but found no significant relationships.

Similarly, benefits satisfaction was negatively related to turnover intentions, but other found no significant relationships, as a result of these conflicting results, there is a need to further test these relationships. Thus, according to the positively associate between flexible benefits and procedure justice and satisfaction and these positively related to commitment and negatively to intention to quit we assume that the FBP will be positively related to higher levels of organizational commitment and lower intentions to quit. Thus, we examine if employees’ satisfaction with their benefits and their perceptions of the value of their benefits are associated with higher levels of commitment and loyalty. Flexible benefits plans and employees behaviors toward their organization concerning commitment, intention to quit and the effect of demography variables in order to determine the differences and confirm the importance of the flexible benefits plan compare with traditional plan.


The company can use Flexible benefits schemes to strengthen communication with staff, by understanding the organizational decision-making processes in adopting flexible benefits plans, comparisons can be made to understand the costs and benefits of such plans from the organization’s points of view. We believe that our analysis of the impact of this type of benefits on organization commitment and intention to quit provides a useful framework for such efforts for administrators and academicians. Other areas for future research include evaluating the effects of other workplace democratic and ethical practices on employees’ work attitudes. Finally, job performance, turnover, and deviant behaviors have been found to be important outcomes of the effect of reward system in compensation management literature. The importance of these issues and them relationship with flexible benefits plan needs to be further elaborated in future research.

•Agarwala, T. (2003). Innovative human resource practices and organizational commitment: an empirical investigation. The International Journal of Human Resource Management, Vol. 14, Iss. 2, 175-197. •Dr. Zoubeir Ayache and Ghennam Naima The Impact of Flexible Benefits Plan on Organization Commitment and Intention to Quit.

•Brashear, T. G., Manolis, C., and Brooks, C. M. (2005). The effects of control trust and justice on sales person turnover. Journal of Business Research, 58, 241–246.

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