In this article, We are going to discuss about Advantages and Disadvantages of Employee Benefit Plans. These can take the form of medical insurance, paid leaves, retirement entitlements, wellness arrangements and so on. The employer has to take a call on which of these employee benefits that they are willing to provide. To what extent do the advantages outweigh the disadvantages of providing employee benefits plans? In this article, we shall briefly discuss some of the pros as well as cons of a company providing benefit plans to its workers.

Advantages

Following are some of the advantages that accrue to companies for providing employee benefit programs:

Social Security

A salary is not all that an employee looks for in today’s job market. An important consideration for the white-collar employees is that they should have access to certain forms of social security. This is, after all, what sets apart the organized work force from the unorganized sector.

In case the employer is providing benefits such as insurance or disability protection, or retirement benefits, the employee might have a greater incentive to stay at the same job. It is a misconception that an extraordinarily high salary is all that most workers are after. The high salary would mean for little, if all of it goes into payment for rent, insurance, and saving for retirement. On the other hand, if they have a respectable salary along with social security benefits, workers are more likely to continue in the same employment.

Spirit of ownership

Benefits such as bonuses upon meeting the company targets, or salary raises keep employees motivated to perform at their optimum level. Even more so, measures such as profit sharing and stock ownership encourage the senior management to have a spirit of ownership in the company. They see their own personal goals as aligned with the vision of that of the company. There is an added incentive for putting more effort in to the growth of the company. This is because they develop a sense of ownership towards the company.

Potential attraction for new Recruits

While prospective employees are looking for new jobs fresh out of graduation, they will invariably consider the employee benefits that are on offer by various companies. Word of mouth helps to spread information about which company has what employee benefits. Young and impressionable employees are likely to put more effort into being selected by the companies that offer the benefit packages that they desire.

Healthier Staff

Stress and fatigue are a common result of all the strain that results out of the rigorous work that most employees have to undergo. It is in the best interest of the company to provide the employees with regular health checkups, and access to medical facilities. As employees grow older, their immune systems grow more susceptible to disease. This can especially be a threat in industries which are exposed to waste, smoke or other hazardous material.

Similarly, older employees can develop fatigue. It would be extremely expensive to replace their experience. Hence, a company which invests in the health of their employees by providing them access to healthcare either through direct access to hospitals or through financial subsidy, is likely to enjoy more dedication by its senior employees.

Reduced operating costs

It is clear that the employer needs to see the worker as more than a resource. On the contrary, they need to invest in the growth of the employee. One of the potential benefits of providing educational as well as training benefits to the employees is that it reduces operating costs for the company as a whole.

In case there is not adequate motivation among the employees, more personnel will have to be recruited in to the line management. Greater input would be required not just in terms of recruiting human resource, but also in financial outlay in other departments, such as marketing and sales operations. On the other hand, if the employees are allowed to pursue education in their field of work, they are likely to take greater interest in the field of company operations, and perform with greater zeal and vigour.

Helps reduce employee absenteeism

An employer needs to maintain a balance: they need to be strict with their employees as far as work and deadlines go, but at the same time they also need to be attentive to their personal needs. In case employees feel a sense of disconnect with their work, they are likely to find more reasons to be absent at every available opportunity. Policies such as leave encashment can be an effective counter to this issue.

Improves morale and productivity

Research has demonstrated that having employee benefits such as flexible working hours, or growth opportunities, helps to keep the employee morale high. Often, work tends to become monotonous, and people lose sight of why they are stuck in a certain job. This needs to be countered through creative employment programs by the company, while of course, not compromising with the rigour and professionalism that is required for maintaining industry standards. 

The more the company provides incentives for career growth, the more motivated are the employees going to be to perform. A liberal approach to work along with flexibility helps the employee to feel valued at their organization. They feel a greater sense of self-esteem, and do not see themselves as merely cogs in a profit making machine. In case employee benefits are able to promote a greater sense of identity among the workers, they perform their tasks with greater efficiency and responsibility.

Disadvantages

Providing employee benefits can have its own issues. Can the company really afford to provide the programs without affecting its budget? Will there also be some issues which might affect the workforce? In this section, we shall discuss the disadvantages of providing employee benefits.

Costs

The cost involved in providing the benefits can often tend to outweigh the advantages. For smaller companies, the annual turnover might simply not allow as much investment in employee welfare. Most of the revenue would go in to maintaining the profitability of the company against existing competition in the market. The company cannot sacrifice its economic feasibility in the market for employee benefits, which it might not be in a position to handle.

Legalization Issues

There can be serious legal issues that the company might have to face with regard to providing certain employee benefits. A company might decide that the benefits are not worth the legal hassle, after all. For instance, the provision of health insurance requires not just a lot of bureaucratic paperwork, but it also requires verification on the part of both insurance companies, as well as hospitals. In case there is a lapse in attending to the employee benefits that have been promised, there might be legal complaints, and the company might have to deal with notices from several quarters.

Changes to the Plans are difficult

In case the company has offered certain employee benefits, these might have to be mentioned in the terms of the contract. However, with a change in circumstances, the organization might find it difficult to re-negotiate the terms. For instance, rising insurance costs might require the company to have the employee part of the costs. However, in case this was not part of the original agreement, it would lead to not just contractual issues, but also disillusionment on the part of a valued employee.

Maintenance issues

In case the employer decides to provide facilities within the campus, say, gyms or cafeteria, these would require regular maintenance. The organization might even have to establishment separate departments with the purpose of just looking into these extra commitments. Thus, the company would have to bear overhead costs per employee in addition to the traditional departments which mainly keep the company operational.

Improper handling of benefits can cause litigation

In case the company has offered certain benefits to the employees, and is unable to provide the same, it can lead to complications. The employee feels entitled to the benefits, and they might file a lawsuit for not getting the same. Lawsuits can tend to be extremely expensive, not just in terms of finance, but also in terms of reputation. The lawsuits would put great pressure on the legal department, and it would distract them from their existing responsibilities. It could also lead to a campaign of negative feedback and misinformation, which would harm the potential of the company getting fresh new recruits in the future.

Perception issues

The employee benefits programme, if not implemented in an equitable manner, might lead to jealousy, and insecurity among employees. There might be the complaint that certain employees are enjoying greater entitlements. Moreover, certain employees might also feel hard done by, in terms of the perks that they are given access to.

Conclusion

On the whole, if the company is scaling its operations, it should definitely consider providing certain employee benefits strategically. While it might not be as feasible for smaller companies, it is an indispensable provision for the established legacy companies. Employee benefits are a decision to be made by the senior management of the company based on their vast experience, and a careful evaluation of the financial and legal obligations that the company is willing to take, based on its existing resources.