The issue of employee compensation has always occupied a central position in human resources management. Compensation refers to both financial returns and other (in)tangible benefits which include: paid vacations, sick-off days, insurance, pensions plans among others (Pegg, 2009). According to Cole and Flint (2004), compensation practices vary from one organization to another.
Consequently, these practices impact differently on organization’s performance. This notion implies that, a comprehensive and strategic compensation benefits plan is an essential human resource tool. However, it is imperative to mention that, human resource managers are often faced with a huge task, while deciding whether to adopt either the flexible or standard compensation benefits plan (Anvari et al., 2011). As epitomized above, research has shown that employers’ utilize compensation benefits as a bait to attract and retain employees (Khera, 2011).
However, human resource managers ought to be knowledgeable about the impact of flexible and standard on employee productivity. This will enable them to chose the plan that is likely to bring the most benefits to their organization. Against this backdrop, this study was carried out with an aim of reviewing documented literature concerning the impact of flexible/standard compensation and benefits plans on organization’s competitive advantage.
This objective was formulated based on the notion that workforce composition is constantly changing, and that today’s workplace consists of diverse employees’ with distinct benefits requirement. Apparently, this variability calls for a flexible benefits plan in order to ensure that the needs of these different generations are met. For instance, while Generation X and Y may be concerned with flexible pension plan benefits, Baby Boomers may be interested in car insurance plans. Subsequently, in order to accomplish the above objective, four articles were selected from various peer reviewed journals.
To begin with, Cole and Flint (2004) study adopted organizational justice model to explore the relationship between compensation benefits plan and employee perceptions. These authors considered both the flexible and standard plans to test their hypothesis.
Cole and Flint (2004) study indicated that, flexible benefit plans were perceived positively by a great number of employees, and that human resource manager communication about benefits cultivated even more positivity among employees. Furthermore, employees under flexible benefits plan confessed that they considered their employer to be considerate about procedural justice. Cole and Flint (2004) concluded that, such employees were likely to experience high levels of job satisfaction.
On the other hand, Pegg (2009) carried out an empirical study to investigate the impact of compensation benefits on employees’ and organization’s performance. Furthermore, the author also explored benefits communication models and their effects on employees’ satisfaction. The study which was carried out among AIG UK employees elicited that employees’ perceived compensation benefits as crucial; thus, if their needs are not met, organization performance is likely to be impacted negatively. Most importantly, employees aired the concern that human resources managers should communicate openly about these benefits (Pegg, 2009).
Similarly, Anvari et al. (2011) carried out their study among medical universities employees to investigate the relationship between strategic compensation practices and employees’ commitment to their organization. The results of this study revealed that strategic compensation practices increased employees’ psychological fulfillment and this situation escalated organization commitment levels (Anvari et al., 2011). These findings divulge that strategic compensation practices can be utilized to reduce staff turn-over, since committed employees are unlikely to abandon their jobs.
Furthermore, Khera (2010) study investigated the impact of human resources on employees’ productivity. The author compared human resource practices among three commercial banks in order to identify the key HR practices that increased employee productivity. The results of this study revealed that human resource practices had a direct impact on employees’ productivity such that attractive practices increased productivity and vice versa.
In a nutshell, it is evident that strategic compensation and benefits plan are the essential tools for managing human resource capital. As revealed above, human resources practices are significant determinant of employees’ productivity. In addition, these studies concur that most employees would opt for flexible instead of fixed benefits plans.
Anvari, R. et al. (2011). The relationship between strategic compensation practices and affective organizational commitment. Interdisciplinary Journal of Research in Business, 1(2):44-55.
Cole,N.D. & Flint, D.H. (2004). Perceptions of distributive and procedural justice in employee benefits: flexible versus traditional benefit plans. Journal of Managerial Psychology, 19 (1):19–40.
Khera, S. N. (2010). Human Resource Practices and their Impact on Employee Productivity: A Perceptual Analysis of Private, Public and Foreign Bank Employees in India. DSM Business Review, 2(1):65-76.
Pegg, T. (2009). Creating engagement through employee benefits. Strategic HR Review, 8(2):5–12.