What are employee benefits and who really benefits from their provision?

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This month’s guest post on employee benefits is written by Stefano Gasparri, Senior Lecturer in HRM, UWE Bristol.

This blog brings to the fore the importance of employee benefits for organisations and employees, as part of their reward offering. I have recently authored two articles (details below) on employee benefits that draw out the advantages and disadvantages of this reward tool, from a critical perspective. Employee benefits have long constituted a classic human resources (HR) topic that also fits with the University of the West of England’s (UWE) research priorities on health and well-being. If you have an interest in employee benefits (you may be an employer, employee or someone who has a research interest in this area) then please read on. 

What are employee benefits and who really benefits from their provision?

Employee benefits usually include healthcare insurance and retirement plans, educational tuition reimbursement and recreational facilities, childcare and elder assistance, wellness programs, extra holiday allowances and shop discounts (SHRM 2018) and, as such, they have an evident impact on the life quality of their recipients. Often, there is also a positive effect on productivity, a key concern for business organisations and policymakers alike that HR experts have long discussed. The CIPD (2021), for instance, assumes that employee benefits constitute a typical tool of a reward strategy that aims to attract, motivate, engage and retain workers; at the same time, it acknowledges that not all benefits are the same: some are suited to achieve specific goals; others have a social purpose (e.g. sustainable mobility) and therefore are fiscally promoted (e.g. salary sacrifice schemes). What is certain is that employee benefits pertain to complex issues, so here is how I try to explore and clarify them.

My starting point is the work by Titmus (1976), who associated different benefits with three types of welfare – social (based on public agencies), fiscal (tax breaks) and occupational (industry-based). He illustrated that their mix is based on private and public sources, concluding that what really matters is how these two integrate: are they well intertwined, supporting each other, or in constant tension, undermining each other? I apply this reasoning to employee benefits, which I frame in terms of ‘company welfare’ and consider a form of occupational welfare whose diffusion depends on measures of fiscal welfare and affects the provision of social welfare. Then I focus on what drives changes of this welfare mix and note that interest organisations play a key role. The literature here offers contrasting examples: it can be workers’ mobilisation and their ability to forge cross-class alliances to push for the egalitarian social policies and benefits, as occurred in Sweden throughout the XXth c. (Esping Andersen 1985); vice versa, it can be employers’ resistance to public welfare the main reason why companies emerge as the gateway to benefits, as happened in the US after WW2 with private pension and health insurance plans (Swenson 2002). Eventually, the question that underlies my research interest in employee benefits is the following: who benefits the most, amongst individuals, business organisations and/or society as a whole, from the diffusion of employee benefits and how/why the transformations of such benefits over time alter this? The two articles I wrote contribute to answer this question in two different ways, as illustrated in the next section.

Insights on employee benefits from two articles about ‘company welfare’ in Italy

The first article, published in the Management Revue – Socio-Economic Studies, examines the changes of employee benefits in light of the controversies associated with paternalistic work regimes (Thompson 1978; Dworkin 2020). It reviews historical (industrial, scientific, bureaucratic, sophisticated) and recent (libertarian) variants of paternalism (Jacobi 1998; Kaufman 2001; Thaler and Sunstein 2005), eventually framing contemporary developments in terms of ‘market paternalism’. This is a rather counterintuitive neologism that appreciates the marketization of employee benefits and the measures of fiscal and corporate welfare that support it (Farnsworth 2013; Morel et al. 2018; Greer and Umney 2021). Evidence to substantiate this argument comes from an overview of historical forms of paternalism and the evolution of company welfare schemes in Italy.

The second article, published in the Journal of Industrial Relations, applies the concept of ‘frames of reference’ (Fox 1974; Heery 2016) to explain the growth of company welfare in Italy after the 2008 crisis (Colombo and Regalia 2016; Sacchi 2018). The analysis considers three phases: in the first, a path-breaking case, the eyewear conglomerate Luxottica, launches an innovative set of employee benefits (Eurofound, 2012), nourishing a debate on the potential of company welfare (McKinsey, 2013; Ferrera and Maino, 2014); then, Renzi’s government promotes company welfare through tax breaks in the 2015-2016 budget laws (Eurofound, 2016); finally, trade unions try to affect the diffusion of company welfare, displaying contrasting ideologies as well as pragmatic joint solutions in the process. Overall, two contiguous sub-frames – ‘consultative unitarism’ and ‘collaborative pluralism’ (Bray et al. 2020) – offer the mainstream justification to the events and the policy debate around them (Heery 2016; Gasparri 2017). A critical interpretation is present too, suggesting that the recent success of company welfare schemes is due to the mobilisation of a political and economic elite and results in few cases of positive employment relations alongside broad social inequalities and economic imbalances (Johnstone and Wilkinson 2016).

Conclusions and implications for practice

My research on employee benefits and company welfare examines crucial aspects underlying the role of business organisations in health and wellbeing. It contributes to clarify the interconnections between private and public sources of welfare, a topic attracting renewed attention (Natali et al. 2018; Seelkopf and Starke 2019) and that the Covid-19 pandemic makes even more topical (e.g. my latest research is on the role of interest organisations in national immunisation campaigns and, wherever present, company vaccination programmes). At the same time, the analysis has implications for practice, which can be summarised in the following four recommendations.

  • Put employee benefits in perspective. The history of company welfare displays very different forms of benefits, whose rationale ranges from enlightened to authoritarian, from residual to rewarding, each time expressing a peculiar relationship with other welfare measures, either positive or negative. It is important for practitioners to understand the context they operate in and how employee benefits fit in: if inclusion and sustainability are key to today’s business, employee benefits are to be shaped accordingly.
  • Beware of tax breaks favouring employee benefits, especially in the medium term. The more employee benefits are normalised through tax incentives, the less they are an effective lever for enhancing employee productivity. When benefits interfere with wage dynamics, expect further scrutiny, disputes and dissatisfaction.
  • Watch out for employee benefits experts! The market for welfare services is enlarging for many reasons (e.g. ageing workforce, tight public budgets) and constitutes a massive business opportunity for specialised providers, often multinationals, tied with large consultancy firms, the finance industry and academic thinktanks. This might be far from convenient to employers, who are charged fees to offer benefits to their own employees. Whether the tax incentives will offset these fees is uncertain.
  • Is a win-win scenario possible? Within companies, employees tend to welcome such initiatives: when wages stagnate, the offer of employee benefits and their fiscal convenience look attractive. Besides, on some occasions, trade unions have a say on the design and implementation of such schemes, pressing for the creation of industry-wide negotiated programmes. However, looking beyond the organisational level, company welfare schemes risk provoking social inequalities and economic imbalances. Taxpayers in Italy, for instance, are funding those companies in a better position to take advantage of the tax breaks to employee benefits, that is mostly large manufacturers and finance players in Northern Italy, arguably the least in need of such support across the country.

References

Gasparri, S. (2020), Employee benefits and paternalistic work regimes. Historical and contemporary perspectives on company welfare in Italy, Management Revue – Socio-Economic Studies, 31(4): 465–488.

Gasparri, S. (2021), Framing work and welfare. Insights from the growing relevance of company welfare in Italy, Journal of Industrial Relations, 63(2): 235-262.

Gasparri 2020 —> https://doi.org/10.5771/0935-9915-2020-4-465

 Gasparri 2021 —> https://doi.org/10.1177/0022185620973685 (open access)

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