Just benefits? Employee benefits and organisational justice

Pages708-723
Published date03 June 2019
DOIhttps://doi.org/10.1108/ER-11-2017-0285
Date03 June 2019
AuthorMelinda Laundon,Abby Cathcart,Paula McDonald
Subject MatterHR & organizational behaviour,Industrial/labour relations,Employment law
Just benefits? Employee benefits
and organisational justice
Melinda Laundon, Abby Cathcart and Paula McDonald
School of Management,
Queensland University of Technology Business School, Brisbane, Australia
Abstract
Purpose Employee reward is central to contemporary debates about work and employment relations; and
in the context of ongoing wage stagnation,benefits represent a growing proportion of total reward value. Past
studies have shown that when employees perceive benefits as unfair, this has a negative impact on
engagement, performance and retention. Yet no previous studies have explored the components of a benefits
system that influence employeesfairness concerns. Using organisational justice as a theoretical lens, the
purpose of this paper is to examine how dimensions of an employee benefits system influence the fairness
perceptions of employees.
Design/methodology/approach This paper reports on a qualitative, inductive case study of the benefits
system in a large finance and insurance company, drawing on three data sources: interviews with the
companys benefits managers, organisational documents and open-text responses from a benefits survey.
Findings Three dimensions of the benefits system strongly influenced fairness perceptions constraints
on accessing and utilising benefits; prosocial perceptions about the fairness of benefits to third parties; and
the transparency of employee benefits.
Practical implications The study informs organisations and benefits managers about the important role
of supervisors in perceived benefits usability, and how benefits may be managed and communicated to
enhance employee fairness perceptions.
Originality/value This study makes a conceptual contribution to the benefits literature through a detailed
exploration of the type of organisational justice judgements that employees make about benefits; and
identifying for the first time prosocial fairness concerns about the impact of benefits on third parties.
Keywords Employee benefits, Compensation, Rewards, Organizational justice
Paper type Research paper
Introduction
In a time of prolonged wage stagnation in many industrialised economies, employee benefits
are increasingly important to employees. Benefits have been growing as a proportion of
remuneration since the 1990s, with estimates suggesting they represent 2030percentoftotal
compensation costs in the USA, UK and Australia, and 1020percentinmanyWestern
European nations (Shields et al.,2016;Dulebohnet al., 2009; Tremblay et al., 1998). Yet there has
been a significant paucity of scholarly attention afforded to benefits (Dulebohn et al., 2009;
Deadrick and Gibson, 2009). This is perhaps because benefits have been viewed as a relatively
unproblematic and inconsequential aspect of the employment relationship a simple HR issue,
rather than an increasingly important part of the rewardeffort bargain. Alternatively, the dearth
of empirical studies may be because benefits, like pay, is an area of employment practice that is
relatively hidden, making data difficult to access (Dulebohn et al., 2009; Gupta and Shaw, 2014).
The heterogeneity of employee benefits also presents challenges for research. Benefits are
broadly definedas non-wage compensation outside of base-level pay and performance-linked
rewards (Australian Bureau of Statistics,2013; Bureau of Labor Statistics, 2015). Non-financial
benefits include health and well-being plans, career development initiatives or paid leave
for training,whereas financial benefitsinvolve indirect compensationsuch as superannuation
or pension contributions. Employee benefit plans differ between jurisdictions; depending, for
example, uponstatutory requirements for employersto provide retirement plansor insurance.
Employee Relations: The
International Journal
Vol. 41 No. 4, 2019
pp. 708-723
© Emerald PublishingLimited
0142-5455
DOI 10.1108/ER-11-2017-0285
Received 29 November 2017
Revised 25 September 2018
Accepted 3 October 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0142-5455.htm
One of the authors received support for this research through an Australian Government Research
Training Programme (RTP) Scholarship.
708
ER
41,4
They usually include both legally required employee entitlements (statutorybenefits) such as
health insurance or leave entitlements and additional, voluntarily provided non-statutory
benefits. Types of benefits also vary by industry and organisation and are influenced by
labour marketconditions such as competitionfor talent, and managementperceptions of what
will produce favourable employee outcomes (Dulebohn et al., 2009). Benefits are often
consistentacross large cohorts of employees(such as ongoing workersor employees beyond a
certain pay grade), rather than being tailored to individuals. This enables organisations to
derive value from economies of scale at a low cost to the organisation.
Employee perceptions of the justice (or fairness) of the employment relationship is a
central concern of employment relations (Ackers and Wilkinson, 2008). There is evidence
from prior studies that benefits influence organisational justice perceptions (Tremblay et al.,
2000), which in turn affect a range of employee and organisational outcomes such as job
performance, engagement and turnover intentions (Cohen-Charash and Spector, 2001;
Colquitt et al., 2001). Despite the importance of benefits to judgements about fairness and
unfairness, no research to date has examined how the particular dimensions of a benefits
system influence these perceptions.
The case study reported in this paper draws on organisational documents, interviews
with benefits managers and qualitative responses to a recent employee benefits survey
conducted in a large finance and insurance services company, to examine the question:
RQ1. How do the dimensions of a benefits system influence employee fairness perceptions?
The organisation was an ideal setting in which to study employee perceptions of a benefits
system in context because it features a well-established and comprehensive system of
employee benefits. The rich and varied data sources, including those derived from the voices
of employees, provided insights into employees organisational justice perceptions relevant
to the distinct components of the companys benefits system. The findings revealed three
dimensions that are strongly influential constraints on accessing and utilising benefits;
prosocial perceptions about the fairness of benefits to third parties; and the transparency of
employee benefits. The paper makes a threefold contribution to the employment relations
literature. First, the findings provide detailed insights into employee fairness perceptions
regarding benefits; showing that all four organisational justice types are present. Second,
the study reveals employeesaltruistic concerns about the way their organisations benefit
system impacts others. Third, the study reinforces the importance of an under-examined
aspect of informational justice by highlighting the crucial role of transparency in
communicating benefits policies in shaping employee perceptions.
Employee benefits
Although a key aspect of the employment relationship and an issue of significant
practitioner concern (Deadrick and Gibson, 2009; Gupta and Shaw, 2014), employee benefits
remain neglected in the scholarly literature. Benefits are often briefly discussed in the total
reward managementliterature, some of which explores the optimal mix of various reward
components including benefits (Fuehrer, 1994; Kao and Kantor, 2004). This tendency to
examine reward as a part of the bundle of high performance work practices has resulted in
insufficient exploration of specific components of reward systems (Guest, 1997; Jiang et al.,
2012). Additionally, the reward literature tends to focus on organisational-level issues such
as fit with strategy and implementation (Armstrong, 2012; Gomez-Mejia et al., 2004), while
neglecting analysis at the level of the employee.
While some pay and compensation literature deals with benefits, compensation itself is
an under-researched field, with research into employee perspectives on compensation
particularly lacking (Gupta and Shaw, 2014). Satisfaction with employee benefits has,
however, been established as one of four key dimensions of overall pay satisfaction, along
709
Employee
benefits and
organisational
justice

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