Chapter 2

Review of Related Literature

This chapter discusses the related literature and studies relevant to the current

undertaking. The reviewed literature and studies are presented and examined under the following

subheadings: identified employee benefits packages, employee benefits and productivity,

employee benefits and work motivation, employee benefits and job satisfaction.

Implementing Employee Benefit Packages

Employee benefits are the way to ensure, maintain, and increase the employee's income,

as stated by C.B. Mamoria (2009). It is referred to as fringe benefits, benefits in kind, perks, and

perquisites by Galanaki (2019). Employee benefits are additional non-wage compensations

provided to employees other than their regular salaries. These cater to employees' personal needs

and serve as a means of enhancing their commitment to the company indicating the employer's

concern towards the well-being of the employees. Moreover, a study by Amarah and Ekere in

2014 mentioned the need for employers to provide employee benefits as it takes a significant part

of the compensation package and is of great importance to both the employer and employee.

Employee benefits are either mandatory or voluntary. Mandatory benefits are benefits

employees are required to be provided by law. In contrast, voluntary benefits are not required by

law but are provided as an inducement to work for the employer. In other words, employee

benefits may be guaranteed in the contract or taken voluntarily from the company’s profits

(Spisakova, 2019). Common examples of mandatory benefits include the minimum wage, social

security, premium pay, and regular break periods. For voluntary benefits, common examples are

life and dental insurance, travel insurance, and long-term care coverage.
 An article by Amah et al. in 2013 found that piece rates, commissions, tips, bonuses, stock

options, and other benefits provided by employers, such as health, life, and dental insurance,

retirement plans, maternity leave, and child care, can have a significant impact on employee

performance and commitment. The article stated that employee benefits are provided to increase

economic security among employees, discourage unionization, be competitive enough to both

attract and retain competent workers, provide for employees personal welfare, and in doing so,

may improve worker's retention across the organization. Amah et al. (2013) also added that

offering fringe benefits may promote more significant work effort. Furthermore, SoonYew et al.

(2008) suggested that mandatory and fringe benefits had a substantial and positive relationship

with employee commitment and organizational performance. Compared to required benefits,

fringe benefits had a more vital link, implying that their loyalty to the firm is higher when

employees receive more excellent fringe benefits.

In summary, employee benefits are programs an employer gives for an employee's

benefits that serve as a protection from financial risks apart from wages, salaries, and time-rated

payments. These benefits include housing, health insurance, family and accident insurances,

retirement benefits, sick leave, vacation leave, education fund, social security, and other

specialized benefits. The principal purpose of providing employee benefits packages is to

increase productivity, motivate employees and promote job satisfaction.

Employee Productivity

Organizations use various compensation schemes such as payments and benefits to

increase employee productivity. The goal of these compensation schemes is to provide a reward
based on individual performance. Hence, several studies have debated the same topics on how

offering benefits to employees will encourage them at work, and journals published recently are

presented to create a connection to the theme.

A study by G. Kibet and A. Kalei in 2020 reveals that employee benefits and productivity

are linked significantly. The study's findings suggested that social security, housing, and health

care boost the productivity of an individual. Employers should also raise employee benefits to

cover all employees, strengthening their commitment to their work and resulting in a

considerable rise in its productivity. Similarly, a research study by Sreenath et al. in 2019

concluded a strong relationship between employee benefits and productivity. Sreenath et al.

(2019) enumerated different types of employee benefits: leave policy, educational benefits,

recognition, and mobile and internet benefit, and it shows that these benefits significantly affect

the performance of employees. The researchers also mentioned that perks and recognition

motivate employees more, thereby increasing their productivity at work.

MetLife (2020) cited that employee recognition, competitive salary, and a comprehensive

benefits program are the top drivers of productivity, engagement, and loyalty. Zirra, Mambula,

and Anyatonwu (2019) suggested that organizations provide health protection, retirement

benefits, and recognition programs. Providing health care benefits to its employees fosters a

sense of loyalty among them. Employees will be attracted to and retained by a good retirement

plan, and employee recognition systems will stimulate employees' interest, resulting in increased

productivity.

According to Chukwudumebi and Kifordu (2018), cash bonuses are the most effective

productivity motivators, especially when tied to performance. Fringe benefits like end-of-year

and other bonuses, for example, promote employment stability and considerably drive employees
towards increased productivity. A link between fringe benefits and welfare matters of the

employees as the author of the journal stated that canteen services, one of the employee benefits,

saves time from looking for lunch outside, improving the performance of an individual thus

viewed as an effective welfare weapon for increased productivity.

To summarize, one of the employers' concerns about benefits is that they promote

employee productivity. Employee recognition and health care benefits constitute an essential part

of a comprehensive benefits program because these promote loyalty and engagement among the

employees, thus increasing productivity in the workplace. Monetary compensation such as cash

bonuses enhances job security and encourages employees to be more productive. An association

also exists between benefits and the well-being of employees because when they feel that they

are protected mentally, physically, and financially, they can be more productive at work.

Employee Benefits and Work Motivation

Employee motivation is both an activity and a status that is linked to employee

satisfaction and morale. The action occurs when management takes steps to establish a work

environment in which employees are self-motivated to complete their job activities to a standard

that meets or exceeds management's expectations. Employee motivation is essentially a state that

shows how good governance is: when measured against one or more performance measures,

employees are either relatively motivated or unmotivated. There are numerous competing studies

concerning what inspires employees. Most of these concepts center on the types of incentives

that employees receive (or anticipate to receive) from their jobs, particularly intrinsic vs.

extrinsic benefits.

           Numerous factors are associated with management, employees, organizations, and the

workplace, making it a complex and challenging job to motivate employees. Employee

daily. Great businesses recognize that retaining top talent necessitates a competitive salary and a

comprehensive benefits package. Most high-quality employees understand their worth and will

not accept anything less, especially when competitors are exploiting their potential.

           Mensah, et., al. (2015) concluded that employees of the four large-scale mining

businesses are motivated by intrinsic and extrinsic motivations, with a particular focus on money

or remuneration. Intrinsic rewards stem from performing the work itself are not that significant

to drive motivation, for they only drive behavior change by using internal sentiments to motivate

employees to act for intrinsically pleasurable or rewarding reasons. They include, among other

things, feeling essential or successful, gaining vital skills, and appreciating the results of

accomplished work (e.g., helping others, pioneering new technology). On the other hand,

extrinsic rewards are associated with but not directly associated with the work process. An

employee driven by external benefits works to win a specific reward from the employer.

Financial compensation such as pay raises, new benefits, bonuses, or promotions are examples of

tangible and typically monetary rewards (Mensah, et., al., 2015).

           Another study by Oguzie and Ekhayemhe in 2018 reveals that there is a significant and

positive relationship between extrinsic rewards and employee motivation, however, it has been

noted that organizations in this sector are not providing their employees with the required

amount of cash rewards (extrinsic rewards). Extrinsic motivators, such as money or other prizes,

can promote extrinsic motivation because they inspire the desire for the activity's outcome rather

than want to engage in the action for its reason. People's motivation is rooted in the environment

rather than themselves when they engage in activities for extrinsic benefits. Employee

motivation and appreciation (intrinsic rewards) have an indirect relationship since employees are
dissatisfied with their compensation packages. Without extrinsic rewards, which are the primary

source of motivation for employees, intrinsic rewards like recognition, respect, and

empowerment are useless.

Meeting employee ideas about benefits affects their positive attitude towards work, their

complete absence or bad condition leads to employee dissatisfaction according to a published

journal by Němečková in May 2017. Clear visualization of the impact of extrinsic and intrinsic

rewards on employee motivation is significant for employee benefits may be an excellent tool for

motivating employees. Moreover, the findings of a study by Candradewi and Dewi in 2019,

states compensation should be given more attention by the organization to promote a significant

impact on employee performance. When it comes to employee perceptions about salary, leaders

should always provide incentives in benefits to motivate employees. Because the allowance is

the most important factor in constructing a compensation structure in this scenario, for it can

partially mediate the relationship between compensation and employee performance, it is

recommended that managers raise employee motivation to improve employee performance.

Additionally, a business journal by Alam, et., al in 2020 suggested that firms should

consider paying employees enough money on time to keep them motivated and productive, as

well as offering suitable welfare facilities to boost employee productivity and motivate workers

for employees will only be naturally driven to conduct an activity if they are delighted with the

rewards they receive.

           In summary, employee or fringe benefits are highly important in motivating employees,

supported by existing studies and literature. As a result, businesses and other institutions should

provide all essential fringe benefits to their employees, as these benefits will also help them

perform their jobs more efficiently. On the other hand, a motivated employee is enthusiastic,
committed, and proud of their work. They are quick to finish work, act quickly, and are driven to

do a good job for themselves and the company.

Employee Benefits and Job Satisfaction

           As the economy has improved, employers have been more willing and able to boost

salaries, benefits, and incentives for their employees, which is one explanation for the high level

of satisfaction. In each job situation, satisfaction is essential. Work provides a sense of

fulfillment that is a reward in and of itself. Job employee satisfaction is described as an

individual's positive response to their job. The greater this metric is, the better it is for the

organization. It helps to increase employee engagement, retention, and productivity. Job

satisfaction is determined by a person's capacity to execute required tasks, the organization's

level of communication, and management's treatment of employees. Adequate job satisfaction

refers to a person's overall emotional reaction to their work. Employees' cognitive work

satisfaction refers to how happy they are with certain aspects of their jobs, such as income,

hours, or benefits.

           The results and interpretation of a research study by Nisar and Siddiqui in 2019 show and

confirms that a relationship exists between fringe and employee job satisfaction. Employees who

are provided fringe benefits are more likely to last in an organization for a long time. However,

employees expect more fringe benefits offerings to compensate their workers with benefits and

rewards. Providing fringe benefits proved to be a vital and essential policy for the organization

since the employees have a flexible schedule of work, health protection plans, recreation leaves

such as annual leave, sick leave, maternity leave, and overtime facility. Fringe benefits are

essential for any company because it directly and positively affects the employee satisfaction.
The more employee is satisfied with his work and offerings, the more they tend to be loyal,

dedicated, compassionate and profitable for the firm.

Moreover, a study by Hina, et., al in 2014 also discusses the same findings that benefits

are related to the emotional state of contentment and happiness with one's work. The best

employees in a firm are always those that enjoy what they do. They become more committed and

produce better results when satisfied with their work, increasing job satisfaction on all levels. It

has also been proved that job satisfaction is inextricably linked to the facilities and working

environment supplied. Employees who enjoy and are engaged in their work are more likely to

put in extra effort for the organization's greater good. In other words, if an employee is happy

with their job, they will perform better, but they must do well to be satisfied.

We can categorize this satisfaction in two; affective and cognitive satisfaction. Affective

satisfaction refers to a person's overall happiness as a result of their work. It also considers the

impact it has on one's life. Cognitive satisfaction refers to a person's enjoyment due to rational

aspects of their employment, such as responsibilities, salary, and title. People will be satisfied

and perform better at work if they receive rewards that have both intrinsic and extrinsic worth. It

is proportionate to one's job expectations and results, as well as management. Employee

satisfaction rises when results meet or exceed expectations and vice versa. The administration

uses salary, employee benefit packages, job security, working conditions as the measures that

need to be developed to improve employees' working satisfaction.

           The majority of workers who are extremely satisfied with their benefits are also happy

with their job in general, according to the survey conducted by EBRI and Greenwald &

Associates, published on its site in 2018. Employers who offer a robust employee benefits

package that balances the costs and options will have a competitive advantage over other
companies when attracting and maintaining suitable individuals and more satisfied employees

overall, EBRI added. Employees who receive monetary remuneration and their pay and salaries

in the form of fringe benefits are more likely to be satisfied in doing their regular job. They

evaluate job options based on the benefits they would receive as a result of their employment.

Those who are less satisfied with the benefits they received tend to believe that their work

compensates for their expenses without gaining any satisfaction and happiness as emotional

attainment apart from their regular salaries.

           Another perspective towards job satisfaction is highlighted by Merga and Fufa in 2019,

which revealed that health professionals' level of job satisfaction was low, which showed that the

working environment and benefits packages impacted health professionals' job satisfaction.

Moreover, job satisfaction was influenced by the age of the health professionals, the type of

health facility in which they were working, and the years of service they had in the health

sectors. Particular emphasis should be given to the benefits packages of health workers at

different levels.

Another factor aside from the employee benefits received by an employee is the internal

and external factors that can influence the level of satisfaction among workers on their jobs.

Employees are satisfied by the monetary rewards they can get and the emotional and social gain

they acquire from their working environment that will mold and shape them into their individual

goals and objectives and the organization's goals and objectives. Other organizational factors

such as corporate culture, benefits, and salary are also suitable for employee job satisfaction.

Employee retention will be high, and organizations can lead by having a competitive advantage

of having a more satisfied and retained workforce. Suppose any organizations want to succeed in
working place. In that case, it has to maintain desired benefits, attractive salary packages, an

excellent organizational culture, and satisfy its employees as much as possible.  

               Higher education institutions must strengthen their remuneration approach to increase

employee engagement, which will enable commitment and retention of their workforce while

delivering excellent results efficiently, as stated by Mabaso and Dlamini in 2017. It is critical to

comprehend the complexities of compensation, job satisfaction, and how to increase

remuneration to meet the needs of employees, so organizations design novel remuneration

packages to attract and retain the best candidates and satisfy their employee's expectations, in

that they are fair, equitable, and free of bias. Additionally, it should be prepared to provide

salaries comparable to or greater than those in the labor market to attract and retain talent.

Similarly, pay should be consistent with industry standards. Regularly undertake proper sector

research to determine what others are offering and modify payment accordingly.

           Hence, in a nutshell, these related works of literature and studies found a strong

connection between fringe benefits and how they connect with employee job satisfaction. The

more employees have paid time off, the more relaxed and less distracted to their responsibilities

over their professional lives. Flexible working hours bring a great deal of satisfaction to

employees because it helps them arrange their work in an easy main lenient schedule without

compromising the output. Each category of employee benefits, such as security and health

benefits, payment for non-monetary work benefits, and employee services benefits are positively

related to employee job satisfaction. Finally, the overall job satisfaction is positively associated

with the total benefits package of the company. It shows a moderate relationship between

comprehensive employee benefits and employee job satisfaction as a whole.

and connection between employee benefits packages on employee productivity, work

motivation, and job satisfaction for the past ten years and see how employee benefits packages

can impact an employee's productivity on a task given, their work motivation and their job

satisfaction in a working environment. It is clear from the studies and literatures reviewed that

employee benefit packages are very immersed and widely implemented throughout different

institutions, including some cooperatives.

Along with this, it is also clear that the employee benefits packages just in regards to the

kind of employee benefit packages implemented that employees received on their work is varied

and continues to be studied and analyzed in order to best benefit the employees, the institutions,

and the society at large. Much research and discussion have been conducted on these topics but

with almost similar variables put into study. Most of the related studies and literature were found

to discuss the employee benefits packages and their impact on an organization's success, further

specifying employee productivity, work motivation, and different factors that influence job

satisfaction. To conduct more studies on the topic at hand is essential for they are relevant to

identify factors that would impact an organization's success in maintaining its competitive edge

against the competitors with their best asset, the employees.

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