Impact Of Employee Benefits On Employee Retention

Project and Seminar Material for Human Resource Management (HRM)

Impact Of Employee Benefits On Employee Retention

Chapter One


1.1 Background Of The Study

The employer should always ensure that organization is perceived as a great place to work meaning that it becomes an employer of choice i.e one for whom people want to work. There is a desire to join the organization and once there, to want to stay. Employees are committed to the organization and engaged in the work they do. To acquire a national, even a local reputation as a good employer takes time, but its’ worth the effort .The objective of employee benefits policies and practices of an organization are to provide an attractive and competitive total remuneration package which both attracts and retains high quality employees. Turnover of key employees can have a disproportionate impact on the business and the people organizations wish to retain are probably the one most likely to leave (Armstrong, 2006).

Turnover is an expensive organizational outcome and companies expend considerable time and resources in attempts to reduce turn over particularly dysfunctional turnover (Dalton &Todor, 1993). It is caused primarily by poor supervision, a poor work environment and inadequate compensation (Hinkim et al, 2000). Excessive employee turnover often engenders far reaching consequences and at the extreme may jeopardize efforts to attain organizational objectives, indicated that when an organization loses a critical employee, there is a negative impact on innovation e.g consistency in providing services to guests may be jeopardized and major delays in the delivery of services to customers may occur (Abbasi and Hollman, 2000). Employee remuneration is not just about pay, i.e wages and salaries. It is also concerned with non pay benefits, or benefits-in-kind. These non-pay benefits are usually known as employee benefits and sometimes as fringe benefits or perks. The former refers to the more important benefits such as pensions and include those which are widely applied in the organization. The latter refers either to less significant benefits, such as private health insurance or to the benefits provided primarily as privileges (Cole, 2002).

1.2 Statement Of The Problem

On average a company losses approximately $1million with every 10 managerial and professional employees who leave the organization. The combined direct and indirect costs associated with one employee ranges from a minimum of one year’s pay and benefits to a maximum of two years pay and benefits. Thus, there is a significant economic impact when an organization losses any of its critical employees especially given the knowledge that is lost with an employee’s departure (Fitz-enz, 1997).The role occupational schemes are believed to play first is attracting and subsequently retaining staff. There are grounds for questioning the extent and significance of the link between occupational pensions and employee turnover. While it is true that staff retention in general terms remains one of the objectives employers believe accounts for continued pension provision, it is no longer a sufficient explanation for the existence of a substantial occupational sector in the UK.

Moreover, claims that pensions are effective means of reducing turnover or that employers have to provide schemes if they are to retain sufficient staff of the desired caliber are unsustainable in general terms (Taylor, 2000). Many companies are making concerted efforts to control employee turnover through enhanced pay, benefits or incentive systems as well as by training the managers (Simon & Hinkin, 2001). However since benefits are touted as having the ability to attract and retain employees (Carraher, 2006b, Hart & Carraher,1995;Mobley,1982), perceived benefits inequity could result in the converse, namely dissatisfaction, higher levels of absenteeism, lower levels of performance and higher turnover rates. The extent to which this may occur is unknown (Carraher et al, 2003).

1.3 Objectives Of The Study

The main objective of the study is to examine the impact of employee benefit on employee retention in University of Benin, Edo state. Specific objectives of the study are:

  1. To identify employee benefit packages available to staff of University of Benin.
  2. To examine employee turnover ratio of University of Benin.
  3. To examine the impact of employee benefits on employee retention in University of Benin.

1.4 Research Questions

  1. What type of employee benefits exist in University of Benin?
  2. What is the turnover ratio of staff of University of Benin?
  3. How do employee benefits affect employee retention?

1.5 Research Hypothesis

Ho: There is no significant relationship between employee benefits and employee retention.

Hi: There is a significant relationship between employee benefits and employee retention.

1.6 Significance Of The Study

The study is first important to the management of University of Benin, they will be able to know the effects of employee benefits on employee retention and to identify various forms of employee benefits to individual employees. This will reduce the employee turnover and hence improve the organizations image.

The study will be of great interest to the researcher and the Human Resource and Administration Division. It will improve the administration of various forms of benefits to employees and also link the employee benefit with staff retention.

The study will enable the organization to be seen as the employer of choice when it is able to retain it’s most valued and talented staff through the provision of the employee benefits which results into motivated, committed and loyal employees to the organizational goals.

1.7 Scope Of The Study

The study will cover employee benefit forms and packages of staff of University of Benin and how these packages affect their will to stay with the University from 2010-2015.

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