Do benefits provide advantage to organisational producitivity?

Based on the Taiwan high-tech sector, there were some surveys carried out in different time periods. Examinations were done on the impact of employee benefits on firm productivity. Employee benefits in this research were treated as a moderator instead of independent variable. Several important control variables were also considered in analytical models. The examinations reveal that employee benefits have a significant moderating effect on firm productivity whether samples were analysed by industry or by firm size and that moderating effect of employee benefits on labor productivity in small enterprises was greater than that of large ones.

Two important implications for industry managers arose from the findings. Firstly, the investment in employee benefits at high-tech firms represents not only costs but also profits. A lot of studies suggest that employee benefits are a useful tool in attracting and retaining employees with critical skills. Skilled employees have been viewed as a strategic input for a firm to strengthen its core competency. Hence, firms can use employee benefits to enhance their competition through better quality of labor. Secondly, using employee benefits to achieve competitive advantage for small enterprises seems to be more important than large companies. However, attractiveness of a top-quality work force at small enterprises is low due to lower stability. Since benefit awareness moderates the effect of benefit attractiveness in recruiting and retaining qualified employees, managers at small enterprises should pay more attention to communicating information about benefit packages offered.

There were some major limitations to the research carried out. One limitation is that benefit programs consisted of different employee benefit types, such as health-care benefits, security benefits, employee services and premium pay but these types of employee benefits were treated as a package in this study. In essence, such treatment primarily came from a lack of data as the surveys did not distinguish categories of benefits. As a consequence, the study cannot provide individual effect of different benefit types on firm productivity. Next, except for the financial part, employee compensation also includes non-financials, such as work-place flexibility and flextime. Since this research confines the examination to financial compensation, the results cannot be generalised to non-financial compensation. Furthermore, although the analysis shows the moderating effects of employee benefits on relationships between labor input and value added, the estimations failed to reveal how such impacts were actually realised.

In summary, despite the growing cost of employee benefits, little is really known about effects of benefit level on firm performance. We can still say that, in a way, employee benefits offer advantage in terms of firm productivity through improvement of labour efficiency.