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Benefit Systems: How Rewards Affect Employee Behavior

Michele is a published author who loves to write on a plethora of topics including business, crafts, cleaning, family, and management.

Learn more about the types of benefit systems used in the workplace and how they can affect employee behavior and motivation.

Learn more about the types of benefit systems used in the workplace and how they can affect employee behavior and motivation.

Rewards and Benefits for Employees

Employee benefits are often taken for granted since almost all organizations offer them to permanent employees. Organizations gain reward power because they are able to provide positive valences that employees find valuable. Research has found that reward systems have a significant impact on an employee’s perception of organizational leadership.

The incentive industry is booming. Organizations invest in developing programs that attract, retain, and motivate employees. This is because incentive programs work. Basically, you obtain the performance of employment you deliver in terms of benefits.

Organizational Behavior

The results of employee rewards play an important role in organizational behavior. The rewards an organization provides will be rewarded back to the organization by the positive employee behavior. According to Maslow’s Hierarchy of Needs, one of the levels, safety needs, includes rewards such as seniority plans, health insurance, employee assistance plans, severance pay, and pensions. The secondary need, the need for security, may be met with benefits from the job. This drives them to do well.

The Results of Reward Systems

Rewards bring motivation. Employee motivation occurs when management takes steps to foster a work environment where employees are self-driven to perform their job tasks at a level that meets or exceeds management’s standards. Employers can see a spike in the level of interest among employees with a well-planned reward system. If the system continues successfully, even greater performance levels and job satisfaction can be achieved.

Rewards, whether in the form of gift cards, cash, or time off, increase performance. Employees often come to work with a new attitude once a reward system is put in place, and executives see a healthier and happier work environment. In fact, employee incentive programs can increase overall reduce turnover, boost morale and loyalty, improve employee wellness, and increase retention. Aside from motivation, many believe that spending more on benefits is worth it because it attracts, maintains, and retains outstanding employees.

Benefits packages help motivate employees and maintain their happiness in the workplace.

Benefits packages help motivate employees and maintain their happiness in the workplace.


Benefits are crucial to being competitive in the marketplace. Money is the top reward that motivates employees. However, a benefits package is a very important part of the package deal of a particular job. Employees can be overwhelmed with the variety of benefits they are offered. Benefits constitute a large percentage of most companies’ expenses. Endless mixes of employee benefits such as health care and life insurance, profit sharing, employee stock ownership plans (ESOPs), exercise facilities, subsidized meal plans, and more have been used by companies in their efforts to maintain happy employees.


Most organizations offer insurance coverage, including prescription drugs, vision care, mental health care, and dental care. Health insurance costs have been rising the past few years, yet employees expect insurance coverage. Almost all companies pay a major portion of the premiums for health care coverage. About three-quarters of the United States companies require employee participants to share the health care costs via deductibles, coinsurance, copayments, and other means.

Many health plans give employees an incentive to take costs into consideration when seeking health care services by allowing them to save what they do not spend in a given year for their future needs. Life insurance and disability insurance may be available as well. Many companies are working towards improving the health of their employees so as to improve productivity and reduce absenteeism.


Employers have long sought to enhance their organizational performance by improving employee satisfaction. The idea that a satisfied employee is a better employee seems to be intuitive. Designing a retirement plan that strongly appeals to employees can create significant value for an organization.

The two most popular pension plans are the individual retirement accounts (IRAs) and 401K plans, which allow employees to save money on a tax-deferred basis by entering into salary-deferral agreements with the employer. The design and features of a retirement program can have very meaningful effects on workers’ behavior, which can deliver favorable economic returns to the organization. Retirement plans can enhance productivity and influence workers’ behavior, giving younger workers a compelling reason to continue working for their employer and encouraging older workers to retire on a timely basis.

Paid time off is a popular benefit.

Paid time off is a popular benefit.

Time Off

The purpose of time off is to provide employees with paid time off work that can be used for such needs as vacation, illness, and appointments. The importance of this time is taken to heart by employers as an effective benefit for their employees. Allowing employees time off to take vacations or run errands helps save them stress. For example, knowing errands need to be done during work hours can be frustrating. Saving employees time like this can increase productivity and retention. An innovative way to meet corporate social responsibility is to allow employees paid time off in order to do charitable work throughout the community. There is evidence that time off such as this helps in recruiting and retaining top talent.

Paid sick days are time off from work that an organization voluntarily provides employees as a benefit. Jury duty is also an acceptable reason for time off. Employers often allow time off for special religious holidays or funeral leave for friends or family members for personal reasons. Employers are not obligated by either federal or state law to provide personal leaves of absence to their employees, but employees value any time off, as time is a precious gift.

Life Cycle Benefits

Life cycle benefits are based on a person’s stage of life and include things such as child care and elderly health care services. Saving employees the cost of daycare services is a huge benefit for parents. For those caring for elderly parents, referral services or long-term health care insurance may be offered. Employee assistance programs (EAPs) were originally designed to help alcoholics. Today, they help with a variety of problems, including drug abuse, marital problems, and financial planning. Helping employees deal with their personal problems can bring about a more positive atmosphere and improve their job performance. In order to encourage participation, services such as these should be kept confidential.

Flexible Spending

Flexible benefits allow employees the opportunity to put together their own benefit package by choosing those benefits that best meet their personal needs. Companies allocate a specific budgeted amount for each employee, and then the employee is allowed to allocate this money. These cafeteria-style plans have led to increased benefit satisfaction, reduced turnover, and increased overall job satisfaction. For organizations, these types of plans can be costly because they are hard to maintain.

Child care subsidiaries are an example of another type of employee benefit.

Child care subsidiaries are an example of another type of employee benefit.

Other Benefits

Some companies offer other fringe benefits that may compensate for lower taxable income, such as the use of a company car, reimbursements for education, moving costs, child care or elder care subsidies, or help in finding a spouse’s job. Branded merchandise, such as gift cards and gift certificates, can produce a lasting effect that can result in increased engagement in the organization’s goals. Giving the gift of travel creates memories that last well beyond any incentive program.

Companies are getting more and more innovative with other rewards. Other gifts such as gifts or presents, tickets to concerts, auto repair assistance, or prepaid legal plans. Legal services can assist with legal advice, wills and estate planning, and investment counseling.

Wellness Programs

Other programs, called wellness programs, help employees deal with stress and prevent them from getting physically or psychologically ill. By assisting employees in this way, absenteeism due to these types of illnesses can be reduced. Less sick days will be taken, a reduction in health insurance premiums, and an increase in productivity when employees are healthier. Organizations realize this and are installing gymnasiums or providing the opportunity of a membership to a gymnasium or health club. Some encourage healthy workers by paying for unused sick days.

Convenience Benefits

Convenience benefits, such as dry cleaning, ATM machines, postal services, and video rentals, life-cycle accounts, such as savings accounts for college education, housing assistance, such as relocation assistance, seminars, and mortgage arrangements, group purchase programs, such as legal and financial planning assistance, discounts with local merchants, group auto and homeowners insurance, and fleet arrangements for auto purchases, and casual day programs are other innovative work and family programs. Even the little things count.

Examples of Other Employee Benefits

Flexible hours

Pizza party

Prime parking

Life coach

Free education

Company picnic


Company newsletter

Ice cream party

Employee of the month

Celebrate birthdays

Food baskets

Movie tickets

Thank you notes

Cash bonus


Michele Kelsey (author) from Edmond, Oklahoma on September 14, 2013:

Wow! Now that's a perk! :)

Derrick Bennett on May 18, 2013:

Your right rewards do motivate employees; a friend of mine just received an i-pad at her job.