IMPACT OF FRINGE BENEFITS ON EMPLOYEE PERFORMANCE: CASE OF HOTELS IN BUEA
|Tourism and Hospitality Management|
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Employees are the heart of any organization. For any organization to operate successfully and without interruption, employee cooperation cannot be replaced with anything else. The purpose of this research work was to examine the impact of fringe benefits on employee performance: case of hotels in Buea. The objectives of the study include to: find out the different types of fringe benefits of hotels in Buea, examine the effects of fringe benefits on employee performance, and investigate the challenges associated with fringe benefits and to suggest ways in which fringe benefits can be used to improve employee performance in hotels. In order to achieve these objectives, the study was guided by the following hypotheses: Fringe benefits has significant effect on employee performance of hotels in Buea, there are no challenges associated in providing fringe benefits to employees of hotels in Buea. The study reviewed the concepts of Fringe benefits and employee performance, empirical review of this study was divided into themes culled from the specific objectives as well as different theories which were used to guide the study such as Maslow’s hierarchy of needs theory and Vroom’s expectancy theory of needs theory. The data collected for this research included primary and secondary data. Primary data collection instruments included a Likert scale questionnaire for employees and an interview guide for top management staff whereby, a total of 80 questionnaires were administered to the employees using the random sampling technique while a convenience sampling technique was used to collect data from a total of 10 semi interview guide questionnaires administered to the top management staff of some hotels in Buea. The data analysis involved descriptive and inferential statistics. The descriptive statistics included frequency count and percentages while the hypotheses of the study are tested using the Spearman’s rho test and the Chi-Square test. Finally, findings were presented using frequency distribution and thematic tables and on charts. It shows that fringe benefits have significant effect and positive effect on employee performance (R- value= 0.489**, p-value 0.004< 0.05). Therefore, the hypothesis that state fringe benefits have an effect on employee performance of hotels in Buea is accepted. Findings again shows that the respondents significantly differ in their opinion as concern challenges associated in providing fringe benefits to employees (χ2=6.76, df=4, P-value=0.045 < 0.05) with the findings showing that more of the respondents 57.5% (50) indicating that their organization is faced with challenges in motivating employees. Therefore, the hypothesis that states there are no challenges associated in providing fringe benefits to employees of hotels in Buea is rejected.
This chapter discusses the background information of fringe benefits and presents the statement of problem from which the research questions, hypothesis and objectives of the study are derived. It will also look at the significance of the study as well as definition of terms in the context.
1.1 BACKGROUND AND CONTEXT OF STUDY
Fringe benefits are supplementary compensations made in addition to wages and salaries with the purpose of stimulating workers and to make the job more attractive, conducive and productive. They are as a matter of fact indirect benefits and as to their nature, they are neither mere fringes nor peripheral wage trimmings but a substantial part of the wage and salary structure. To quote Belcher (2018), these benefits are any wages cost not directly connected with employees’ productive efforts, performance, services or sacrifices.
The hospitality and tourism industry has grown considerably over the past decade, and is expected to remain one of the high-growth industries through 2014 (Bureau of Labor Statistics, 2008).
However, the availability of a skilled pool of labor for this sector has not kept pace, and is likely to remain in short supply in the near future. As a result, the need to retain employees, and improve employee experience within the organization, has become increasingly important.
Rogers, et al., (1994) find that increasing employee job satisfaction results in higher levels of customer satisfaction, increased employee productivity and, consequently, an increase in revenue and profits for the employer. Baum, et al., (1997) find that, alongside education and training, employee benefits play a crucial role in attracting and retaining quality personnel in the industry.
Belcher says that “a fringe is a catchword attributed to the regional director of the War Labor Board (USA) during World War II. The idea caught on and is now widely used in spite of its limited value in describing the present practice”. It sprang up as off-shoot of the industrial wage system. The word “Fringes” with reference to remuneration or compensation came into usage primarily during the Second World War period in the United States of America (USA). The war labor board which was entrusted with the responsibility of controlling wage increases with a view to prevent inflammatory pressure, permitted provision of non-cash benefits. The board adopted this policy on the premise that these benefits were at the fringe of usual wages and salaries and could not immediately affect the purchasing power of the employees and were not related to consumer demands. Initially, fringe benefits constituted only a minor portion of the total compensation. However, the term “fringe benefits” in the sense of all non-monetary benefits and services came to be widely used in spite of its limited value in describing the actual practices. David W. Belcher says “the large proportion of total compensation that such benefits represent appears to be inadequately accounted for by a name implying trimming or frills”.
In spite of some obvious limitations in the use of the term, it came to be variously interpreted. The National Industrial Conference Board (USA) has therefore defined “fringe benefits” as “payments to workers over and above the wages paid on the basis of time worked or production completed”.
Following its existence, some subsequent interpretations emphasized such elements as follows: employers labor cost beyond wages and salaries, compensation beyond wages and salaries requiring no additional productivity and compensation, benefits or services not related to employee performance. Despite this differences in approaches, the term has continued to be in wide usage even today. However, more recent scholars and practitioners have preferred to use in its place such terms as: “compensation” by Belcher, “employee benefits” to Mortocchio), “employee benefits and services” by Dessler and Varkkey), denoting all non-monetary benefits, services and facilities made available to employees over and above monetary payments. Thus, fringe benefits may be defined as all non-monetary benefits, services of facilities and some fringe monetary benefits made available to employees in addition to their usual and established monetary compensation such as regular wages, salaries, cash allowances, incentive payments and bonuses.
In India, the government has prescribed certain minimum amenities to be provided by employers to their workers. Indirect benefits are fringe benefits but it is very difficult to distinguish between direct wages and indirect bene3fits. For instance conducive working conditions benefit the employer directly, over time wage paid for work done cannot be described as indirect benefit. As per article 43 of the constitution of India, it states that “all workers should be given a living wage conditions of work ensuring decent standard of life and full employment to ensure social and cultural opportunities”. Therefore, fringe benefits act as a social level to the employees because a worker is not a commodity but he is an active participant in the program of economic development and social reconstruction.
According to the Cameroon compensation law, Cameroon’s minimum wage is currently 36,270 CFA Francs, which is about 55 EUR. This minimum wage applies to all sectors unless there is a collective bargaining agreement (CBA) governing an industry. In the guaranteed benefits in Cameroon, all employees must receive statutory benefits required by law for a company to stay compliant.
Management is thus concerned with attracting and keeping employees, whose performance meets at least minimum level of acceptability; and at keeping absenteeism and turnover to tolerable levels. The provision of benefits and services can be and are important in maintaining employees and reducing or keeping turn over and absenteeism low. It is important to note that financial incentives are paid to employees’ whose work is above standard. Employee benefits on the other hand are available to all employees based on their membership in the organization. The purpose of such benefits is to retain people in the organization and not to stimulate them to greater efforts and higher performance. It is difficult to define fringe benefits because there is no agreement among the experts on its precise meaning, significance or connotation.
According to Mathis and Jackson (2003), fringe benefits are forms of indirect compensation given to an employee or group of employees as a part of organizational membership. Fringe benefits focus on maintaining or improving the quality of life for employees and providing a level of protection and financial security for workers and for their family members. Mathis and Jackson goes further to explain that, an employer that provides a more attractive benefit package often enjoy an advantage over employers hiring and retaining qualified employees. Like base pay plans, the major objective for most organizational fringe compensation programs is attract, retain and motivate qualified and competent employees (Bernardin, 2007).
In the current competitive business environment, organizations are facing a lot of challenges and hotels are not left out. These challenges faced include: getting the right employees, retaining them and ensuring that they are committed and productive in the working milieu. In addition, today, the benefit of human resource is measured to be one of the most important advantages of any organization and in order to acquire the results with the highest efficiency and effectiveness from human resource, motivation of employees is essential (Gohari, Ali Seyed and Mahmood, 2013).
Employees will turn to put in efforts and do their utmost best when they feel their hard work will be or is rewarded by the employers. Employee commitment, productivity and retention issues are emerging as the most critical challenge on management of workforce in the immediate future. This challenge is driven by the concerns of employees’ loyalty, corporate restructuring efforts and tight competition for key talents (Kresiman, 2002). In this regard, organizations have organized employee fringe benefits to be significant elements that influences the success of organizations.
Kreitner and Kiniki (2004), pointed out some common fringe benefits to include retirement or pension plans, medical and dental insurance, education and reimbursement, time off, paid vacation and the use of company car. The authors stated that, fringe benefits increases economic security of employees and motivates them and in doing so, improve workers retention across the organization.Kwak (2012) stated that employees value retirement benefits more than other fringe benefits. In this light, Ifediniru (2012) made it clear that retirement benefits is the prime motivator to improve employees’ productivity. Lack of retirement benefits makes employees not to be committed to their job which limits their contribution to the organization and in turn affects organizational performance, produce dissatisfied employees and disengage more than feeling empowered. The success and survival of any organization is determined by the way the workers are compensated. The reward system and motivating incentives will determine the level of employees’ commitment and their attitude to work.
Besides based compensation and incentives, employees are provided various types of benefits and services by organizations. These benefits and services are provided to different classes of employees either as a matter of statutory requirement or on voluntary basis or a combination of both. Such benefits are called by various names such as: fringe benefits, employee welfare, wage supplements, sub-wages, supplementary compensation and social security. However, the term fringe benefits is more common in practice (Chedna A, 2017).
The issue of fringe benefits and employee performance in hotels has become debatable. There are two basic views: fringe benefits leads to employee performance and productivity. One holds that satisfaction gotten from incentives leads to effective performance and the other holds that effective performance leads to satisfaction from bonuses or extra profits. In effect, it is noted that if employees’ are happy with their jobs they will work better and to be satisfied, they have to be committed to their work and bring out their possible best. With this, it appears challenging to determine whether the provision of fringe benefits satisfies employees’ or if the employees’ are efficient in their work to earn a reward in the form of incentives or bonuses. After recruiting workers, companies and organizations tend to expect maximum employee productivity.
In some hotels in Buea, there following problems were noted: lack of benefits, benefits are not always given, not all employees have the opportunity to receive extra bonuses, insufficient wages, low rate of fringes, moderate incentives and little or no knowledge on what fringe benefits are. Such problems might thus affect the productivity rate and performance rate of workers in hotels.
There is still some debate over fringe benefits on whether they facilitate employee productivity, leading to an organizational performance which leads the organization to retain, attract and motivate employees leading to productivity.
Given the absence of empirical evidence on the relationship between employee benefits and productivity and the escalating cost of benefits, it is clear that there is a research gap and that further research needs to be carried out, in order to find out whether fringe benefits really do have any effect on the productivity of employees of hotels in Buea.
1.3.1 GENERAL RESEARCH QUESTION
What role do fringe benefits play in influencing employee performance of hotels in Buea
1.3.2 SPECIFIC RESEARCH QUESTIONS
What are the different types of fringe benefits?
How do fringe benefits affect employee performance of hotels in Buea?
What are the challenges associated with providing fringe benefits to employees of hotels in Buea?
How can fringe benefits be used to improve employee performance of hotels in Buea
The main purpose for carrying out this research is to find out the impact of fringe benefits on employee performance of hotels in Buea.
- To find out the different types of fringe benefits
- To examine the effects of fringe benefits on employee performance in some hotels the Buea municipality.
- To assess the challenges associated with providing fringe benefits to employees of hotels in Buea.
- To investigate how fringe benefits can be used to improve employee performance in hotels