The Impact of Fringe Benefits on the Performance of Workers in Hotel and Catering Industry


The term fringe benefit has been defined by various authors.  Flippo E.B. personnel management 5th edition, 1976 defined it as all expenditure designed to benefit employee over and above regular wages and direct monetary incentives related to output.  (Armstrong and Murlis 1980:140) defined it as the total package offered to employees over and above salary, which increased their well being at some cost to the employer. 

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In search for a suitable definition, certain characteristic of fringe benefit has been described by Reid and Robertson (1965:19).

Theses characteristic are as follows

  1. They all cost the employer money
  2. They all add to the employees pay and they are of some service to him too.

iii.      They are available to call or most of the employees

  1. They cost rises of falls as the size of the work forces changes.

According to Ejiofro (1986:102) benefits are almost encompassing. “They span a workers life from the date of employment to life after death” As every company expects something in return for its fringe benefit programme, certain factor were drawn by some authors as how a company can get best out of money spent on fringe benefits.

These factors are considered below.



  1. One of the factors to be considered for an effective fringe benefits Plan is that “It must be built on a base of satisfactions” (Blomstrony 1964).
  2. The second factor as stated by flippo is that should never be established unless there is a real need for it. (Flippo 1982:295).  However his findings stated that in many cases, fringe benefits have been installed, only to be met with employee outright resistance.
  • The third factor for effective benefits plan is that as nearly as possible, plans should be structured so that maximum number of employee are affected. But this does not mean that all employees must participate in all plans.
  1. The cost of fringe benefit should be calculated and provision should be made for sound financing (Flippo 1982).
  2. Another factor is that in designing fringe benefit programs, efforts should be made to create a more favourable image of the company in the eyes of the public.

Finally according to Blomstrong, fringe benefit plans should be operated in such a way that employees what kind of benefit should an organisation adopt? And how should these benefit plans be administered to bring about the effectiveness of programme? According to Coleman, survey of benefit offered by other organisations which are necessary to determine what the competitor is providing that Coleman suggested the ways of developing and administration the benefit program.

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Coleman (1976) listed certain questions an organisation must ask itself in developing and administering the benefit plans.  These include:

What do we have?

What do others offer?

What is the cost of the existing programme?

What is the behaviour of anticipated by the programme change?

What is the cost and pay-off for change?

Yet another question comes up, what should be the philosophy of the manager in the realm of employee services? According to Flippo (1976:544) the basic guiding principle should be that no employee benefit programme should be undertaken unless there is some return to the organisation that is at least equal to its cost.

However, one problem always arises on the effectiveness of the benefit programme and this problem is lack of adequate information provided by companies to their employees about the kind of fringe benefit available in the company.  In Harrington findings, “Lack of knowledge of fringe benefit programmes in the companies are astounding as they are numerous leading to poor understanding of the programme (Harrington 1970:604).


In a survey of over 36,000 employees in fifteen companies, Harrington found that more than 30% of those surveyed indicated that they did not understand the fringe benefits provided by their companies.  According to him, in some companies, the number indicating such lack of knowledge exceeded 60%.


In his findings, Harrington continued.  Since so many employees do not appreciate the benefit that are provided, management finds itself under pressure to add or revise benefit faster than it should be.  Also in any company, he further stressed, pressure may be applied by increases turnover, productivity decline or absenteeism.

Ejiofor, (1986) in his own contribution said that usually, many employee are not a were of the existence of fringe benefit programme according to him, the time many employees becomes aware of the benefit in existence in their organisation is the time it is being threatened with withdrawal by management or when the employee might have left the organisation.  The question that poses itself now is what should be done to insure full appreciation and good return for money spent on employee benefit?


In pursuance of the aforementioned objective of ensuring full appreciation and good return for the money spent on employee benefits, the company could embark on a benefit awareness programme as a means of information to the employees on what their company is doing for their well-being.

In line with this, Harrington (1970:604) mentioned four ways through which employees may come to appreciate employees benefit programme.

The company could provide an annual statement to each employee showing the amount paid for each benefit for the last year.

The company could hold employee meeting once in a year to review benefit or schedule them when revisions are made to both of them explain the new or changed benefit and review the rest of the package.

Running of contest by asking people to guess the percentage the company is providing for the total benefit package and follow up periodically with other contested designed to make employees think about the provision of each benefit component could be of great help.

The company could train supervisor to be part of its sales force to sell employees on the valve provided through benefit programmes.  But then the company should ensure that them supervisor, them selves are satisfied with their benefit before being asked to convince the employees.



One of the reasons why fringe benefit fail to motivate workers according to Ejiofor (1986:105) is the wrong notion which colours management attitude to employee welfare programme that workers should see benefit as a kind of gesture from employers which they should reciprocate.  He pointed out that paternalistic assumption ends in disillusionment.  “workers expect fringe as right” (Ejiofor 1986).

Also emphasised is the fact that for any reward to motivate employee, it has to be attractive to the prospective recipient.  Different people valve different thing at different stages of their lives and working careers.  As a result of differences in valence, while some employees are enthusiastic about some of the benefit other are not.  Some are even hostile to some benefit programme.  On explanation for difference in valve attached to certain benefits is ones position in Maslow’s Hierarchy of needs (maslow 1943:739-396) fig 1 for instance a study leave programme means little to a fifty year old labour, gateman or cleaner.

According to Newman (1963:2190) many employee benefit programme turns out to be moral depressant rather than stimulants because they are not varied proportionately within the organisation.  They are inequitably dispensed between senior and junior staff.  Though subordinates do not expect to be treated like their bosses, all employee are interested in what the boss gets.


In his own view, Ejiofor (1986), agreed that benefit not properly administered causes frustration.  He illustrated this point with the employee training facilities.  According to him, most employees expected to be promoted to him, most employees expected to be promoted soon after training and get frustrated if they do not get prompted while employee on their part may argue that promotion is based on productivity.


Regardless of the necessity of individuality, it is interested to look at reasons given for establishing fringe benefit programme by companies.  In Blemstrom view, some companies think that they have a certain social responsibility which can be fulfilled by providing fringe benefit to their employees (Blomstrom 1964) they seem to feel that the lives of their employees are so closely related to the company that the firm must provide for old ago problems and the like it.

Also in recent times, management has observed that it is their own advantage to maintain a sound fringe benefit plan “as employees seek security as well as leisure, and deprivation in either area may lead to paralysing unrest that reflects it self in decreased effectiveness” (straus and sayles 1971:711-714)

Some companies find the thought of unionzation very distasteful.  Some go to the extent of keeping the union out by providing more and better benefits that union have been able to secure.  The reasoning being that benefit which are superior to those obtained through negotiations will make unions less attractive to employees.


The tax position in which many companies find for themselves also make it attractive to provide various benefit programmes since both benefit and services programme are expensive items and thus deductible before taxable income, companies considered it an advantage providing fringe benefit to their employee rather than the same fund for paying taxes some companies are also of the view that generous fringe benefits help create more favourable image of the company in the eyes of the public, thus making it easier for management to recruit high calibre employee and to maintain amicable relationship with the entire community.  This led to the view that like fair wages and salaries, adequate health welfare programme impress the community with value of the firm, particular as these programmes become more widely identified (srauss and sayles,1971:70).

Also considered by companies is the factors that attractive fringe benefit tends to “trap” employee into remaining with a particular firm in that they might want to accumulate such benefits as sinkable pension, long vacations or extensive sick leave benefit, (French,1964:509) it is know that people who would have other wise left their employment in civil services are often complaining that they would not leave until it is possible for them to get all their benefits.  According to Nwachukwu, employee satisfaction correlates negatively with high rate of labour turnover, tardiness, laborer management disputes and high rate of absenteeism (Nwachukwu 1984:272).



One of the problems of installing fringe benefit plan is the financial problem involved before entering into a programme, management is faced with the problem of having to make thorough realistic evaluation of its cost, both short and long term.  This is because even where there are no legal obligation to provide fringe benefit to employees, employees often feel to management programme indefinitely.  But where management find itself in capable of continuing a programme, it could bring the company is plight.  Before the union so that re-negotiations would take place for trading off the programme

Furthermore, benefits services designed to build employed morale may have some disastrous effects, for instance experience has shown that many fringe benefit programme which provide such thing as housing, food and the likes often developed into rich sources of workers grievances.

Such grievance could arise when the company is faced with such problems as

When is it fair for the company to raise price of food in the company restaurant?

How often should rice of beans be served the canteen?

Problems may also arise when for one reason or the other, there is delay in settlement of employees claim, such as claim for medical expenses, claiming for overtime payment or premium allowance and any other allowances.  The danger in such delays is that it sometimes leads to bad feeling, complaints and union grievance and all these could be regarded as threats to morale.



For the purpose of convenience and the limits of this study, a partial list of commonly offered benefit include:

  1. Holiday Transport Accommodation
  2. Payment During Absence for Domestic Reasons
  3. Pension
  4. Subsidized meals
  5. Subsidized Purchase
  6. Medical benefits
  7. Car subsidy
  8. Housing
  9. Overtime and Holiday pays
  • Leave of absence
    1. Annual Leave
    2. Maternity leave
  • Casual leave
  • Call in-call out- A and call-Back pay
  • Employee Counselling
  • Recreation Programmes
  • Group insurance programme

Some of these benefit packages will now be explained further based on the opinion of macbeath and Rands (1976:327-549).


A number of companies run holiday or convale-scent homes.  However, a few individual organization go far beyond this stage to provide holiday accommodation for senior executive for example to the best salesmen.


Some organizations defined periods of time permitted for absence with pay for domestic reason.  This is primarily intended to cover such incidents, as the funeral of an immediate relative, birth of a son or daughter, sudden sickness of an immediate dependent relative or some other personnel emergency which necessitate time off choose to define it with the result that it become a right and as such may be rigidly taken up by some employee.


There are few staff employees who do not enjoy the prospect of receiving a pension when they retire.  However, the many pension plans which individuals companies have developed, or purchased from specialist pension or life insurance companies vary substantially both in cost to the company contributions from employees and benefit for the employee.


Wherever it is difficult for employees to return home for lunc, employers tend to make some arrangement to ensure that their staffs are adequately fed at mid-day at subsidized price.   On an industrial estate, or in a large factory this normally takes the form of providing canteen service, while in town or city center where the office accommodation is very close to existing canteen or restaurant faculties, some form of luncheon voucher may be issued.


Virtually all organization producing or selling any form of consumer product make some concession to their staff in form of discount of purchase.  The cost of this service to the employed according to macbeeath and Rands is limited to be administration cost of service.  This is probably very small and is virtually certain to be more than offset by profit on the sale, even after discount has been allowed


Many companies arrange for senior member of staff to have regular medical checks to ensure that all is well, and may extend this to other staff to save the time which would be taken by those staff going to private practitioners if medical facilities are not available in the company.  As macbeath and rands noted, must of these items have a marginal cost which is more than offset by reductions in cost working time. They contended that these facilities are widely appreciation by staff.



The award of a company car, with either limited or completed use is probably the most substantial single benefit given according to macbeath and rands (1976).  The pointed out in general the larger companies tend to make rather limited use of this expensive benefits and to restrict it to people of director or top management statue.  Smaller companies often reading make a car available to people who are at middle management level, and are lees strict in controlling the use of car outside normal business hour.  This may help to offset the general more restricted carrier prospect in a smaller firm.


There are many forms of housing assistance in an industrial estate or in a town.  A company may have available a certain number of house for rental through the housing authority.  In these circumstances it can offer as a recruitment incentives, subsidizes, rental accommodation, which may be of a high standard.


Whenever the normal hours of worker has been agreed upon or fixed, any hours worked in excess by a workers is regarded as overtime and is paid for.  But noting prevents employers and users from bargaining contract terms that provides for premiums for weekend works such as double time for Sunday.


It is now common for employers to grant leave of absence with pay.  In some 80% of employer-union agreement, provision is made for leaves, although specific rules governing such leaves are not so frequently set out in detail.  Some of these leaves include:

  1. Annual Leave: Employees are entitled to holidays with pay at lest six working days in a year after twelve continuous months of service.
  2. Maternity leave: These are usually granted to women for a period of six weeks following the confinement
  • Casual Leave: These could be granted to any employee, for a few days on compassionate ground.

A “call in” occurs when the employee records for work for various reasons there is no work robe done while a “call out” and a “call back” occur when an employee is asked to report for work outside his regular hours.  If an emergency required a company to call out an employee outside his regular hours the customers practice is to pay him at a higher rate (yonder 1958:15-18).


One employee service, which has traditionally been provided for employees who are experiencing personal problems is employee counseling.  Those according to Naylor and Torrington (1974:238) fall into three categories.

  1. Employees who are in financial difficulties.
  2. Employee who are ignorant of how to deal with any other personnel situation confronting them
  3. Employees who need and required advice.

Such problems in the opinion of Naylor and Torrington often not only worry employers but may also affect the efficiency of the firm.  If an employee has a problem arising from any of the above source, his mind might not be at rest for the job, which he is being paid for.


It is a general saying that “all work and no play make Jack a dull boy”.  This has helped employed to known the importance or recreation facilities in their organization.  Generally, it is believed that workers attitude improved when the routine of every body living is broken occasionally.  In addition, it is agreed that through the contact and relation built up in recreational events, more agreeable informal atmosphere is promoted (flippo 1976:550).  The employee not only gets to know the other employee, but also gets in touch with the management in a climate unaffected by he chain of command.


Group insurance programmes are frequently provided by companies for protection of employees against such risk as loss of life and incidence of accidents and illness.  According to Flippo (1976), programme of his nature are aimed at retrieving the employee of worry about security of his depended and of financial strains to enable him devote greater attention to the job of the company.  Generally, group insurance is preferred by employee because group of life premiums are considerable smaller than insurance purchased by the individual.


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