10987_The employee benefits industry and benefit practices following the 2008 recession

1

THE EMPLOYEE BENEFITS INDUSTRY
AND BENEFIT PRACTICES
FOLLOWING THE 2008 RECESSION:
AN IRISH CONTEXT
BY
BALOGUN, RASHEED A.

STUDENT NUMBER: 1712039
SUPERVISOR: MR. DAVID WALLACE

2

CONTENTS
Acknowledgements
…………………………………………………………………………………………………………. 8
Abstract …………………………………………………………………………………………………………………………. 9
1.
Introduction
…………………………………………………………………………………………………………… 10
2.
Literature Review…………………………………………………………………………………………………… 12
2.1 Hrm During The Industrial Revolution Era ……………………………………………………………… 12
2.2 Employee Attraction And Retention
……………………………………………………………………….. 13
2.3 Employee Motivation And Performance …………………………………………………………………. 14
2.4 Employee Benefits ……………………………………………………………………………………………….. 16
2.5 Link Between Employee Benefits And Employee Attraction And Retention
……………….. 17
2.6 Link Between Employee Benefits And Employee Motivation And Performance …………. 19
2.7 Employer Reaction Followiing The 1930 Great Depression
………………………………………. 20
2.7.1 GE Case Study ………………………………………………………………………………………………. 22
2.8. Employer Reaction To Employee Benefits Following The 2008 Recession
………………… 23
2.8.1. Kpmg Case Study …………………………………………………………………………………………. 26
2.8.2. Adecco Case Study ……………………………………………………………………………………….. 26
2.9. Human Resource Management In Ireland ………………………………………………………………. 27
2.9.1. The Recession In Ireland ……………………………………………………………………………….. 27
2.9.2. The Effect Of The Recession On Hrm In Ireland ………………………………………………. 29
2.9.3. Response Of HR Managers To The Recession
………………………………………………….. 33
2.10.
Research Gap
……………………………………………………………………………………………….. 36
2.11.
Research Objective ……………………………………………………………………………………….. 37
2.12.
Research Questions……………………………………………………………………………………….. 37
3.
Research Methodology …………………………………………………………………………………………… 38
3.1. Introduction
……………………………………………………………………………………………………… 38
3.2. Research Philosophy
…………………………………………………………………………………………. 40
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3.2.1. Introduction
………………………………………………………………………………………………….. 40
3.2.2. Justification For Selecting Interpretivism As The Research Philosophy
……………….. 41
3.3.
Research Approach ………………………………………………………………………………………….. 42
3.3.1.
Introduction
………………………………………………………………………………………………. 42
3.3.2.
Justification For Selecting The Inductive Research Approach
…………………………. 43
3.4.
Research Strategy
…………………………………………………………………………………………….. 43
3.4.1.
Introduction
………………………………………………………………………………………………. 43
3.4.2.
Justification For Selecting The Case Study Research Strategy ………………………… 44
3.5.
Research Choices …………………………………………………………………………………………….. 45
3.5.1.
Introduction
………………………………………………………………………………………………. 45
3.5.2.
Justification Of Selecting The Mono Method Research Choice
……………………….. 46
3.6.
Research Time Horizon
…………………………………………………………………………………….. 46
3.6.1.
Introduction
………………………………………………………………………………………………. 46
3.6.2.
Justification For Selecting The Cross-Sectional Time Horizon ……………………….. 47
3.7.
Data Collection And Analysis
……………………………………………………………………………. 47
3.7.1.
Introduction
………………………………………………………………………………………………. 47
3.7.2.
Primary Data Collection …………………………………………………………………………….. 48
3.7.3.
Secondary Data Collection …………………………………………………………………………. 50
3.8.
Sampling…………………………………………………………………………………………………………. 51
3.8.1.
Introduction
………………………………………………………………………………………………. 51
3.8.2.
Justification For Selecting Non-Probability Sampling Method
………………………… 51
3.9.
Research Plan ………………………………………………………………………………………………….. 52
3.9.1. Ethics…………………………………………………………………………………………………………… 52
3.9.2. Limitations …………………………………………………………………………………………………… 53
4. Findings And Analysis
……………………………………………………………………………………………….. 54
4.1. Introduction
………………………………………………………………………………………………………… 54
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4.2. Abstraction Of The Employee Benefits Industry……………………………………………………… 54
4.2.1. Introduction
………………………………………………………………………………………………….. 54
4.2.2. Methodology For The Abstraction Of The Employee Benefits Industry ………………. 54
4.2.3. Result ………………………………………………………………………………………………………….. 56
4.3. Top Benefit Offerings In Ireland …………………………………………………………………………… 65
4.3.1. Introduction
………………………………………………………………………………………………….. 65
4.3.2. Methodology For Determining The Top Benefit Offerings In Ireland
………………….. 65
4.3.3. Result ………………………………………………………………………………………………………….. 66
4.4. Employee Benefits Practices Following The 2008 Recession
……………………………………. 71
4.4.1. Introduction
………………………………………………………………………………………………….. 71
4.4.2. Methodology For Extracting Information Concerning Employee Benefit Policies
After The 2008 Recession
……………………………………………………………………………………….. 71
4.4.3. Result ………………………………………………………………………………………………………….. 72
4.5. Validation
…………………………………………………………………………………………………………… 75
4.5.1. Methodology For Validation…………………………………………………………………………… 75
4.5.2. Results
…………………………………………………………………………………………………………. 76
4.6. Summary ……………………………………………………………………………………………………………. 80
5. Discussion And Conclusions ………………………………………………………………………………………. 81
5.1. Conclusions
………………………………………………………………………………………………………… 83
5.2. Recommendations
……………………………………………………………………………………………….. 86
5.3. Future Work ……………………………………………………………………………………………………….. 88
6. Reflections On Learning …………………………………………………………………………………………….. 89
6.1. Introduction
………………………………………………………………………………………………………… 89
6.2. Background ………………………………………………………………………………………………………… 89
6.3. Master‘s Experience…………………………………………………………………………………………….. 90
6.4 Areas Of Development …………………………………………………………………………………………. 90
6.4.1. Leadership Skills
…………………………………………………………………………………………… 90
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6.4.2. Interpersonal Skills ……………………………………………………………………………………….. 91
6.4.3. Marketing Skills
……………………………………………………………………………………………. 92
6.4.4. Knowledge Of The Employee Benefits Industry
……………………………………………….. 93
6.5. Conclusion …………………………………………………………………………………………………………. 94
7. Bibliography …………………………………………………………………………………………………………….. 95
8. Appendix
………………………………………………………………………………………………………………… 103

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LIST OF FIGURES
Figure 1: Research Methodology Sequence ……………………………………………………………………… 39
Figure 2: Research Onion (Saunders, M.N.K., Lewis, P., Thornhill, A., 2009. Research Methods
For Business Students. Pearson Education.)
……………………………………………………………………… 39
Figure 3: Deductive Research Approach (Blackstone, A., 2012. Principles Of Sociological
Inquiry: Qualitative And Quantitative Methods.)
………………………………………………………………. 42
Figure 4: Inductive Research Approach (Blackstone, A., 2012. Principles Of Sociological
Inquiry: Qualitative And Quantitative Methods.)
………………………………………………………………. 43
Figure 5: Research Choices (Saunders, M.N.K., Lewis, P., Thornhill, A., 2009. Research
Methods For Business Students. Pearson Education.)
………………………………………………………… 46
Figure 6: Simple Service Model ……………………………………………………………………………………… 57
Figure 7: Extended Service Model ………………………………………………………………………………….. 58
Figure 8: Abstraction Of A Benefit Supplier
…………………………………………………………………….. 59
Figure 9: Abstraction Of A Benefit Consultant …………………………………………………………………. 60
Figure 10: Abstraction Of A Technology Provider ……………………………………………………………. 61
Figure 11: Abstraction Of An Employer ………………………………………………………………………….. 63
Figure 12: Abstraction Of An Employee ………………………………………………………………………….. 64
Figure 13: Top Benefit Offerings In Ireland
……………………………………………………………………… 67
Figure 14: Top Benefit Offerings In The Us …………………………………………………………………….. 69
Figure 15: Top Benefit Offerings In The Uk …………………………………………………………………….. 70
Figure 16: Hard And Soft Hr Policies………………………………………………………………………………. 71
Figure 17: Hard And Soft Employee Benefits Policies (Roche, W.K., Teague, P., Couglan, A.
And Fahy, M., 2011.)
…………………………………………………………………………………………………….. 72

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LIST OF TABLES
Table 1: Search Strategy ………………………………………………………………………………………………… 50
Table 2: Benefit Offerings From Top Irish Firms ……………………………………………………………… 66

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ACKNOWLEDGEMENTS
I am grateful to my family for supporting me and being there when I needed them. I also say a
special thank you to Deborah for being a source of unlimited support and encouragement
throughout this thesis. I thank Naomi for her tremendous support and generosity without which I
would have struggled to complete this study.
Furthermore, I wish to thank my supervisor Mr David Wallace for his overall guidance and
direction without which I would have gone off the mark.

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ABSTRACT
Like most other areas of HR, employee benefits are not immune to the catastrophic effects of the
recession. In a bid to keep up with business strategy HR managers have implemented several
plans, categorized in this study under ‗H
ard‘ and ‗Soft‘
employee benefit policies, which range
cost reducing initiatives such as cutting benefits, to employee motivating and retaining tactics
such as introducing ‗quir
ky‘ and ‗
fun‘ benefits in order to mitigate the impact of the recession on
employees.
This study also aims to shed some light on the employee benefits industry in Ireland and
highlight the main benefits offered by Irish employers. To create a snapshot of the Irish
employee benefits industry it was necessary to i) set the scope and boundaries of what could be
considered as an employee benefit, ii) understand who the main players in the employee benefit
industry are, iii) map out the possible service lines.
The available employee benefits service lines were categorized into two major types (Simple
service line and extended service line). Following this an actor abstraction was also created
showcasing the typical actors involved in the employee benefits industry, that is, the Employee,
Employer, Benefit Consultant, Benefit Technology Provider, and Benefit Supplier. Next a search
to find out the main benefit offerings provided by Irish firms was carried out.
It was found that the Pension, Healthcare benefits are the most offered benefits and could
arguably be the declared as the benefits employers bank on to attract, retain and motivate its
employees. Meanwhile, it was suggested that employee benefits may not be as important to Irish
employees anyway as they are more appreciative of the fact that they are in employment than
anything else.
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1.
INTRODUCTION
We have come a long way from the times when employee benefits were only regarded as
luxuries received only by the lucky few who managed to secure employment in benevolent
companies. Prior to the 1940s, employers rarely compensated their employers with any benefits
outside their wages which, in turn, were tightly in line with the number of times they worked.
This meant that the employees and/or their families were solely tasked with the responsibility of
covering issues such as old age, death and poor health (Beam and Mcfadden, 2001).
Fortunately, from the 1940s and onwards employers started to recognize the advantages of
employee benefits as an accessory to wages and since then its growth has increased immensely.
The rise in the availability of employee benefits have led to changes in the compensation system
so much so that government imposed regulations now exist, also employers are now faced with
the difficulty of making decisions as to which benefits to provide as well as how it will be funded
(Beam and Mcfadden, 2001).
Employee benefits can be divided into two main categories; mandatory (or legally required)
benefits which are usually made obligatory by the government of a country, and non-mandatory
(or discretionary) benefits which a benefits provided by employers at their own will. Mandatory
benefits differ from country to country and usually include benefits such as pension schemes
(including retirement, widows), social security etc. non mandatory benefits include perks such as
cycle to work schemes, medical insurance, canteen facilities, dental insurance, employee training
etc. (Ronald McGaughey, 2005).
Employers that are able to offer an attractive employee benefits package are usually rewarded
with improved employee attraction and retention statistics (Ronald McGaughey, 2005), as they
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have are said to be linked to their attitudes and behaviours in the workplace (Muse and
Wadsworth, 2012). Moreover, employees see benefits as a source of financial security for they
and their families (Ronald McGaughey, 2005). Suffice it to say, employee benefits nowadays
come with a huge price tag for employers.
Take for example; an employee accepts a job and as part of his remuneration package he is
guaranteed a salary of €25,000 along with employee benefits including life insurance (€75),
medical insurance (€1000 – €1500 for single cover, €3000 to €3600 for family cover), income
protection (€125), dental insurance (€120 to €325 depending on cover). Other benefits could
include company car, accommodation, and employee assistance programs. Therefore, the total
costs of employing the employee (that is, salary, taxes and benefits) could potentially be nearly
1.5 times the basic salary of the employee, so in this case €31,250 to €35,000 (Hadzima, 2005).
And according to Curran (2009) the cost of providing benefits by an average American company
is just under $15,000 per annum.

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2.
LITERATURE REVIEW
2.1 HRM DURING THE INDUSTRIAL REVOLUTION ERA
According to Khilawala (2013), The need for Human resource management began as far back as
the late 1700s during the industrial revolution era. During this period vast changes were evident
including the replacement of man made goods with ones made with machinery, so much so small
businesses were replaced with factories producing products on a much larger scale. The changes
resulted in the influx of a vast amount of immigrants seeking employment and necessitated the
need for a different structure, one which would encompass the better management of employees
and recruitment practices to create employment for job seekers.
Pravin (2010) also points out that during this period, factors such as the working conditions and
the social behavior of employees arose as chief issues. Factory working areas were deemed as
unhygienic and employees were made to perform arduous tasks (Nayab, 2011). In response,
companies and nations responded to this threat by instilling a code of discipline made to check
unpermitted behaviour and create a standard set of appropriate behaviour. Further down the line,
―
labour welfare measures‖ were also introduced in the United States (Pravin, 2010). Khilawala
(2013) mentions that these welfare measures assisted in the aim of assisting immigrants in fitting
into their community and helped to adjust them to the demands of the jobs. Inclusive were
programs put in place to help immigrants learn English and medical care and training. Soon
afterwards the National Cash Register Company (NCR) created would be the first personnel
management department which was tasked with the job of managing issues including working
hours, wage management and record keeping (Nayab, 2011). At the same time, major companies
like Cadbury introduced benefits such as the construction of model villages for its employees and
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the employment of welfare workers who were tasked with the duty of looking over the wellbeing
of employees (Khilawala, 2013).
2.2 EMPLOYEE ATTRACTION AND RETENTION
Scott-Ladd et al (2010) described the attraction and retention of employees as an important part
of a company‘s HR efforts claiming that it is connected to the success of a company. Likewise,
more and more companies had started to realize this and they saw a need for them to check that
their recruitment and retention practices within Human resource management were in par with
their overall strategy formulation. In addition, Scott-lad et al (2010) warned against making
assumptions about what employees wanted in terms of attraction and retention. According to
Scott-lad et al (2010), before rewards can be offered a thorough analysis must be carried out to
assess the employees‘ situation. Scott-lad et al (2010) cited the US as an example saying that the
rewards that are more likely to be received favourably in the country include more pay and
flexible hours.
Gonzalez (2009) conducted a study in order to shed some light into the attraction and retention of
low level Mexican workers to the maquiladora industry. Jobs offered in this industry are mainly
from multinational companies outside Mexico which are mainly low skilled jobs in plants and
warehouses. The industry itself is faced with increasing job cuts and plant closures, and as such,
high turnovers have always been the norm. Gonzalez (2009), through his interviews, came to the
conclusion that there was no attraction to the industry and pointed out that the maquiladora‘s
need for basic necessities precluded selective practices and was the main motivator behind
wanting to get a job in the maquiladora industry. He continued by saying that many of the
14

workers actually saw it as a personal objective to get a maquiladora job, though they preferred
working with their friends and families, when push came to shove they went ahead regardless.
With regards to retention, Gonzalez (2009) was able to list out a couple of points he gathered
from his interview with the workers in maquiladora, and he mentions that money acts as a
motivator of people. According to him maquiladora workers like the idea of being paid for every
ounce of effort put in. An issue which was noted was the relationship between workers and their
supervisors. Workers complained about how they were maltreated by unprofessional supervisors
and cited this as one of the reasons they were likely to leave. Gonzalez (2009) suggested that in
order to rectify this problem the supervisors must be trained. Maquiladora workers also preferred
the idea of having people promoted from within. This gesture gives them the hope that they
might someday move up the ranks of operator to member of management. Furthermore, they
despised it when people from other maquiladora were brought into the company instead. The
workers also made mention of wanting to be recognized or appreciated for the work they did.
They pointed out how they were criticized by their supervisors when production levels were bad
but then would not get any commendation when production was good again. He points out that
the economy has had its toll on some maquiladoras making them cut expenditures on
celebrations for their staff. However some workers feel unappreciated when they see that other
firms going through the same recession still put out a little money to appreciate their staff.
2.3 EMPLOYEE MOTIVATION AND PERFORMANCE
According to Muhammad Ikhlas Khan (2012), one of the challenges of the workplace is getting
employees to be motivated enough to carry out their work. However finding out what motivates
people is a mystery that has been debated for a long time. He cites that Maslow‘s hierarchy of
15

needs attempted to shed some light on the topic by providing five levels of employee needs,
physiological, safety, social, ego, and self-actualizing (Muhammad Ikhlas Khan, 2012).
Anyim et al (2012) points out that for performance to increase motivation should be the
manager‘s main priority, a point also mentioned by Nicu (2012) who believes that of all human
resources processes in an organization motivation takes a chief role because other facets of the
organization gain from its ―he
alth functioning‖.
Like Scott-Ladd et al (2010), Nicu (2012) also stressed the importance of knowing the motives
of the employees explaining that knowing the motives of the employees would assist employers
in improving action efficiency. He also goes on to say that there exist interdependence between
motivation and performance stating that the motivation and satisfaction levels of employees
would always affect the individual and organizational performance. Popescu and Popescu
(2011) also add that this interdependence of motivation and performance is also affected by the
complexity of the tasks an individual is to perform. He continues by saying, in the case of
simple tasks (for example repetitive tasks), as motivation intensity increases so does the
employee‘s performance also increase. With regards to complex tasks (for example tasks
requiring creativity), as motivation increases so does performance also rise until a certain mark is
reached where there are no more increments in performance.
According to Rani and Kumar (2012), research performed in the fields of psychology and
business literature have uncovered that motivation may vary as a function of different facets in
work environment, including evaluation expectation, actual performance feedback, reward,
autonomy, and the nature of work itself. They also state that human motivation to do work can
be split into two forms namely, intrinsic and extrinsic (Rani and Kumar, 2012). According to
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Krivonos (1978), motivation is said to be intrinsic when an individual receives his reward for
performing a task from within himself / herself or from actually performing the task itself.
Whereas he explains extrinsic motivation to be work carried out to in order to fulfil a non-
objective goal for example, tasks done to relieve guilt, help a friend, or climb up the career
ladder. (Krivonos, 1978)
2.4 EMPLOYEE BENEFITS
Employee benefits are part of an employee‘s total reward package provided along with his/her
usual cash payments (Armstrong, 2006). (Armstrong, 2002) states that employee benefits can
exist in three forms, namely; Deferred (or contingent) – which include benefits such as medical
insurance, and pension scheme. Immediate – this includes car allowance and season ticket loan.
And benefits which are not strictly classified as remuneration: such as holidays or holiday
trading
Most benefits provided by employers are subjected to tax, also called ―
benefits in kind‖, with the
notable exception of some benefits including pension schemes, canteen meals, car parking,
professional subscriptions and other benefits that are used mainly for job duties. Flexible
benefits, also known as ―
cafeteria schemes‖, give employees the choice to decide what benefits
they want out of a package of employee benefits (Armstrong, 2006).
Employee benefits play a significant role between employers and employees and are said to be
advantageous to both parties. Over half of today‘s employees acknowledge that employee
benefits are just as important to them as their basic pay. This is so because some employee
benefits enable employees to make savings, or provide amenities that otherwise would have been
difficult to get such. Examples include health care and insurance (deanandraper.com, 2012). The
17

scope and range of employee benefits has continued to grow at an increasing rate, however, a big
stumbling block exists in that employers sometimes do not understand what their employees
want and so provide the wrong employee benefits. (Human Resource Management International
Digest, 2010).
One of the biggest issues with employee benefits lies in the cost of providing it. According to
(Kalamas, Mango and Ungerman, 2008) companies in the United States have spent up to
$2trillion in funding employee benefits with a significant amount of the cost incurred by the
rising cost of healthcare (Prudential Financial, 2012) (Wells Fargo & Company, 2012). While in
the UK, the British government‘s recent pension auto-enrolment has been cited as a cost concern
for employees (Tolley, 2011). In a bid to cut costs, employers are looking into several cost-
cutting benefit strategies including introducing technology to improve benefits delivery
(Bridgeforth, 2012), balancing business costs and benefits using tactics such as cost shifting
which involves passing on the cost of benefits – e.g. from insurance rates – from employers to
employees (Managing Benefits Plans, 2011) (Metlife, 2011a), and predictive modelling which
helps employers predict their future benefit costs (e.g. healthcare take-up) ahead of time giving
them the opportunity to decide which benefit programs would suit them best (Uborcev, 2011)
(Silva, 2008).
2.5 LINK BETWEEN EMPLOYEE BENEFITS AND EMPLOYEE ATTRACTION
AND RETENTION
―
Employee retention is a process in which the employees are encouraged to remain
with the organisation for the maximum period of time or until the completion of the
project.‖ (Giri, 2008)
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Replacing an employee is an expensive process and according to Carsen (Carsen and
Incorporated, 2005), the cost of carrying out a replacement is as high as 200% of the employee‘s
annual salary and benefits put together. This is so because hiring an employee usually includes
factors such as advertising, recruiter‘s salary, training and other expenses. Most HR
professionals and economic researchers believe that employee retention will be a key business
tool. This is based on the fact that 81% of US executives feel that employee retention is an
important business priority (McCooey and McCooey, 2009).
Furthermore, (Ryan, 2000) stated that employee retention poses as a business concern for many
firms. He states that employee retention is an issue which should be considered as a strategic
problem and hence must be handled with a benefits professional in sight. He also theorized that
one of the many reasons why employees decide to leave their current employment is due to
unsatisfactory tangibles (pay and benefits). (Koch, 2006) also points out how health benefits are
being used by employers as a tool for retaining their prized assets. She also mentions how
employers are starting to understand that offering an attractive pay is not always enough for an
employee but that benefits and job security are usually demanded, most especially medical
benefits.
(Brenner, 2010) warned that mature workers are likely to leave the workforce unless policies are
instilled in order to keep them in; such policies include ―
targeted employee benefits programs‖,
and examples include favorable health and life insurance policies. Some organizations do take
advantage of this fact by offering an increase in these benefits in return for an employee‘s
decision to stay past their retirement age ((Brenner, 2010). ―
Fun‖ benefits also help cement the
bond between employer and employees, these types of benefits include perks such as picnic
19

outings, company parties and milestone rewards. Other benefits can also include childcare, pet
care and paid travel for an employee‘s spouse(Toledo Business Journal, 2009).

2.6 LINK BETWEEN EMPLOYEE BENEFITS AND EMPLOYEE MOTIVATION
AND PERFORMANCE
According to (Forsyth, 2006) motivation has the ability ―
to increase efficiency, effectiveness and
productivity, and makes it more likely that whatever results are targeted will be a hit‖. He also
states that the consequences of not motivating employees include increased management times,
possible altercations in the form of arguments and countless scrutiny. (Grigoroudis and Siskos,
2010) poised that employees are the internal customers of an organization and stresses that their
satisfaction is an important driver to business success. This notion is also supported by (Nawab,
Bhatti and Shafi, 2011) who suggest that an important factor for any organization that wishes to
achieve its goals and objectives is to make sure that its employees are motivated.
Keller (cited by (Anyim, Chidi and Badejo, 2012) asserts that employees give back in
performance what they are expected of by their employers, that is, when employers expect the
best, employees give their best and when employers expect little employees give little in
performance. Also, according to Vroom (cited by Hong et al., 1995), people work with the
expectation that they will be rewarded for whatever they do. He also asserts that the level of
reward is directly proportional to the quality and quantity of work produced, hence affecting
his/her productivity. (Green, 1992) also makes similar suggestions by stating that employees are
motivated to perform better when offered something that meets their satisfaction.
20

As a result, employers motivate their employees in a number of ways one of which involves
offering them incentives in order to bolster their satisfaction levels hence increasing their
interests in their tasks and duties (Nawab, Bhatti and Shafi, 2011). Hong et al (1995) sought out
to assess the impact employee benefits had on employee motivation and performance by carrying
out a study on the topic. His sample included 113 corporations. At the end of his research, he
was able to come to the conclusion that employee benefits have ―
great impact on work-
motivation‖ which in turn affects performance. He also discovered that people reacted to
employee benefits depending on factors such as job grade, gender and marital status etc. This
phenomenon was also pointed out by Green (1992) who stipulates that approaches that motivates
an employee to perform well may ―
miss the mark‖ with another employee.
2.7 EMPLOYER REACTION FOLLOWIING THE 1930 GREAT DEPRESSION
The 2007 – 2008 financial crises has sometimes been portrayed by in the media to be just as
detrimental or even worse when compared with the Great Depression in the 1930s. Common
examples of situations during this period include great hardship and unemployment (Bennett et
al, 2010). Moriguchi (2003) carried out a research into the use of private welfare capitalism (that
is, compensation and benefits that were above wages and legal obligations) pointing out that
welfare capitalism began to mature in the 1920s to form ―
sophisticated HRM policies‖ with the
main goal of nurturing a stable and committed working pool. The ulterior motive was also to
prevent employees from getting involved with unions. Before the start of the 1930s at least 200
firms, with a workforce totalling just less than 2million production workers, established
comprehensive HRM programs including (1) incentive contracts such as retirement pension plan,
paid vacation plan, and group insurance plan (2) human capital investment such as company
21

libraries and employee classes (3) internal enforcement mechanisms such as company picnics,
recreational facilities and athletic teams. (3) internal enforcement mechanisms.
Moriguchi (2003) further uncovered evidence that gave the perception that employee benefits, or
corporate welfarism as it was referred to, had developed into a mutually binding obligation
between management and workers. He went on to state that employers at the time noticed the
benefits of the HRM program and showed concern that ending these programs would have a
knock on effect on employee morale or give rise to labour disputes and hamper recruitment in
the future.
Moriguchi (2003) also carried out an investigation into the impact of the great depression on
employee beenfits provided by top companies at the time. These companies included the likes of
Ford, General Motors, General Electric and IBM. In his findings, he found that there were
substantial inter-firm variations which highlighted the varying experiences of the companies in
the industries in dealing with the depression. Out of the four companies, Ford was the hardest hit
due to the poor sales records which reduced by approximately 80%. On the other hand IBM was
able to sail through the depression with little or no dent.
Moriguchi (2003) made an assessment of the HRM policies implemented during the great
depression period (1929 – 1934) using different measures namely; wages, employment, HRM
programs, and emergency relief plans. According to his assessment, despite the decline in sales
revenue, all companies were able to maintain and sustain a steady work force size and hourly
wage level until early 1931. This changed in 1932 when companies were involved in making job
cuts and wage restructuring. Ford, General Electric and General Motors were amongst several
other companies that carried out major job cuts ranging from 50% to 80% of their work force.
22

Furthermore, several companies suspended, closed, or shrunk their HRM programs to
manageable sizes which included introducing tighter eligibility rules, reducing the number of
benefits or increasing the amount of employees contributed towards a benefit.
Moriguchi (2003) pointed out that during the great depression, a majority of the share plans,
profit-sharing plans, and housing plan schemes were shelved by employers that offered them.
However companies did provide other benefits such as relief assistance including food baskets,
emergency loans, dismissal pay and in special cases private unemployment benefit plans.
2.7.1 GE Case Study
According to Moriguchi‘s (2003) case study analysis, General Electric was known for having
introduced one of the most comprehensive HRM programs. Its programs included a non-
contributory pension plan, an additional compensation plan (5% of annual wages) rewarding
employees who had given at least 5 years of service. A holiday plan which gave employees a
week of holiday which would have increased to one week after 3 years and 2 weeks after ten
years. Also provided were savings and investment plan and a corporate housing plan to help
employees purchase homes.
The management at GE took employee retention serious. Their work force was made up of semi-
skilled and skilled employees, and both were regarded equally as essential to retain. In addition,
General Electric was of the belief that employees who had been at the company longer had the
most experience and skills and therefore were great assets to the company (Moriguchi, 2003).
During the depression GE suffered a serious decline in sales of 67% whilst it share price fell
91%. The management of General Electric made attempts at protecting its valued assets, the
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―
corps of skilled and loyal employees‖ which the company had spent years investing in. One of
the many HR strategies include the introduction of work sharing in order to cut the chances of
carrying out large layoffs and as a result were able to maintain 75% of their work pool in the first
two years of the depression. They also introduced extensive relief efforts and an ―
employment
stabilization program‖ which was an unemployment benefit plan (Moriguchi, 2003).
However by the third into the recession, huge cracks began to show in GE. Their work force was
reduced significantly to less than half of its 1929 level. Furthermore, GE started to discontinue
benefits such as home mortgage assistance, paid holiday leaves, and suspended the 5% additional
compensation. Revisions were made to the savings and investment plan and it also reduced
interest payments. All in all, the amount allocated to benefit expenditures took a nose dive from
$10 million in 1931 to $6 million in 1933. He noted that there was concern among workers
towards the change in wage amount as well as the layoffs occurring and the benefits that had
been discontinued (Moriguchi, 2003).
2.8. EMPLOYER REACTION TO EMPLOYEE BENEFITS FOLLOWING THE
2008 RECESSION
―
In today’s weak economy, catered meals, dry cleaning and babysitting services,
traditionally associated with the Googles of the world, are being scrapped faster
than “McCain 2008” bumper stickers‖ (Robbins, 2009).
Although Robbins‘ (2009) statement above was made in 2009 the same can still be said of the
state of things 2012. Employers of today are much more interested in innovative and cost
efficient employee benefit solutions (Aon.com, 2012). According to (Bridgeford, 2010), in 2010
18% of large companies reduced their employee benefits offerings while 19% cut or suspended
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employer contributions towards pensions. In all, 63% said that the recession negatively affected
their organization (BenefitsSellingMag.com, 2010). In addition 41% of employees were said to
now value their benefits more than they did prior to the economic downturn and 40% have
increased their interest in learning more about their employee benefits (Managing Benefits Plans,
2011).
Furthermore, as the economies of most countries struggle to regain a stable flourishing state,
employers have had to undergo massive restructuring and have implemented cost-cutting
exercises and made redundancies in effect (employeebenefits.co.uk, 2012). Companies are trying
to survive amidst the recession by cutting back on staff numbers and replacing humans with
machines where possible. And although these tactics are showing reward, they are also have
knock-on effects. As a result of the cuts, employees are being asked to do more work than they
usually would whilst their compensation package remains stagnant. Despite the unhappiness of
employees at such arrangements there is little that they can do but consent to the unspoken truth
of ―
Be happy that you still have a job at all.‖ In effect, employee loyalty and satisfaction has
taken a plunge (MetLife, 2011b).
However, some employers have acknowledged that retaining key staff is an important part of
their HR goal this year and have positioned it as the key issue shaping their benefits strategy. In a
survey carried out by the Employee Benefits Group, employers mentioned that the reason why
they were offering employee benefits was to keep their employees engaged ―
because they are an
effective retention tool (80%) and an effective recruitment tool (79%)‖ (employeebenefits.co.uk,
2012).
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From an employee perspective, in 2009 Ceridian and Vebnet carried out some market research
involving over 1,000 employees in order to find out the impact of the recession on the mindset of
employees. In their research, they discovered that most UK employees were more interested in
being able to get along with their daily struggles, with almost half of the employees citing ―
day-
to-day‖ survival as their top priority. They also found that there was a prominent distinction
between employees who place a heavy premium on such benefits as holidays and socialising (the
fun group) and those who took the much more prudent approach instead (the frugal group)
(Ceridian.co.uk, 2009).
Furthermore, they were able to discover that a significant number of employees were of the
belief that in the times of hardship and difficulties they should be supported by their employers
in the short-term and rewarded in the longer-term. They pointed out that employee plans for the
upturn of the economy revolved around the improvement of rewards in three main aspects:
 Pay: In which 20% of employees surveyed planned to ask immediately for a pay rise,
 Promotion: in which 20% of employees surveyed stated that they would be looking for
new challenges within the company or elsewhere.
 Personal development: In which 16% of employees surveyed mentioned that they would
be looking to receive training in order to develop their skills. (Ceridian.co.uk, 2009)
All in all, their recommendation to employers was that they hold onto their staff and make
preparations for how they intend to meet the requirements of their employees. They stressed how
employers will need to face the recession with a realistic mindset and open themselves to the
chances of ‗
implementing alternatives‘ to pay rises and bonuses ahead of conversations with
employees whilst been open to communication and honest throughout. (Ceridian.co.uk, 2009).