Employers tend to keep their employees happy by providing various types of benefits in addition to their salary. The benefits which are generally called “fringe benefits” were considered to have a minor role to play in the pay scale of a worker. However, with various changes taking place over the years, these benefits are no longer considered as something to ignore. Since a long time, these kinds of benefits have made it possible for many employers to retain their potential employees. These include different types of remuneration such as commissions and benefitsthat make up almost 20%-50% of theorganization’s salary budget. The employers have to make sure that the employees get all the additional benefits they deserve. When an employee looks for a job, the first thing he/she notices apart from the salary are the incentives that the company offers. This includes festival bonuses, parking facilities, sick pay, company cars, accommodation facilities, maternity allowances, relocation expenses, insurance and other allowances paid over and above the salary. Another significant benefit that all employees are entitled to is of ‘pension’.
This is an important remuneration as it is the earning of a retired person and hence needs to fulfil all the standard requirements. However, certain studies (Smith, 2000a, p.153) have shown that these benefits tend to be distributed unevenly among all the workers. This means that senior levels get more proportion than the average employees which accounts for almost 30%-40% of their pay being the various benefits. Employers are always devising ways to keep their employees motivated by improving the pay with those benefits that the employees require. A survey was done by Towers Perrin (IRS 2000a, pp. 5–9, Thompson and Milsome 2001, pp. 55–62), and it shows that among 13,000 employees most of them were not content with the perks they received from their employers. This is because their needs are different than what the companies provide and as such are not sufficient to keep them motivated in the workplace. Thus the best solution was to make it more flexible and let the employees choose what benefits are suitable for them. This way the employer would be able to understand what the employee actually needs and use the money to fulfill that requirement rather than spending on something he/she doesn’t require. Therefore, this approach seemed to gain a lot of attention in the United States of America as it aided in the retention of employees and as such was accepted by many in the United Kingdom as well.