Employee Benefits Literature Review and Emerging I

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Employee benefits: Literature review and

emerging issues
Article in Human Resource Management Review · June 2009

DOI: 10.1016/j.hrmr.2008.10.001
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HUMRES-00297; No of Pages 18
Human Resource Management Review xxx (2008) xxx–xxx
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Human Resource Management Review

j o u r n a l h o m e p a g e : w w w. e l s e v i e r. c o m / l o c a t e / h u m r e s
Employee benefits: Literature review and emerging issues

James H. Dulebohn a,⁎, Janice C. Molloy a, Shaun M. Pichler a, Brian Murray b
a
Michigan State University, School of Labor & Industrial Relations, 412 South Kedzie Hall, East Lansing, MI 48824, USA
b
College of Business, University of Dallas, 1845 East Northgate Drive, Irving, TX 75062, USA
a r t i c l e i n f o a b s t r a c t
Available online xxxx Many have noted the lack of human resource management research on employee benefits,
which is surprising because employer-sponsored benefits are a primary concern of executives
Keywords: and employees alike. Moreover, of special interest to scholars, benefits provide a unique
Employee benefits opportunity to examine fundamental theoretical and empirical questions about employee
Health care behavior and contemporary employment relationships. This paper provides a foundation for
Retirement such research by providing an overview of the context from which U.S. employer-provided
Pension
benefit programs evolved and the contemporary state of benefits research in human resource
Work-family
management. Propositions related to primary employee benefit research are provided.
© 2008 Elsevier Inc. All rights reserved.
The implications of employee benefit decisions are among the most relevant for remaining competitive in the labor market.
From a total compensation perspective, indirect compensation or benefits plays a significant factor in the attraction and retention
of employees. This is particularly true for costly benefits such as health insurance and pension plans, the provision of which is an
increasingly important issue to both employers and employees. Executives have long been concerned about the costs of providing
competitive employee benefits (Conference Board, 2007). Typically, benefit costs comprise about one-third of an organization's
total labor costs and such costs have steadily increased (Hewitt, 2002). As such, benefit decisions often have a significant effect on a
company's bottom line. For example, the decision to promise current employees health benefits or certain types of pension plans
following their retirement has long-term financial implications. The general managerial focus and concern regarding benefits such
as health care is reflected in statements by CEOs such as Bill Ford who said: “Clearly, it's our biggest issue we have, bar none. The
health care issue is one that I find intractable” (Wilson, 2003).
In spite of the prominence of benefit issues to organizations, when reviewing the human resource management (HRM)
literature, there is a surprising general absence of attention given to employee benefits. Indeed, in their analysis of gaps between
HRM academic research and practitioner interests, Deadrick and Gibson (2007) found that the largest gap was in the areas of
compensation and benefits. While employee benefits are recognized as a major area of HRM practice, HRM researchers generally
have not taken adequate steps to provide research in this area to inform practice. In an era when HRM scholars wish for greater
influence with executives, greater attention by HRM researchers to these areas of concern among organizational leaders can
contribute to elevating the role and perceived value of HRM.
The purpose of this article is to begin to address this academic research-practice gap by identifying core topics in the benefits
literature, and for each topic, identifying emerging issues for future benefits research. To this end, five benefit topics are identified:
(1) the context of employer-sponsored benefits, (2) benefits satisfaction, (3) pensions, (4) health care, and (5) work family benefits.
For each topic, extant research is examined, and future research propositions are provided. The paper continues by defining
benefits, the scope of the paper, and how welfare capitalism has influenced benefits.
⁎ Corresponding author. Tel.: +1 517 432 3984.

E-mail address: dulebohn@msu.edu (J.H. Dulebohn).
1053-4822/$ – see front matter © 2008 Elsevier Inc. All rights reserved.
doi:10.1016/j.hrmr.2008.10.001
Please cite this article as: Dulebohn, J. H., et al., Employee benefits: Literature review and emerging issues, Human Resource
Management Review (2008), doi:10.1016/j.hrmr.2008.10.001
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2 J.H. Dulebohn et al. / Human Resource Management Review xxx (2008) xxx–xxx
1. Context: definitions, scope, and welfare capitalism
During the 20th century, employers increased the economic security of employees by providing, in exchange for labor, benefits
in addition to direct compensation. Apart from direct compensation, benefits encompass all other inducements and services
provided by an employer to employees (BLS, 2005). Like other HRM policies, employer-sponsored benefits have been shaped by
social, cultural, and legislative forces (Kaufman, 2004). To maintain focus, this manuscript addresses voluntary employer-provided
benefits for individuals in the U.S. Employer-provided benefits in countries other than the U.S. are not addressed given the
significant variation in legislation, norms, and implementation. Similarly, statutory benefits that federal and state governments
require employers to provide to U.S.-based employees (e.g., workers' compensation insurance), are not addressed given the
significant variation in legislation, cost-containment strategies, and implementation approaches across states.
Most industrialized nations assure the welfare of citizens through government-sponsored systems that provide for the health
and safety of citizens, protecting them from consequences of economic fluctuations. In contrast, in the U.S. a system of welfare
capitalism emerged whereby employers, rather than the government, played a primary role in assuring the health and welfare of
employees and their families. Welfare capitalism encompassed a wide range of private, firm-level social and benefit policies,
including employee representation, recreation, stock ownership, and benefits relating to retirement, sickness, paid time off, and
unemployment (see Jacoby, 1997).
Prior to the Great Depression of the 1930s, welfare capitalism was centered in high wage industries. Accordingly, relatively few
workers were provided employer-sponsored benefits in addition to direct compensation. The Depression brought the inadequacies
of the welfare capitalism that existed at the time into sharp relief. In response, New Deal policymakers joined labor leaders and
reform activists to establish the basis of the modern U.S. welfare state. Private employer benefits, subsidized by tax incentives,
became an essential supplement to the basic government safety net and a key bargaining chip in negotiations with organized labor.
Welfare capitalism expanded beginning with the economic recovery after the Depression and this expansion was supported by
government legislation and workforce unionization.
Today the U.S. continues to retain aspects of welfare capitalism, but what has changed is that organizations face more intense
competitive pressures than when welfare capitalism first emerged. The benefits responsibilities employers shoulder today are
increasingly portrayed as a burden given the competitive pressures brought about by the globalization of product and service
markets, demographic shifts in the workforce (e.g., the baby boomer generation nearing retirement being followed by a much
smaller base of employees to potentially fund retirement benefits), health care inflation rates that outpace inflation and growth,
and uncertain immigration policies. Such strain has led to discussion of shifting responsibility for major benefits such as retirement
savings and health care from employers to employees as well as to the government.
2. Satisfaction with employee benefit offerings
A number of factors have contributed to employer provision of non-mandatory benefits such as health insurance and pension
plans. These include self interest of the decision makers, union bargaining, tax advantages provided to companies by the federal
government for offering certain benefits, the need to be competitive and retain employees, and union avoidance. The logic
underlying employer strategies to voluntarily provide benefits suggests that benefit offerings are associated with employee benefit
satisfaction, which in turn is associated with attitudes and behaviors that serve the employer's interests (Harris & Fink, 1994). The
implied process, based on social exchange, is that when employees are satisfied with benefits provided to them, they are
committed to the employer, remain with the employer, and perform their jobs well, which in turn leads to strong organizational
performance. Benefit satisfaction has been one area that has received some research attention by HRM scholars.
One might expect employee satisfaction to be related to the actuarial value of benefits and the level (i.e., amount and type of
benefits) of a benefits package to be positively associated with employee satisfaction (Micelli & Lane, 1991). Scholars have studied
the relationship between benefit level and employee satisfaction with the benefits package (e.g., Dreher, Ash, & Bretz, 1988) and,
despite its intuitive appeal, such research does not support that the level of benefits offered and satisfaction with those benefits are
positively associated. This paradoxical finding prompted Gerhart and Milkovich (1992) to state:
“The state of knowledge about the influence of benefits on employee attitudes and behaviors is dismal. … Studies
examining the links between the forms and levels of benefit coverage with valued outcomes (e.g., turnover, attraction)
offer potential important contributions to our understanding of employment relationships.” (p. 541)
To begin to disentangle factors underlying the paradoxical finding that the actuarial-value of benefits and employees' benefit
satisfaction are not correlated, scholars have examined three distinct elements of benefits: the benefit offering construct,
antecedents and moderators of benefit satisfaction, and organizational outcomes associated with benefit satisfaction.
2.1. Benefit satisfaction construct
Employee satisfaction has historically been conceptualized as a uni-dimensional construct that captures the value, or level, of
benefits (Dreher et al., 1988). In this line of research, the level of benefit offerings has been assessed with a four-item benefit scale
embedded in the Pay Satisfaction Questionnaire (PSQ) (Heneman & Schwab, 1985). Items on this benefit scale include satisfaction
with ‘my benefit package,’ ‘the value of my benefits,’ amount the company pays toward my benefits,’ and ‘the number of benefits I
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receive.’ Advantages of operationalizating benefits as part of the PSQ include that this approach allows measurement of benefits
within the context of compensation, is distinct from pay-related scales, and consistently exhibits high internal consistency (i.e.,
coefficient alpha values greater than .85) (Williams, Malos, & Palmer, 2002).
Later, with the onslaught of changes in benefit delivery systems (e.g., flexible benefit programs), Williams et al. (2002)
conceptualized and validated a benefit offering construct consisting of two dimensions. One dimension related to benefit level,
reflecting the value of benefit plans (e.g., levels of coverage, financial payments provided). The new dimension related to benefit
system satisfaction which reflected employee perceptions of the system used to deliver such benefits (e.g., communications, billing
support, ease of use). Whereas the benefit level dimension focused on the specifications of the benefit plans, the system dimension
reflected the employee's perceptions of how benefits were administered.
Given that perceptions of other HRM practices may be influenced by both the content of the HRM practice and administration/
delivery of the practice, the Williams et al. (2002) perspective may be expanded to compare with other HRM practices. Indeed, an
opportunity exists to incorporate the level and system dimensions posed by Williams et al. (2002) with the content and process
dimensions that Bowen and Ostroff (2004) suggest underlie all HRM practices and the objectives/content and delivery dimensions
in the training and development literature (Salas & Cannon-Bowers, 2001). Such integration may address construct proliferation
and allow findings in the benefits literature to inform the strategic HRM literature and vice versa.
2.2. Antecedents and moderators of benefit satisfaction
2.2.1. Generational differences and implications for measuring benefit offerings

Dencker, Joshi, and Martocchio (2007) argued that individual differences in benefit preferences emerge from the particular
employment relationships with which individuals have the most experience. For example, older employees likely experienced
or observed the period when career-long employment and cradle-to-grave benefits were provided by employers. As such, and
given that they may have extensive service with an employer, they may prefer benefits in which the employer shoulders the
risk of economic fluctuations and provides packages with defined benefits. In contrast, given that during their formative years
members of Generation X and Y witnessed the dismantling of internal labor markets, job security and lifelong benefits, these
individuals may not expect—or even be willing to trust—employers to provide for their economic and health security. As such,
these employees may prefer benefit programs in which employers define contributions and clarify which risks they will and
will not bear.
Given that today's employers are populated by individuals who grew up in different times and have different expectations of
employers (up to four different generations may work side by side), the potential effectiveness of a “one size fits all” benefits
approach is strained. Consistent with arguments of Boudreau and Ramstad (2007), Dencker et al. (2007) argued that market
segmentation of employees (and offering market segments different benefits) may strengthen the benefits “return-on-
investment.” Such return-on-investment may be achieved by either varying benefit offerings by employee segments (which may
present legal issues) or giving employees the choice among an array of benefits. A research need exists to examine preference
differences that exist among age groups in the workforce.
Proposition 1a. Benefit preferences may vary by generation or age cohorts. Therefore, the relationship between benefit offerings and
benefit satisfaction will be moderated by the cohort to which the employee belongs.
Proposition 1b. The level-dimension of the benefits satisfaction construct likely has facets which include the: (a) actuarial value of the
offerings, (b) locus of responsibility (between the employee and employer), and (c) time orientation (i.e., the extent to which the benefits
are used “now” (i.e., during employment) or in the future (e.g., retiree health care). The relationship between each facet level-dimension
and benefits satisfaction will be moderated by cohort membership.
Although Dencker et al.'s (2007) arguments regarding the variation of benefit preferences by generations are interesting, one
could also argue that a portion of any perceived variations are statistical artifacts of cross-sectional studies; hence, variance in
benefit preferences may not solely be associated with generation but may also be associated with life and/or family stages (e.g.,
Levinson, 1986; McGoldrick & Carter, 1982). For example, perhaps employees (regardless of generation membership) are likely to
value future-oriented benefits more when they are in their maintenance or mid-adult stage than when they are in their
establishment or early-adult stage. If so, then longitudinal studies comparing different generations at specific life stages may show
that there are actually more similarities than differences among generations at various life stages (i.e., baby boomers during
establishment, Generation Y during establishment, etc.). Accordingly, findings regarding variations in benefit preferences may
arise in part from life stage rather than only generation.
The difference between variation by generation or life stage may appear subtle. However, accurately isolating factors predicting
variation in benefit preferences has implications that are anything but subtle for employers' allocation of scarce benefit dollars.
Indeed, expecting benefit preferences to remain fixed when they vary in predictable ways over time may lead executives to make
misguided decisions. To partition variation associated with life stage vs. generation, longitudinal datasets gathered by the Bureau
of Labor Statistics or consultancies may be helpful.
Proposition 2. Although differences exist between life stages, benefit preferences change in predictable ways over time. Incremental
variance in employee benefit offering preferences (e.g., time orientation of benefits) predicted by generation (over and above life stage),
therefore, may not be significant.
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2.2.2. Actuarial- vs. perceived-level of benefits

Research has demonstrated that actuarial and perceived levels of benefits have differential impacts on benefits satisfaction. For
example, Williams (1995) tested a model of benefit satisfaction antecedents developed by Micelli and Lane (1991). She found that
employees' perceived level of benefits was more highly associated with benefit satisfaction than the “true” actuarial-value level of
benefits provided. Moreover, she found no support for a positive relationship between perceived level and actuarial-value level,
which provides a hint about a potential root cause of the benefit-satisfaction paradox. Williams also identified a set of individual-
difference factors including negative affectivity and the perceived-level of previous benefits among others that moderated
relationships between both actuarial-value level and perceived-level, and actuarial-value level and benefit satisfaction.
The lack of support for the relationship between actuarial-value level and benefit satisfaction provides an opportunity for
benefit researchers to contribute to the emerging strategic HRM literature on “perceived vs. intended” HRM practices. Williams'
study foreshadowed evolving strategic HRM theory (e.g., Nishii & Wright, 2008) that proposes differences between the HRM
practices an employer intends (e.g., a rich benefit program) and employee perceptions of the HRM practice (e.g., an average benefit
program). These related findings in strategic HRM and employee benefits point toward an opportunity to develop a refined model
of benefit and HRM system satisfaction. To create such a model, aspects of theory and research from compensation (e.g., Heneman,
Greenberger, & Strasser, 1988) and strategic HRM (Nishii & Wright, 2008) necessarily must be integrated.
3. Pensions
3.1. Definitions and context
Although historically in the U.S. income security for the elderly was provided for by the extended family, Social Security
legislation was passed by Congress in 1934 when it was estimated that approximately half of the elderly in the U.S. did not have the
means to be self-supporting and the unemployment rate was 25%. Initial contribution rates were 1% for both employer and
employee. Replacement rates for median earners were 23.4% in 1940, the first year anyone received benefits, and 41.3% in 2006.
However, while Social Security replaces about 40% of the average worker's earnings, in the future it will not replace as much. For
example, by 2030 the replacement rate will be 30% based on future Medicare premiums, taxes, and planned benefit reduction
legislation that has been passed. A majority of public and private sector companies in the U.S. provide their employees with
pension plans as a form of indirect compensation (Kramerich, 1999). In contrast to Social Security's replacement ratio of 40%,
employer-sponsored pension plans provide about 20% of income for all individuals over age 65.
The salience of employer-sponsored retirement plans to American employees has grown in recent years as a result of a number
of factors including the graying of the labor force, the increasing concern regarding the future solvency of Social Security, and the
decreasing replacement rate (Dulebohn, Murray, & Sun, 2000). Widespread agreement exists today among scholars and public
policy makers that the retirement income security of future retirees will increasingly depend on their participation in employer-
sponsored retirement plans and their own savings rather than on social security (Kramerich, 1999; Mitchell & Moore, 1998).
Employer-sponsored pension plans play a number of important roles for both employers and employees. While employers
provide pension plans for a variety of reasons, the overall goal of organizations is to design compensation systems that are
consistent with their human resource policies (Mitchell & Rappaport, 1993). The two major types of qualified pension plans offered
by employers are defined benefit (DB) plans and defined contribution (DC) plans.
DB plans were the pension plan typically provided by companies in the past as part of the use of internal labor markets
(Dulebohn & Werling, 2007). DB plans are formula-based pension plans in which employers typically promise to pay their
employees a benefit based on the employee's retirement age, final average salary, and years of service. The employer maintains a
pension fund and holds the risk of investment and returns on that fund. It also possesses the risk of paying out greater benefits if
workers live longer than expected. The risks faced by workers in a DB plan include the funding-level and solvency of the plan and
the necessity to maintain employment at a single employer (i.e., immobility and non-portability).
During the past 25 years there has been a decline in qualified DB plans from approximately 250,000 in 1980 to less than 80,000
in 2005. Concurrently, there has been growth in the use of DC plans among both private and public employers (Dulebohn, 2002).
DC plans are similar to savings plans and provide a benefit based on annual contributions, as a percentage of pay made on behalf of
the employee, and accumulated investment earnings on the employee's account. The employer's obligation is limited to providing
a plan that meets regulated guidelines and to any promise to contribute to the plan on behalf of the employee. Consequently,
participants of DC plans bear the risk of investment loss. The risks faced by the worker also include accumulating sufficient capital
to replace earned income in retirement, outliving one's savings, financially surviving catastrophic health, and maintaining
sufficient savings in the face of economic conditions (e.g., interest rate changes) and financial market fluctuations. Furthermore, a
number of employers have begun offering employees "hybrid" plans combining features of both plan types (Bodie & Merton, 1993).
3.2. Issues in pension research
Several foci emerge with respect to employer-sponsored pension plans. First, is the choice among plans that employees who
have to select among plans may face (e.g., a DB vs. DC plan). Some employers, particularly in the public sector, offer employees an
irrevocable choice among major plan types. Second, is the issue for DC plan participants of managing their retirement savings.
Specifically, this involves the topic of risk and selecting investments involving different levels of risk. Third, is the issue of
retirement savings adequacy and retirement preparation. The question exists whether employees are saving enough for
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retirement. This issue has employer implications for outflow, because employees who do not have adequate savings may want to
remain with their employer past normal retirement age.
3.2.1. Pension plan choice

Although the changes occurring in employer offerings of pension plans have received notable research attention (cf., Clark &
McDermed, 1990; Gustman & Steinmeier, 1992), a review of the literature indicates that only a couple studies have investigated
employees' choice among retirement plans. The first, a study by Clark, Harper, and Pitts (1997) examined direct effects of
demographic predictors on a choice between a DC plan and a DB plan among faculty members at a state university. Their results
indicated that age and years of service were positively related to the selection of the DB plan, while salary was positively related to
the selection of the DC plan.
The second study by Dulebohn et al. (2000) involved a field survey of 2400 employees who participated in a state sponsored
retirement system covering 60 participating employers. Their results identified primary predictors distinguishing plan selection
and indicated that employees' preferences for plan features (such as investment choice for a DC plan, benefit formula for a DB plan,
and portability for a hybrid plan) explained significant variation in their selection among pension plans. The results highlighted the
critical role played by individual differences in plan choice beyond demographic predictors.
A research question that still exists with respect to plan choice is: what choice will be made by new organizational members
who are given a choice? As noted previously in the discussion of generational and career stage differences, it is logical to assume
that different predictors of plan choice may play a role among younger, new employees than older employees with some seniority.
Consequently, exploratory analysis should be done with respect to investigating whether there are differences in determinants of
plan choice among employees based on their age or career stage.
3.2.2. Managing risk in DC saving plans

Because of the growth in the provision by employers of DC pension plans, issues surrounding managing DC savings plans are
topics warranting continued research attention. Unique to the DC environment is the necessity for workers to act as personal fund
managers by allocating savings among investment options that have differing levels of outcome risk. The decisions they make
regarding the risk levels in those funds have important effects on the level of savings they are able to achieve (Mitchell & Moore,
1998; Porterba, 2004). Because greater investment returns are often associated with taking on greater risk, if a worker is to achieve
sufficient savings, she or he will have to choose among investment options, such as equities, that have greater variability in
outcomes (Burtless, 2003; Shapira, 1995). For the naïve investor, selecting simply among high and low risk is a difficult task, but in
the present DC environment employers are increasing the number of investment allocation choices available to workers (Employee
Benefit Plan Review, 2001; Institutional Investor, 2001), which is causing dysfunctional responses from workers such as non-
participation (Sethi-Iyengar, Huberman, & Jiang, 2004). Most troubling for investment outcomes is the decision by a full third of
401(k) participants in the U.S. to place all of their assets in non-equity savings options (Munnell & Sunden, 2006).
To better understand the risk-taking decisions workers make when managing their retirement savings in DC plans, our review
focuses on the risk allocation question and summarizes key findings in each of the major approaches that historically have been
used to examine risk-taking behavior. First, we review literature on demographic correlates to risk-taking based on initial risk
taking research that focused on this area. Second, we review research on behavioral tendencies in decision-making. Third, we
review literature on attitudinal, perceptual, and dispositional modeling of the risk allocation decision.
3.2.2.1. Demographics. Several demographic factors have been studied relative to risk-taking in retirement savings, including
age, income, education, gender and marital status. The relationships that have been found have not been consistently supported
across all studies. Age, for example, has been shown to be negatively related to increased risk-taking in retirement savings
allocations (Agnew, Balduzzi, & Sunden, 2000; Dulebohn, 2002). As people near retirement, their time horizon for recovering from
losses in accumulation decreases, so they are less able to include investment options that have greater volatility in their outcomes.
However, in alternate studies of risk-taking correlates, age has either not been found significant (Sunden & Surette, 1998) or the
opposite relationship was observed (Dulebohn & Murray, 2007). The examination of age as a proxy variable for time horizon to
recover from loss is representative of demographic variables serving as proxies for underlying economic or behavioral principles.
Income and education have demonstrated positive relationships to risk-taking (Agnew et al., 2000; Dulebohn, 2002).
Individuals who have greater wealth, beyond that needed to survive, should be better positioned to substitute other savings or
accept losses in retirement savings (Munnell, Sunden, & Taylor, 2000). Likewise, it is speculated that individuals with higher
education either have greater earning potential or are better able to understand the role of risk in their retirement savings
(Munnell, Sunden, & Taylor, 2000). However, as with age, these expectations have not been consistently supported. Relative to
income, after controlling for attitudinal and dispositional factors, Dulebohn and Murray (2007) found no relationship for income
with the risk level of savings allocations. Relative to the education correlation, some studies have demonstrated no effect
(Dulebohn, 2002; Dulebohn & Murray, 2007; Sunden & Surette, 1998), while others showed that higher education was negatively
related to risk taking in the form of stock inclusion in savings plans (Bernasek & Shwiff, 2001).
As a general observation, females are less likely to include greater amounts of risk in their retirement savings allocations
(Agnew et al., 2000; Bernasek & Shwiff, 2001; Dulebohn, 2002; Dulebohn & Murray, 2007); however, that assertion depends on
marital status and the characteristics of the spouse (Bernasek & Shwiff, 2001; Lyons & Yilmazer, 2004; Sunden & Surette, 1998).
Female plan participants whose male partners were willing to take on additional risk in retirement savings, or whose male
partners expected to receive social security benefits, elected to take less risk in their own savings choices (Bernasek & Shwiff,
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2001). Single females also are more risk adverse than single men (Jianakoplos & Bernasek, 1998) or married females (Sunden &
Surette, 1998). Overall, demographic correlations do not explain much of the variance in retirement decision-making behavior
(Dulebohn et al., 2000). Consequently, researchers have looked to other areas of research including that focusing on decision-
making and attitudes for additional explanation of retirement risk savings behavior.
3.2.2.2. Decision making. Research on decision making has provided several contributions to our understanding of how workers
approach allocating their retirement savings. Thaler et al. have identified investment decision issues including self-control, lack of
commitment to decision preferences, the avoidance of short-term losses, and a bias toward allocations based on the over-
weighting of fund types among choice options (Benartzi & Thaler, 1999; Thaler, 1981; Thaler & Shefrin, 1981). Self-control manifests
itself as the disconnect between intentions and actions; for example, people intend to balance their portfolio of savings in a way
that includes enough risky assets to support growth over the long run, but never get around to doing the work to make the choices
to make it happen. A lack of commitment or decision preference is evident when individuals are easily influenced to change
savings allocations based on situational context (Benartzi & Thaler, 2002); consequently, a specific plan of savings is more often
emergent than purposely formulated. The avoidance of short term losses impacts workers' investment decisions by causing them
to construct less aggressive portfolios with fewer equity holdings when they review annual rather than long-term compound data
(Benartzi & Thaler, 1999). Finally, the mix of investment options also influences workers' allocation decisions. When the offerings
are weighted toward more equity options, workers will construct a more aggressive portfolio with more holdings in equities
(Benartzi & Thaler, 2001).
Kahneman and Tversky's (1979) work on decision heuristics and prospect theory has also provided a foundation for
understanding workers' decisions relative to risk-taking. Some important implications from their work are that we expect workers
to react more strongly to potential losses than gains, and we expect them to focus more on incremental losses and gains than on
their total retirement savings accumulations when making decisions.
3.2.2.3. Attitudes, dispositions and perceptions. Researchers have demonstrated that several attitudinal and individual difference
constructs drawn from psychology are useful for explaining risk-taking behavior in retirement savings allocations. Drawing on past
research on the influence of knowledge on risk-taking (Baird & Thomas, 1985; Funk, Rapoport, & Jones, 1979), Dulebohn and
Murray (2007) demonstrated that workers' knowledge of investment principles was positively related to the risk level in their DC
savings plan allocations. Extending into attitude research, they also showed that investment risk preference directly influenced
risk-taking in allocations, and moreover demonstrated that it served a key mediating role for the relationships of general risk
propensity, investment risk inertia, and opportunity perceptions with risk-taking. They further showed that risk opportunity vs.
threat perception mediated a relationship between a worker's experienced investment outcome history, self-efficacy toward
managing investments, and locus of control with investment risk preference and risk-taking in allocations. Their findings
supported prior work that also found empirical support for relationships between general risk propensity, investment principles
knowledge, and self-efficacy with risk taking behavior in retirement savings investment allocations (Dulebohn, 2002). Together
this research represents initial steps in examining the role of attitudes as determinants of risk-taking.
3.2.2.4. Inertia. Inertia, whether purposefully or by default, has also been found to influence retirement savings risk-taking.
Researchers have noted that the way in which individuals respond to risk in specific contexts tends to continue over time and
forms a relatively stable pattern (MacKenzie, 1998; Sitkin & Pablo, 1992; Slovic, 1972). This finding is consistent with research
that has found that employees who participated in DC pension plans often exhibit inertia by continuing with, rather than
changing, the risk level of their initial investment choices or the initial default allocation selected by the employer (Choi,
Laibson, Madiran, & Metrick, 2001; Madrian & Shea, 2001). Research on the role of individual difference predictors in inertia
behavior is needed. Specifically, based on prior research and findings on predictors of investment risk-taking, it is expected that
individual difference variables such as self-efficacy, investment risk preference, and investment knowledge will be associated
with inertia.
Proposition 3. Individual difference variables, including self-efficacy, investment risk preference, and investment knowledge, will
explain variance in inertia in retirement savings behavior.
3.2.2.5. A planned behavior perspective. Based on our literature review, we observed that demographics are often studied as
proxy variables for underlying economic or behavioral principles, and as such are not always consistent in their relationships to
risk-taking. As more proximal or direct attitudinal or dispositional influences on risk-taking, which more directly represent the
attitudes or preferences proxied by the demographic variables, are included in empirical models, these distal or proxy effects
disappear. Our observation is consistent with prior research conclusions that demographic variables do not add significant
explanation beyond comprehensive attitudinal variables (Ajzen, 2001; Albarracin, Fishbein, & Godestein, 1997).
From this observation, we suggest that a planned behavior model (Ajzen, 1988, 1991) would be a useful extension of the attitude
approach in examining risk-taking in retirement savings allocations, because it might identify additional psychological constructs
more directly influential to allocation decisions than demographic characteristics. The planned behavior approach extends or
complements past research, because it addresses issues different from decision heuristics or biases of behavioral finance or
prospect theory, and it adds to the attitudinal approach a general theoretical framework that goes further than present research by
incorporating questions of social norms and influence. Finally, and most importantly, it serves as a meta-framework that marries
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the behavioral finance and attitudinal research by bring together the issues of the imperfect relationship between intention and
actual behavior and of the role of inertia or habit in behavior.
In addition to its potential efficacy as a unifying theoretical perspective, planned behavior also has demonstrated its
usefulness in the study of risk taking in a variety of situations. For example, it is a dominant theoretical perspective in the study
of risky health-related behaviors (Martin, 2006; Reinecke, Schmidt, & Ajzen, 1997; Rivis & Sheeran, 2003) and has been
demonstrated as a model of risky driving intentions and behaviors (Parker, manstead, Stradling, & Reason, 1992). Accordingly,
though it is generally held by researchers that risk-taking behavior does not necessarily generalize across situations and may
vary among individuals (Bromiley & Curley, 1992; Wiseman & Levin, 1996), we expect that the planned behavior model as a
general framework will likewise explain significant variation in risk intentions and behaviors related to risk-taking in retirement
savings investment allocations.
Proposition 4. A planned behavior model, incorporating expectancies, social norms, perceived behavioral control, and intentions, will
explain variance in risk-taking behavior in retirement savings plans.
3.2.3. Retirement preparation and savings accumulation

The retention and planned exit of employees has become increasingly more difficult to manage due to the shift toward DC
retirement programs. Historically, organizations' provision of DB plans represented a predictable process for moving older
employees out of the organization by providing a benefit based on years of service and final salary. Retirement was variously
viewed as a scheduled transition, an achievement, or something the employee had earned; consequently, organizational exit was
more of an expectation than a choice once the requirements for the defined benefit were met. In contrast, in today's DC
environment, there are a larger number of determinants of, and greater variability in, savings levels and future retirement income
adequacy across employees. Thus, employees are not always able to retire “on schedule,” they may look for opportunities to extend
their careers, and there is greater uncertainty in staffing forecasts and retention management relative to retirements (Munnell,
Sass, & Aubry, 2006).
3.2.3.1. Retirement savings consequences. A worker's financial condition has long been recognized as an important determinant
of retirement related choices and outcomes (Adams, 1999; Beehr, 1986; Beehr, Glazer, Nielson, & Farmer, 2000). Inadequate savings
accumulation has been shown to be related to lower future income replacement ratios (Holden & VanDerhei, 2006), a delay of
retirement (Munnell et al., 2006), and participation in bridge employment (Kim & Feldman, 2000). Employees who possess
sufficient accumulated wealth or who are satisfied with their planned retirement income retire at younger ages on average than
those who possess less accumulated savings or do not have sufficient financial resources (Adams, 1999; Beehr et al., 2000).
3.2.3.2. Retirement savings determinants. Because savings accumulations play an important and consistent role in the retirement
decision, it is important for HRM managers and researchers to know what is related to savings behavior and accumulations in
order to better understand or manage the staffing and retirement process. The literature provides three categories of variables.
First, there have been several studies of demographic correlates. Demographic variables that have received consistent support
include age, job tenure, and income (Holden & VanDerhei, 2006). The logic underlying these variables is largely grounded in
opportunity. Older individuals have had a greater opportunity to accumulate savings over time than younger workers. Likewise,
individuals with greater job tenure have had a greater opportunity to contribute consistently to a savings plan and are less likely to
have cashed out savings on one or more occasions when changing employers due to disruption in their job-generated income
stream. Workers with higher income levels are able to assign a greater nominal amount of dollars to savings than lower income
workers.
Second, differences in savings accumulations have been attributed to specific savings behaviors, including employee
contribution levels, decisions to participate in optional savings programs, asset allocation and diversification choices, occasional
withdrawal or borrowing from savings, and cashing out when changing employers (Holden & VanDerhei, 2006; Munnell & Sunden,
2006). Chief among the determining behaviors is the decision whether to participate in an employer-sponsored retirement savings
program, and then to elect to contribute additional income to the savings plan. Younger employees and those with lower income
tend to participate less often or to contribute fewer dollars to the plans.
Also important among the behaviors are those that affect the return on the investment. Because the total savings accumulation
is a function of both the initial contributions and the subsequent capital appreciation, an employee can affect the savings outcomes
in several ways. Common behaviors that negatively affect accumulation levels include the tendency to not diversify investment
holdings adequately, to over-invest in the employer's stock, and through inertia fail to balance the portfolio as investment returns
alter the proportions of allocations among fund types (Munnell & Sunden, 2006).
Third, there are structural or plan characteristics that affect an employee's savings accumulation. Among these characteristics
are automatic enrollment, employer contributions, and automatic rollover (Munnell & Sunden, 2006). Automatic enrollment
programs overcome the challenge of motivating employee participation by making participation the default behavior and
requiring the employee to take specific steps if he or she does not want to participate. Employer contributions supplement the
employee's level of savings contributions. Because employer contributions are sometimes contingent on the amount of employee
contribution, they can motivate additional savings on the part of the employee. Automatic rollover provisions positively influence
long-term accumulation by discouraging cashing out behavior by moving funds directly into individual retirement accounts when
employees exit the organization.
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3.2.3.3. Future research. Research in retirement savings is needed to better identify both consequences and determinants of
savings accumulations that have not yet been fully examined. Most important among the consequences is workplace productivity
and health. There are at least two reasons to expect an effect of savings adequacy on employee performance. First, research has
demonstrated that one of the motivators of retirement is being “tired of working” (Beehr et al., 2000). If an employee is forced to
work for financial reasons beyond the time when he or she has psychologically exhausted his or her intrinsic motivation to work,
work effort consequently will decrease. Second, individuals who are ill perform at lower levels than fully healthy workers (Kessler
& Stang, 2006). Given that individuals delay retirement due to inadequate savings and in order to maintain healthcare insurance
(Freidberg, 2007), it is reasonable to expect that the individuals who most need retirement for health reasons are the workers who
are least able to retire. If these individuals are working, out of necessity, when they are experiencing health challenges, then it is to
be expected that their productivity at work will suffer.
Proposition 5. For employees who would otherwise be eligible for retirement, inadequate savings accumulation will be negatively
correlated with workplace productivity.
Among the determinants of savings accumulations, the most beneficial new research would examine dispositions and
attitudes. We expect that there are at least three dispositions that would relate to savings. First, research including the “Big Five”
personality constructs has been especially informative in human resources, and most important among these for retirement
savings is conscientiousness. Long-term savings accumulation relies on disciplined and regular contributions that are allowed to
grow over time and are prudently managed in portfolios that are regularly rebalanced. Each of these requisite behaviors is a
manifestation of the conscientiousness construct as it is traditionally defined (Barrick & Mount, 1991).
Proposition 6. Conscientiousness positively correlates with savings accumulation, controlling for opportunity to save (e.g., time,
income, and employer contributions).
Second, prior research has established a relationship between external locus of control and self-assessed ability to manage
personal finances (Perry & Morris, 2005); we extend this finding with an expectation that employees' locus of control will be
related to their savings accumulation. On the one hand, employees with an external locus will expect that their financial condition
at retirement will be affected primarily by external forces. They would be most likely to believe that the employer, government or
other funding source will determine their savings accumulation. These employees would benefit most from the automatic
enrollment, asset management, and rollover provisions that protect them from non-participation and inertia effects. On the other
hand, employees with an internal locus of control will believe that their financial condition at retirement primarily will be the
consequence of the decisions they make about savings and investment. Accordingly, they would be more likely to see and respond
to the relationship between savings behaviors and accumulations.
Proposition 7. Employees possessing an internal locus of control will have a higher average level of savings accumulations, all else
equal, than employees possessing an external locus of control.
Third, we expect that individuals with a greater propensity to hoard, in general, will extend that disposition into their savings
behaviors. Hoarding behavior has traditionally been defined as an obsessive–compulsive disorder through which individuals
accumulate an excess of objects (Maier, 2004). In the case of retirement planning, we are referring specifically to the behavioral
response tendency to save or accumulate for the sake of saving itself. Individuals who are motivated by accumulating and are
reticent to expend those savings will over time accrue a greater amount of savings than those individuals who are not as
psychologically attached to the accumulated wealth itself.
Proposition 8. A hoarding disposition is positively related to accumulated retirement savings.

In addition to the dispositional influences, we expect that some retirement savings behavior is due to an attitudinal fear or risk
preference response. Jacobs-Lawson and Hershey (2005) demonstrated that financial risk preference was related to self-reported
retirement savings behaviors. A useful extension of their finding is to consider the fear-responsive behaviors exhibited by workers
planning for retirement. Saving is a future-oriented behavior that is engaged to ensure economic security in retirement. Because
there are substantial risks for retirees, including healthcare costs, outliving retirement savings, and declining government benefits,
individuals may mitigate the stress due to fear or risk aversion by building a larger savings accumulation.
Proposition 9. Fear of economic risk in retirement is positively related to savings accumulation.

Overall, the examination of these individual differences could inform employers and assist them in planning interventions to
assist employees in preparing for retirement. For example, if locus of control is found to be a strong predictor, employers could
assess this and then provide training to help orient individuals to be aware of their orientation and its possible impact on their
retirement savings behavior.
4. Health care
While representing one of the most expensive and salient employer-sponsored benefits, health care benefits have been the
focus of only limited research in HRM. Other fields such as economics, finance, and public policy have devoted more attention to
the topic. Because of its salience today and its centrality to total compensation and the employment relationship it is our
contention that health care benefits deserve more attention from HRM.
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4.1. Context—from sickness to health
Early health care plans emerged in the 1920s and were termed “sickness insurance” programs given that they provided
coverage only for hospitalizations. (Davis, 1934; Davis & Rorem, 1932). Due to outcomes of union negotiations (and the interests of
nonunionized employers looking to avoid unionization), employer-sponsored sickness programs became more prevalent in the
1930s. By the 1950s, middle class families were accustomed to sickness benefits being provided through employment relationships
(Faulkner, 1960).
The 1960s were a turning point when the scope of coverage shifted dramatically in two ways in response to the passage of
Medicare and Medicaid legislation in 1965 and union negotiations. First, whereas earlier health care policies covered
hospitalization and insured individuals against catastrophic expenses, policies also began to provide full-coverage (100%
payment) of less expensive health-related products (e.g., prescriptions) and services (e.g., physician office visits) (Falk, Rorem, &
Ring, 1933). As such, a change in terminology emerged as these benefits began to be called “health benefits” rather than “sickness
insurance” (Hewitt, 2005). This terminology reflected a shift in the employers' responsibility from providing protection from
financial ruin due to catastrophic health care expenses (i.e., “sickness insurance”) to providing insulation from the costs of
maintaining and enhancing the health and welfare of employees.
The second shift was that employers provided health benefits not only to the employee, but also the employee's dependents (e.g.,
spouse, children under age 21). With this change, benefit analysts examined not only the number of employees covered and the
number of “lives” covered (employees and their dependents). This norm of providing coverage to employees and their eligible
dependents increased the average number of lives covered by a factor of 2.8 and health care costs by a factor of 3.2 (Henderson, 2002).
With the 1970s came the prevalent use of indemnity plans that were designed to have employees share in the cost of health
care they used (Scofea, 1994). Also during this decade, Health Maintenance Organizations (HMOs) were instituted that
contracted with networks of physicians, hospitals, and other medical providers, negotiated reduced rates for providers,
encouraged providers to use treatment protocols such as primary care gatekeepers, and encouraged individuals to seek
preventative care by charging modest or no fees for such services (Allen & Sullivan, 2006). Although HMOs effectively curtailed
rising health care costs to some extent, they also desensitized individuals to the true cost of their medical expenses. For
example, the use of modest charges for routine office visits and prescriptions (e.g., $10 co-pay per visit or prescription) led to an
increase in office visits along with an increase in the use of prescription drugs—drugs which were increasingly marketed directly
to consumers (Gaynor, Haas-Wilson, & Vogt, 1999). Thus, the managed care plans that had been able to contain health care costs
by influencing how medical care is supplied ultimately led to sharp increases in the health care services that individuals were
demanding.
During the 1990s, health care inflation rates far outpaced general inflation rates, with companies enduring double-digit
inflation and spiraling costs for many consecutive years (Aon, 2007). Employers reacted to cost increases by significantly increasing
employee contributions, shifting costs of accessed care through increased co-payments, decreasing or eliminating health care
coverage in retirement, and in some cases, requiring employees to pay significant portions of the cost of their dependents' coverage
(Chernew, Cutler, & Keenan, 2005).
In 2007, employers provided access to health care benefits for 62% of those under age 65 in the U.S. (those 65 and older were
covered by government-sponsored Medicare programs), while an additional 22% of those under 65 were covered through either
private health insurance contracts or government programs such as Medicaid (Kaiser, 2007). The remaining 16% of individuals
under age 65 do not have health insurance for various reasons including unemployment, lack of access, inability to afford the plans
offered by employers, or the prohibitive costs of private insurance (Ellis & Manning, 2007; Kaiser, 2007).
4.2. Balancing cost management and quality care
Since the most recent review of the benefits literature (Williams & MacDermid, 1994), employers have experienced health care
inflation rates that vary widely (2–15%) from year to year along with increased utilization of health plans, leading to spiraling
claims from the period between 1995 and 2007 (EBRI, 2008; Kaiser, 2007). Employers have responded by advocating national
changes in public policy and implementing “local” cost control initiatives. Public policy debates include how to reform the health
care delivery systems, whether to implement “play or pay” mandates which penalize employers not offering health insurance
(Baicker & Levy, 2007), consideration of universal coverage (Ellis & Manning, 2007), and assistance to employers struggling with
providing health care benefits while remaining competitive (e.g., Allen & Sullivan, 2006; Goldsmith, 2001). Local cost-control
initiatives have most commonly been tweaks in benefit plan designs that shift costs to employees. However, such reactive fixes
have not addressed the underlying causes of uncertain inflationary increases and increased utilization.
4.2.1. Emerging supply—side initiatives

Given that health care providers are employees who work under contracts with managed care networks, some research has
examined the role of incentive programs in containing health care costs while upholding or enhancing patient health outcomes. For
example, Gaynor, Rebitzer, and Taylor (2004) studied the implementation of a group-based incentive plan within an HMO network,
looking at how it influenced amount of care provided. The authors found that the program was associated with a 5% reduction in
medical expenditures. Barro and Beaulieu (2003), likewise, examined the transition of physicians from fixed salary compensation to
a reduced salary with opportunities for profit sharing. Consistent with theory and the findings of Gaynor et al. (2004), they
demonstrated that the quantity of health care services supplied significantly decreased during the time of the incentive program.
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What remains unclear from physician-incentive research is the extent to which such incentives and reductions in expenditures
are associated with both provider outcomes and changes in patient outcomes—either positive (e.g., restored health) or negative
(e.g., reoccurrence rates). Accordingly, research into the relationships between incentive programs based upon quality of care, in
addition to the cost of care provided, and patient outcomes also is warranted. Two important research streams are evident. First,
longitudinal analysis of physician productivity and patient outcomes (e.g., recovery, reoccurrence, death rate) would yield
important information regarding intended and potentially unintended correlates of provider-incentive programs such as cost and/
or quality of care. Second, analysis of job attitudes and turnover patterns of providers employed through various incentive
programs may yield important insights regarding (a) the extent to which providers view the objectives of containing costs and
optimizing patient care as conflicting objectives, and (b) how managed care employers can best structure employment
relationships with and design jobs for providers.
4.2.2. Emerging demand—side initiatives

Having achieved the improvements possible through refinements of existing benefit plan designs, employers are increasingly
taking more proactive approaches to influence the factors underlying health care demand. These initiatives include consumerism
and disease management.
4.2.2.1. Consumerism. Consumerism, or consumer-driven health care, is the name given to employer efforts to make employees
take ownership for their own health and to gain (or regain) an understanding of the true cost of health care services (Aon, 2007;
Hewitt, 2005; Kaiser, 2007; Sharon & Donahue, 2006). The logic underlying consumerism initiatives is that exposing employees to
more information about the cost of health care, as well as more of the actual cost of it, will motivate employees to better manage
(i.e., typically decrease) their use of the health care system (Hiles, Hogg, Tapia, & Winkler, 2007).
Consumerism initiatives typically consist of at least three components (Henderson, 2002; Hewitt, 2007). First, communications
detail the total cost of employee health benefits—and clarify that the portion that employees pay through premiums and
coinsurance is much smaller than the costs shouldered by the employer. In addition, information regarding the skyrocketing costs
of health care not only for the employer, but also across the U.S., is discussed with an emphasis on the toll of such costs on the
employer's competitiveness and viability. Second, employees are encouraged to engage in healthy lifestyle behaviors (e.g., exercise,
nutritional eating) as a way to minimize their need for extensive health care. Third, when employees do use health care, they are
encouraged to become more active consumers of health care. Relative to passive patients, active health care consumers act as if
they are spending “their own” money when making health care decisions.
An evolving form of consumerism is the defined contribution health plan, which results in employers having less responsibility
for managing employee health care and emphasizes the consumer role of the employee. It involves sweeping changes in how
employers define and fulfill their health care obligations to employees. These initiatives move far beyond traditional efforts that
“tweak” (i.e., make minor adjustments in) plan designs by increasing employee premiums or deductibles. There are many
variations of these plans, including health reimbursement arrangements, which are accounts to which employers contribute a
defined amount of money employees use to pay for health care expenses, health savings accounts, to which an employee may
contribute, and self-designed health care plans.
Defined contribution health insurance programs function in a manner similar to defined contribution pension programs. The
employer contributes a dollar amount toward health benefits at the same time informing employees that they are responsible for
acquiring health care and the risks and consequences of their decisions. The benefit to employers of these plans is a substantial
reduction in administrative burden and more predictable cost. Employees in these programs may have expanded choice of health
care options and are believed to be more active consumers than those in other types of plans. These changes in employee behavior
are expected given that employees are “involved in instead of insulated from” the realities of health care expenses.
Pure “defined contribution” plans for active employees generally are not used in the U.S. due to substantial resistance from
employees and questions regarding the tax-qualified status of these plans; however, they are in current use for employer–provided
retiree health plans (Patterson, 2004). A hybrid consumerism alternative of them, however, that is gaining a foothold is the high-
deductible health insurance plan accompanied by a health savings account or health reimbursement arrangement (e.g., Kelley,
2003). It combines a catastrophic health insurance program with an employer-contributed or employer- and employee-
contributed reimbursement or savings account.
4.2.2.1.1. Correlates of consumerism—individuals. Research regarding the effects of consumer-driven or defined contribution
health plans is only recently emerging, and on some points is validating expectations based on consumerism while highlighting
limitations. Important findings include: employee-participants in these types of plans (relative to their counterparts who are
covered by comprehensive health insurance) exhibit lower health benefits satisfaction and higher out-of-pocket expenditures,
more often forgo or delay seeking health care, and include cost as a more important consideration in health care decision making
(Fronstin & Collins, 2005). In their utilization of health services, employees use (a) fewer or less costly alternatives for those
services for which there are real or perceived options, and (b) more preventive health services (Kelley, 2003).
4.2.2.1.2. Correlates of consumerism—employers. Research by consulting firms suggests that employers who implement
consumerism initiatives decrease the rate of health care inflation for their plans by approximately 1 to 3% (Aon, 2007; Hewitt,
2007). Consumerism initiatives, however, are often simultaneously implemented with plan design and other cost sharing
initiatives. Thus, it remains unclear if gains attributed to consumerism relate to any of the three components, including reduced
health care demand, reduced need for health care given a healthy lifestyle, or provision of more cost-effective care through
employees' active partnerships with providers. Therefore, research in these three components is warranted.
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Existing research regarding the efficacy of consumerism most often has been completed at the employer level of analysis using
either health-care inflation rates or plan expenditures as a dependent variable. The basis for comparison may be absolute
comparisons of the employer's health care inflation year-over-year (i.e., within-employer comparisons over time) or relative
comparisons to the national average (i.e., to a standard) or to employers not having consumerism initiatives (i.e., between-
employers). Thus, methodological work regarding the robustness of potential dependent variables (e.g., health care inflation rates
vs. plan expenditures vs. claims experience) and the nature of comparisons (e.g., within employer, between employer) is needed to
understand the true effects of consumerism.
Since research on efficacy of consumerism typically has taken place at the employer level of analysis, such analysis may obscure
potentially interesting variations between individuals nested within the employer. Individual difference research may uncover
important variations between groups of employees. For example, one could possibly argue that those highly committed to the
employer may be more likely to embrace healthcare consumerism than those employees who are disgruntled, because they
are more sympathetic to the effects of health care costs on the employer or organization.
Moreover, other individual differences could be associated not only with job performance, but also health care consumption.
For instance, conscientiousness, cognitive ability, and extroversion are characteristics that consistently predict job outcomes.
Perhaps conscientious employees may be more likely to acquire preventative care, and when treatment is needed, engage
providers in a dialogue regarding the cost and efficacy of treatment alternatives. Or one could argue that employees with higher
cognitive ability are more likely to have the confidence and problem solving skills to engage providers, who are often better
educated, in a dialogue regarding treatment options. Such employees may be more likely or able to research their condition and
process the volumes of information available on the Internet and other sources. Finally, extroverted employees may be more likely
to engage providers in dialogue regarding whether tests are necessary or the recommended treatments have been well-studied.
Proposition 10. Individual differences commonly studied in employment (i.e., organizational commitment, cognitive ability,
conscientiousness, and extroversion) are associated with the manner and extent to which individuals engage in health care consumerism.
4.2.2.2. Disease management. A second approach employers use to manage demand for health care is disease management (Aon,
2007; EBRI, 2008; Kaiser, 2007). Disease management involves the targeted education and interactions with those claimants
having chronic diseases commonly associated with intense health care utilization. Interest in disease management stems from
examination of health care utilization patterns, which across samples (e.g., a large employer's claims experience or the claims
experience of all those in a health care plan) have shown that a small number of claimants are associated with abnormally high
health care costs (i.e., more than 25% of costs typically result from the utilization of fewer than 5% of claimants) (EBRI, 2008).
Likewise, as few as six chronic conditions, including back pain, cancer, coronary heart disease, diabetes, depression, and renal
disease, are associated with up to half of all plan payments (Kaiser, 2007; Kelley, 2003). Accordingly, high-cost claimants and
chronic conditions are often targets of disease management programs.
Disease management programs have been a catalyst for both theoretical and empirical research on health and well-being in the
workplace (e.g., Allen & Sullivan, 2006; Danna & Griffin, 1999; Manning, Jackson, & Fusilier, 1996; Wolff, 2003). Although this
research began in the HRM literature decades ago with a comprehensive theory of employee wellness (Beehr & Newman, 1978),
much of it currently takes place in the health economics and medical literatures using theories borrowed from the OB/HRM and
social psychology literatures (e.g., theories of motivation, commitment). Its primary objective has been to enhance adherence to
wellness programs and disease treatment protocols with a typical focus on the individual-level of analysis.
HRM scholars could contribute to disease management research by focusing on how such adherence and commitment
influences organization-level outcomes such as absenteeism and health care costs. Indeed, one could argue that employers who
engage in disease management initiatives may have “healthier” employees than rivals. Such “healthy” employers may enjoy higher
productivity, less absenteeism, and lower health care costs than competitors.
Proposition 11. Organizations that provide disease management benefits for their employees experience superior attendance, health
care cost-containment, and productivity outcomes.
Moreover, HRM scholars could examine to what extent health influences one's perception of their labor market mobility.1 That
is, one could argue that an individual who is healthy may feel less “bound” to the current employer through health care coverage.
For example, a healthy employee may feel more mobile than an employee who is not as healthy given that the healthy employee
may not feel as vulnerable to the temporary gaps in health care benefits that are sometimes encountered when changing
employers. Or, any coverage limitations the new employer may have for pre-existing conditions may not be of concern to healthy
individuals (although such limitations may be of significant concern to those employees who are not as healthy). These are
important empirical questions for HRM scholars to address.
5. Work–family
Work–family benefits are a form of accommodation and enhancement benefit; that is, they are a benefit designed to “promote
effective coping skills and educational opportunities for employees and, sometimes, family members” (Martocchio, 2003, p. 340).
They are designed to address the conflicting demands between work and family. Despite the relative newness of work–family
1
We thank an anonymous reviewer for this insight.
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benefits, work–family benefits have come to represent a potentially important source of variability between organizations in terms
of discretionary benefits—and thus a source of potential value in terms of attracting and retaining a talented workforce.
Although these benefits could be strategically valuable to the organization, the prevalence of work–family benefits is
surprisingly low (Osterman, 1995). For instance, representative estimates indicate that only 2% of workers have access to
employer-sponsored childcare, and only 5% of workers have access to flexible work schedules (BLS, 2000). Several reasons have
been offered for the lack of benefits: (a) not all organizations are “family-friendly,” (b) only certain types of employees working
for certain types of organizations have access to these policies and programs, and (c) even when employees have access to
work–family benefits, they may not utilize them due to fears about negative repercussions (perceived or actual) for their long-
term career trajectory.
The scholarly management and organization literature in employee benefits has tended to focus on work–family benefits,
even more than on health and economic security benefits. Given that this area of benefits has received so much attention, it is
important to review this literature to get a sense of the reasons why employers sponsor work–family benefits, the potential
payoffs to employers for doing so, and the outcomes for employees who utilize these benefits. Accordingly, in this section we:
(a) identify work–family benefits mandated by public policy, (b) introduce and define work–family benefits from a
management and organization perspective, (c) review literature that has attempted to explain why organizations adopt
work–family benefits, and (d) outline the outcomes for both employers and employees of adopting and utilizing these
benefits.
5.1. Work–family benefits and public policy
The demography of the American workforce has changed dramatically in recent decades (Bond, Thompson, Galinsky, & Prottas,
2003), and consequently, demographic–specific issues have captured the concern of employers and employees. Women continue
to participate in the labor force in increasing numbers, dual-earner parents are increasingly common, and the number of baby
boomers for whom elder care is a concern is growing (Kossek & Pichler, 2006). Based on survey data of human resource executives,
Galinsky and Stein (1990) identified seven major work/family-related problems faced by employees: childcare, elder care, work
time/timing, relocation, job demands/autonomy, supervisory relationships, and culture (pg. 369).
Given these trends and issues, policymakers have attempted to enact legislation to facilitate the labor force participation of an
increasingly diverse population. These policies are generally piecemeal and are far from comprehensive (Kelly, 2006). Therefore,
some employers have chosen voluntarily to develop and offer work–family benefits in order to support the work–family balance of
their employees. Employer adoption of specific provisions has been responsive to the limitations of public policy related to each
type of benefit (Kelly, 2006). Before considering the types of benefits employers offer and why, it is important to briefly review two
major legislative initiatives related to work–family benefits as well as their limitations.
The primary work–family issue is the availability and control over one's time. Federal regulation of work time has attempted to
support employees in terms of maximum work hours per week and additional pay for excess work time primarily through the Fair
Labor Standards Act of 1938 and subsequent amendments to the Act. Legal restrictions related to work hours and work scheduling,
however, are minimal in the U.S., especially as compared to other developed countries. Managerial and professional workers, for
example, are exempt from the hours of work limitations; consequently, given the growth of the service sector in recent years and
the increase in knowledge workers, an increasing number of U.S. workers remain unprotected.
A second work–family issue is the need for extended time away from work that does not limit or negate an employee's ability to
return to work without losing one's position or being disadvantaged in one's career. In terms of leaves of absence for family-related
care, the primary legal mechanism for unpaid leave is the Family Medical Leave Act of 1993, which mandates twelve weeks of
unpaid leave from work for the care of a newborn, parent, severely ill child, or to recover from an illness. Weaknesses of legislated
leave time include the generally discretionary nature of paid leave and the limitations on the scope of eligible events.
5.2. Employer-sponsored work–family benefits
In light of the fact that the U.S. has relatively paltry policies for work–family benefits, some employers have chosen to adopt
family-supportive workplace benefits. Kahn and Kamerman (1987) coined the term “family-responsive workplace” to refer to work
organizations that offer supportive policies and practices to help employees manage conflicting work and family demands. Kelly
(2006) suggested that there is “a relatively well-developed set of employer-based benefits for working families.” (pg. 99) Secret
(2000), moreover, proposed that while the total list of work–family benefits offered by employers is potentially long, there are four
primary types of work–family benefits: alternative or flexible work arrangements, leave time allowances, well-being programs and
dependent care services.
Researchers in the management and organization literature have most often focused on childcare services and flexible work
arrangements. They have shown that employer support of childcare typically involves subsidizing on-site childcare, directly paying
for childcare (either as an employee benefit or through a third-party vendor), or by providing information and referral services
(Goodstein, 1994). Researchers have also found that workplace flexibility typically involves such programs and practices as
flextime, part-time or reduced load work, job sharing and other flex options (Goodstein, 1994). Access to flexible work
arrangements and flexible scheduling, however, is generally determined on an individual basis, and only the highest performers
typically are awarded the opportunity to work on an alternative basis, thus limiting access to this type of “perk” for most workers
(Kelly, 2006).
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While some employers have chosen to offer work–family benefits to support the challenges faced by an increasingly diverse
workforce, researchers have found that their prevalence is limited (Friedman, 1990; cf, Secret, 2000). For example, Seyler, Monroe,
and Garand (1995) found among a representative sample of Louisiana businesses that organizations rarely offered a systematic or
comprehensive set of family-related benefits. Likewise, nationally representative data from the Bureau of Labor Statistics (2000)
indicated that the adoption of work–family benefits is generally low compared to other employee benefits. Osterman (1995), using
data from the Survey of American Establishments on private sector employers with 50 or more employees, reported that “work/
family programs are less widespread than the popular press might lead one to believe” (pg. 685), with only 2% of employers
offering on-site daycare, 9.4% offering eldercare referral services and 40.2% offering flexible work hours.
5.3. The adoption and diffusion of work–family benefits
Why do some employers offer non-mandated work–family benefits, benefits which often represent significant costs, while
others do not? On one hand, organizational theory suggests that institutional pressures dictate which types of organizations are
more or less likely to adopt non-mandated benefit programs. On the other hand, the business case for work–family benefits, or the
rational choice argument, contends that employers adopt benefits to gain competitive advantage through recruiting and retaining
a high-talent, high-commitment workforce (Galinsky & Stein, 1990). Research in the management and organization literature has
tested both arguments, and the results are somewhat supportive of each.
5.3.1. Institutional pressures and rational choice

Several organizational characteristics have been studied relative to work–family benefits adoption. In general, research has
demonstrated that adoption is more likely among industries with relatively greater diffusion of benefits (public sector), and that
larger organizations are more likely to adopt work–family benefits (e.g. Goodstein, 1994; Osterman, 1995), perhaps because they
are more visible and thus subject to more public scrutiny (Kahn & Kamerman, 1987).
Responding to the basic tenet of organizational theory that behavior at the organization level is shaped by social norms and
pressures, Oliver (1991) argued that organizations behave strategically in response to these institutional pressures. Goodstein
(1994) tested this thesis using the adoption of work–family benefits as his focal dependent variable. He found that institutional
pressures, identified as the diffusion of work–family programs across an industry and geographic region, were related to adoption
at the establishment level. He also concluded that mimetic pressures may be more relevant than coercive pressures when it comes
to work–family benefits.
Consistent with a strategic choice perspective, Goodstein (1994) found that organizations were more likely to adopt work–
family programs when there was a perceived benefit. He showed that the amount of women in an establishment, and the number
of unemployed women in an industry group, were differentially related to the adoption of work–family programs, suggesting that
organizations adopt these programs to attract and retain women. While institutional factors were important, so too were technical
factors, suggesting that organizations respond strategically to institutional forces depending on their particular technical strengths
and weaknesses.
Goodstein's (1994) study complements the statistics reported previously, which indicated that certain types of work–family
benefits are more widespread than others, (e.g., flexible work arrangements vs. childcare services). Likewise, it fits with Osterman's
(1995) conclusion presented earlier that employers do not necessarily adopt a uniform set of work–family benefits, but instead
adopt those benefits that are more or less relevant to their workforce. Together the research evidence directs us to propose that:
Proposition 12a. Employers adopt work–family benefits strategically in order to support the particular needs of their workforce.
Research indicates that different employment relationships are negotiated and enacted with different types of employees (Tsui,
Pearce, Porter, & Tripoli, 1997). Accordingly, employee groups with greater power in negotiation receive more favorable terms.
Applying this logic to work–family benefits, theory and research would suggest that organizations utilizing low-cost, low-skill
labor would be unlikely to offer non-mandated benefits like work–family benefits, whereas organizations with more highly skilled
employees are more likely to adopt these benefits. In support of this expectation, Konrad and Mangel (2000) found that the
proportion of female and professional employees in an organization was positively related to the adoption of work–family benefits.
Glass & Fujimoto (1995) found that professional and managerial workers were more likely to have access to leave policies and
telecommuting. The authors contended that workers with relatively greater market power are more likely to have access to work–
family benefits, supporting a rational choice argument for policy adoption.
In a constructive replication of Goodstein's (1994) work, Ingram and Simons (1995) argued that women's power in an
organization (the proportion of women managers) and perceived technical benefits from work–family programs
(remedying problems associated with employees missing work for childcare) should be positively related to adoption,
whereas an organization's countervailing power (i.e. high unemployment rates for women) should be negatively related to
adoption. They found support for the women's power and countervailing power hypotheses, but not the technical benefits
hypothesis.
In subsequent research on women and work–family benefits, Milliken, Martins, and Morgan (1998) found, in a survey of
human resource executives, that although the proportion of female employees was unrelated to the adoption of work–
family benefits, perceptions among human resource executives about the importance of (a) the potential productivity
impact of non-adoption, (b) the increase in women in the labor force, and (c) the salience of changes in family structure
were all positively related to adoption. Taken as a whole, the research evidence suggests to us that when groups have actual
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or perceived power in the labor market, employers will respond to those groups with work–family benefits tailored to their
needs:
Proposition 12b. Workers with relatively greater market power are more likely to have access to work–family benefits than are
workers with relatively less market power.
Consistent with Goodstein (1994) and a rational choice argument for benefit adoption, empirical evidence in the management
literature suggests that customer demographics may also be related to work–family benefit adoption. Organizations that market
primarily to or tend to serve families or groups with family-related concerns are more likely to offer work–family employee
benefits (Friedman, 1990).
Proposition 13. Employer adoption of work–family benefits is responsive to the demographics of external organizational constituents
(e.g., customers) such that adoption is more likely when external constituents have greater family-related needs.
5.3.2. Organizational structure and strategy

Research evidence suggests that the adoption of work–family programs also is dependent on the formal structure of the human
resource function and its particular emphasis on high-commitment. Osterman (1995) found that having an HR department in and
of itself was related to adoption. The findings implied that the extent to which HRM is planned and organized is key to benefit
adoption—and perhaps to the effectiveness of these benefits. Testing the hypothesis that organizations expect high levels of
commitment from their employees will also invest in work–family benefits, Osterman also showed that high commitment HRM
practices at the establishment level were positively related to the adoption of work–family programs. With Osterman's work as a
foundation, we propose that additional research is necessary regarding:
Proposition 14. Employer adoption of work–family benefits is more likely among organizations with (a) an organized HRM department
and (b) a high-commitment HRM strategy.
Drawing from the “bundles” approach to high performance work practices, Ingram and Simons (1995) argued that if work–
family benefits are going to benefit organizations, they should be consistent, complementary and mutually reinforcing. They
proposed that organizations with bundled work–family benefits will outperform firms with relatively unbundled benefits, for
which their analysis provided support—at least in terms of perceptual measures of performance. Similarly, Konrad and Mangel
(2000) found that an index of complementary work–family benefits was positively related to an objective measure of
organizational productivity among organizations that employed relatively large proportions of women and professionals. Recent
research also has indicated that integrating work–family considerations into an organization's broader business strategy is related
to positive career-related outcomes for employees (Kossek, Pichler, Ryan, & Lee, 2006). Thus, a key message of this research is that a
comprehensive, integrated set of work–family benefits is more likely to be related to performance gains for organizations than are
disconnected programs implemented in a non-strategic fashion, which is perhaps typical of most organizations.
Proposition 15. Productivity gains from work–family benefits are more likely among organizations with a consistent and mutually
reinforcing set of benefits.
5.4. Utilization of work–family benefits
Scholars have argued that the mere presence of work–family benefits will not lead to desired outcomes for employees or
employers when employee utilization of benefits is low (Thompson, Beauvais, & Layness, 1999). Secret (2000) found in a multi-
organization study that while most employees had access to work–family benefits, utilization is most categories was relatively low
considering their availability. For instance, of the employees who had access to flexible work arrangements, 37% used them.
Similarly, and more striking, only 1% of employees who had access to childcare services utilized them. Secret (2000) found that
family role and demographic variables such as marital status and dependent care status were generally unrelated to benefit
utilization, as were job attribute variables such as salary level and job tenure. Workplace structure characteristics, including sector,
size and culture, however, were all significant predictors of benefit utilization. These results suggest that, when considered
simultaneously, organizational characteristics, more so than family-related responsibilities, are key predictors of benefit utilization.
Since employees for whom work–family benefits are intended for do not consistently utilize these benefits, it is important to
understand why this is the case. Work–family scholars argue that there may be an economic penalty associated with the utilization
of work–family benefits. For instance, there is a pervasive perception that face time is important for recognition and, ultimately,
career advancement. In support of this maxim, Glass (2004) found that new mothers who took advantage of work–family benefits
experienced a slower wage growth than mothers who did not use the benefits. Consistent with arguments that a lack of visibility in
the workplace, perhaps due to the utilization of benefits such as flextime, can threaten employee's careers. Judge, Cable, Boudreau,
and Bretz, (1995) found that (long) work hours were positively related to managerial career advancement. The argument that
work–family benefit utilization is low because of perceived negative career repercussions among employees seems legitimate.
5.5. Employee outcomes
Given the traditional focus in the management literature on formal work–family benefits for employees, researchers have
attempted to determine if these benefits in fact result in desired outcomes among employees—outcomes that are ultimately
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beneficial for employers as well. There have been disagreements in the literature in terms of whether or not work–family benefits
are effective for employees and, hence, worthwhile to employers. For instance, despite evidence that alternative work
arrangements are related to increased job satisfaction and decreased turnover (e.g. Thomas & Ganster, 1995), work–family leaders
such as Christensen and Staines (1990) caution that flexible work arrangements do not necessarily increase productivity or
organizational performance. The purpose of this section is to review literature related to employee outcomes of flexible work
arrangement benefit utilization, as well as the influence of culture and the outcomes for non-users.
5.5.1. Outcomes of use of flexible work arrangements

Research on the outcomes of flexible work arrangements is more consistent in its findings. The literature indicates that these
arrangements are related to increased job satisfaction (Thomas & Ganster, 1995), decreased turnover (Dalton & Mesch, 1990), and
decreased absenteeism (Christensen & Staines, 1990). Similarly, flextime has been linked to decreased physical and psychological
symptomatology (Thomas & Ganster, 1995) and decreased work–family conflict (Christensen & Staines, 1990). In their meta-
analysis, Baltes, Briggs, Huff, Wright, & Neuman (1999) found that both flexible schedules and compressed work weeks were
related to increased job satisfaction and satisfaction with work schedules. Effect sizes are generally more mixed when it comes to
actual productivity-related outcomes such as absenteeism; however, there may be unidentified moderators or mediators of the
work–family benefit and employee outcome relationship.
5.5.2. Outcomes of use of work–family supportive culture

Given the potential importance of informal support for work and family in addition to formal work–family benefits,
management research has recently shifted its focus from formal benefits per se to cultural support for these benefits (Thompson
et al., 1999) and social support for work and family more generally (Allen, 2001; Kossek, Pichler, Hammer, & Bodner, 2007). This
research tends to indicate that the utilization of work–family benefits is often surprisingly low, and that cultural and social support
for work and family is a necessary complement for the effective implementation of these benefits (Kossek et al., 2007).
For work–family benefits to be effective, they must be culturally supported—including support from direct supervisors.
Empirical results indicate that work–family benefits are positively related to employee attitudes (e.g., organizational commitment)
only when employees believe utilizing them will not result in adverse career consequences (Eaton, 2003). In their study of
organizational cultural support for work and family, Thompson et al. (1999) similarly found that benefit utilization was more likely
when benefits were more readily available and when their use was supported by managers.
Sahibzada, Hammer, Neal and Kuang (2005) found that the availability of work–family benefits and a supportive work–family
culture interactively determined employee job satisfaction such that the former was generally important when the latter was low
and vice versa. While these results should not be interpreted to indicate that formal supports are unimportant, they do stress the
importance of interactive effects of formal and informal work–family supports for employee outcomes.
Proposition 16. The relationship between employee utilization of work–family benefits and employee attitudes such as job satisfaction
is moderated by cultural support for work and family and by support among coworkers and supervisors for utilization, such that it is
more strongly positive at higher levels of the moderator.
5.5.3. Non-user outcomes

Given that some family-supportive benefits, such as childcare services, are applicable only to certain employees or groups of
employees, a concern about “backlash” among coworkers who lack a need for such benefits has developed in the popular press.
Pundits argue that employees who receive no direct benefit potentially perceive a lack of equity or justice in the workplace. Survey
data from two companies with on-site childcare centers, however, indicated that attitudes towards childcare centers are more
positive among users or potential users, but that differences in attitudes between users and non-users are not manifested at a more
general level (Rothausen, Gonzalez, Clarke, & O'Dell, 1998), indicating that backlash is unlikely. Likewise, Grover and Crocker (1995)
found that employees in general are more attached to organizations that offer work–family benefits, regardless of whether or not
they personally gain from them; however, employees who could take advantage of childcare services (e.g., those who had young
children) were more committed than employees who could not.
Sinclair, Hannigan and Tetrick (1995) argued that social exchange theory provides a logical theoretical framework for
understanding the relationship between work–family benefits and employee attitudes and behaviors—regardless of whether or
not an employee is a user of a particular set of benefits. They proposed that organizations and employees reciprocate
demonstrations of commitment, and that positive attitudes and behaviors are exchanged for supportive family-friendly benefits.
Proposition 17. Work–family benefits are positively related to employee attitudes such as job satisfaction regardless of whether they
are applicable to all employees or not.
6. Conclusion
The potential for HRM research in employee benefits is extensive. Our discussion has been limited to a handful of the most
common or costly benefit programs. While other employer-sponsored benefits exist (e.g., non-health insurance benefits, executive
perquisites, educational tuition reimbursement), because of their salience, we feel that the areas and issues related to health care,
retirement benefits, and work and family benefits offer HRM the greatest research opportunities to contribute to management
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concern and close the research practitioner gap. We also noted from our review that much of the research related to benefits,
especially health care and retirement plans, has been performed from an economics perspective, which has left many managerial
and organizational behavior questions and perspectives unexamined. For example, the research questions we asked and
propositions we developed brought forth issues of individual differences, attitudes and dispositions.
Due to the general dearth of normative benefits management research, practitioners are making their way by trial and error.
Prescriptive guidelines are developed through conventional wisdom and hard earned experience, but lack evidence-based
research support or guidance.
Practitioners have not had the luxury to wait on HRM researchers to catch up, because the cost of not making decisions relative
to potentially cost saving programs like consumer-driven health care or defined contribution retirement plans is too high.
However, the other side of the coin is that the cost of making poor decisions in healthcare and retirement benefits because of the
lack of supporting HRM research is also potentially high. The propositions we have delineated throughout this article represent
starting points for future research.
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Human Resource Management Review

Employee beneﬁts: Literature review and emerging issues

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1. Context: deﬁnitions, scope, and welfare capitalism

2. Satisfaction with employee beneﬁt offerings

2.1. Beneﬁt satisfaction construct

2.2. Antecedents and moderators of beneﬁt satisfaction

2.2.1. Generational differences and implications for measuring beneﬁt offerings

2.2.2. Actuarial- vs. perceived-level of beneﬁts

3.1. Deﬁnitions and context

3.2. Issues in pension research

3.2.1. Pension plan choice

3.2.2. Managing risk in DC saving plans

3.2.3. Retirement preparation and savings accumulation

Proposition 8. A hoarding disposition is positively related to accumulated retirement savings.

Proposition 9. Fear of economic risk in retirement is positively related to savings accumulation.

4.1. Context—from sickness to health

4.2. Balancing cost management and quality care

4.2.1. Emerging supply—side initiatives

4.2.2. Emerging demand—side initiatives

5.1. Work–family beneﬁts and public policy

5.2. Employer-sponsored work–family beneﬁts

5.3. The adoption and diffusion of work–family beneﬁts

5.3.1. Institutional pressures and rational choice

5.3.2. Organizational structure and strategy

5.4. Utilization of work–family beneﬁts

5.5. Employee outcomes

5.5.1. Outcomes of use of ﬂexible work arrangements

5.5.2. Outcomes of use of work–family supportive culture

5.5.3. Non-user outcomes

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