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Development Path for Corporate Welfare and Benefit Scheme
Development Path for Corporate Welfare and Benefit Scheme
  • Table of Contents

    Chapter 1. Introduction (Se-Ri No)

    Chapter 2. Corporate Welfare and Benefits: Current Challenges (Se-Ri No)

    Chapter 3. Theoretic Framework: Total Compensation Theory (Se-Ri No)

    Chapter 4. Effects of Corporate Welfare and Benefits (Se-Ri No)

    Chapter 5. Satisfaction and Needs for Corporate Welfare and Benefits (Mihee Kim)

    Chapter 6. Case Study: IKEA Korea (Jisung Park)

    Chapter 7. Conclusion (Se-Ri No) 

  • SUMMARY

    The Korean labor market is undergoing severe growing pains. Plummeting fertility is prompting concerns of future shortage of workers, while the labor market keeps aging rapidly. Amidst these challenges, workers of different stripes are entering the labor market, such as women and international migrants. It is in this context that corporate human resource management becomes all the more important. The total compensation theory breaks down a firm's compensation to its workers into: pay (monetary), welfare and benefits (non-monetary) and working conditions (relational). It broadens the notion of compensation beyond the existing concept of the monetary to also include the non-monetary, such as worker-friendly environment and especially welfare and benefits that are designed to improve employees' engagement and satisfaction. Welfare and benefits are the best-known form of non-wage compensation. Corporate welfare and benefits can be defined as: a program voluntarily implemented by a company bearing part or all of the cost of improving welfare for workers and their family. 

    This study assesses the current status and effectiveness of corporate welfare and benefits programs, identifies workers' needs for such benefits, and reviews through a case study how to run a welfare program to enhance employee satisfaction. In so doing, this study attempts to answer the three following questions. First, what should be the improvement path for corporate benefits? Second, how can a firm strategically design its welfare program to improve the clients' satisfaction? Third, what is needed to ensure not only adoption of a benefits program but also its effective administration?

    Empirical analysis of existing corporate benefits programs in Korea using Panel Survey on Corporate Human Capital conducted by Korea Research Institute for Vocational Education and Training shows that the current system has almost no impact on attracting and retaining workers. The same conclusion was reached regarding selective welfare and benefits program, which also had no impact on attracting, retaining or engaging employees. This result suggests the need for change in corporate benefits program so that it can come closer to achieving its intended theoretic objective. Review of the relations between corporate benefits and wage also yielded no association, indicating that corporate benefits programs are designed haphazardly, and that firms today are not running their compensation scheme under a clear objective.

    Next, this study tried to understand the perception of the corporate welfare beneficiaries, the employees, regarding such program. This study reviewed the antecedents of satisfaction as well as their needs for corporate benefits. One noticeable finding from the analysis is that employees' needs for corporate welfare are generally related to their life as workers. And a breakdown shows differences in needs by age, gender, family type and employment type. The 20s and 30s preferred work-life balance and self-development, while the 30s to 50s wished for tuition support for their children as much as they valued work-life balance. Breakdown by family type, i.e. single, married with no children and married with children, reveals that the presence of children is an important determinant of benefit needs. The ongoing increase in couples with no children and young workers also warrants attention to their needs, which are focused on self rather than on family. Antecedents of satisfaction in corporate benefits include organizational culture and communication by the HR department.

    The case of IKEA Korea was analyzed to gain implications for designing and administering corporate welfare and benefits program in Korea. Despite having a low wage level, this company offers outstanding benefits that attract job-seekers and retain current employees, making it a good example of the effectiveness of corporate benefits when the pay level effect is controlled for. The hallmarks of IKEA Korea's benefits program, and its implications to Korean companies are as follows. The purpose and design of the welfare and benefit program is based on the company's values and culture. There is an environment that allows employees to freely make use of the available benefits. And it helps maximize employees' motivation by making effective use of the various features of the broad compensation scheme that includes both wage and non-wage benefits. The company constantly seeks change and evolution in its benefits program to always reflect the needs of target employees as well as the local specificities.

    Although Korean firms today still have people-based HR management scheme, there are growing calls to transition to a job-based one. From the perspective of total compensation under a job-based HR management, wage compensation will still be important, but the non-wage compensation of welfare and benefits will become more important than it is today as one of the means to deliver the company's strategy and direction. It is in this context that the following suggestions are made. First, a company should design and administer its welfare and benefits program as a mechanism to deliver its values and objectives. And such program can help achieve the principle of equality that is not met by monetary compensation. Under a job-based HRM scheme, compensation for work is premised on differentiation, which makes monetary wage by nature discriminatory for employees in the same organization. In addition, given that the beneficiaries have different needs by such factors as age, gender and family type, new program designs must be sought to reflect such diversity. Last, as important as having a program in place is having the institutional mechanism to increase awareness among employees and allow free utilization of the benefits. 

Se-Ri No's other publications : 1
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No Title Author Date Attach
1 Development Path for Corporate Welfare and Benefit Scheme Se-Ri No, Mihee Kim, Jisung Park December 28, 2018 Development Path for Corporate Welfare and Benefit Scheme
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