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A perk is different from a benefit because it is an advantage that accrues to an employee through the office held, outside of salary and benefits. While the advantage may be justified for the interests of the organization, there is a fine line separating the organization’s needs from those of the employee. A perk is not easily defined or managed, in comparison with other forms of compensation. There are numerous forms of compensation of employees. Salary is the rate of pay provided, while benefits are additional forms of compensation. Benefits can be evaluated as a form of pay, measured in dollars. This is clear in the case of bonuses, insurance coverage, and retirement plan contributions. Cafeteria benefit plans, which allow choices among benefit options, work best when they are presented as equivalent in value to the employee. So human resource managers work to calculate benefits in dollars and assess their equivalent cost to the organization.
The sociologist Viviana Zelizer notes that although perks may be (fully) quantified, people tend to mark these items with meaning. The perk becomes part of what the individual needs to be “who she or he is” as she or he interacts with socially significant others. Economists and other social scientists differentiate the benefits that can be directly measured in money from other less tangible benefits. These less measurable forms of compensation (often called perks) are also less manageable, especially when the employees benefiting from them are deciding what they are and their amount or extent. Perks can also be created by officials through the ordinary process of carrying out their work, as individuals argue that they need the perk to perform their jobs properly.
The most fundamental function of a perk is to provide services or intangible benefits to the organization through its employees. A college president may be supplied with a large house to entertain donors, parents, and alumni. The fact that the house also provides housing to the president and his family is considered incidental to its primary function, serving the larger purpose of the college. A corporate jet for the top executives of a business (or a chauffeur and company car for a larger employee set) is considered a way to provide efficient transportation that allows the recipients to continue working while traveling. Organizational needs may be interpreted to require bodyguards, insurance coverage, a personal assistant, and other services for top executives that also benefit the recipients. Often, there is a suspicion that these benefits are only weakly tied to organizational needs, while the recipient gains from misappropriated resources. For human resource managers, perks such as free snacks, child care, break time, and even vacations can be justified as producing more satisfied and unstressed employees. Seen in this light, many on-the-job perks are either additional forms of compensation or cost-effective motivators to increase productivity.
Thorstein Veblen proposed the symbolic importance of consumption, which is the public side of employee compensation. Visible compensation comes to represent the importance or value of the organization, so even a large salary for its chief executive officer figurehead can be deemed important for the organization’s image. In this case, perks that substitute for a large salary may be useful in maintaining the organization’s image and status because these symbols are under organizational control. The officials may be offered memberships in country clubs, the Chamber of Commerce, and/or the Rotary Club; housing subsidies in high-status communities; luxury autos; and other status symbols. Providing them to executives in place of salary is a way to guarantee that compensation will be directed at maintaining the public image of the organization. In these cases, the needs of the organization and of the beneficiary are joined. The problem arises when the beneficiaries are also those who decide which perks are necessary for the benefit of the organization when they are profiting from their own decisions.
- Marino, Anthony and Ján Zábojník. “Work-Related Perks, Agency Problems, and Optimal Incentive Contracts.” RAND Journal of Economics, v.39/2 (2008).
- Rajan, Raghuram G. and Julie Wulf. “Are Perks Purely Managerial Excess?” Journal of Managerial Economics, v.79/1 (2006).
- Veblen, Thorstein. The Theory of the Leisure Class: An Economic Study of Institutions . New York: Penguin Books, 1994.
- Zelizer, Viviana. Economic Lives: How Culture Shapes the Economy. Princeton, NJ: Princeton University Press, 2010.