Perks Essay

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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.

Bibliography:

  1. Marino, Anthony and Ján Zábojník. “Work-Related Perks, Agency Problems,  and Optimal Incentive Contracts.” RAND Journal of Economics, v.39/2 (2008).
  2. Rajan, Raghuram G. and Julie Wulf. “Are Perks Purely Managerial Excess?” Journal of Managerial Economics, v.79/1 (2006).
  3. Veblen, Thorstein. The Theory of the Leisure Class: An Economic Study  of Institutions [1899]. New York: Penguin Books, 1994.
  4. Zelizer, Viviana. Economic Lives: How Culture  Shapes the Economy. Princeton,  NJ: Princeton  University Press, 2010.

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