Flexibility of benefit systems and firms’ attraction and retention capacities

The purpose of this paper is to analyze three different forms of benefit systems and the effects of their application on Spanish firms’ attraction and retention capacity, differentiating these systems depending on the flexibility offered to the workers.

The data of this study have been collected from a sample of 308 human resources managers in Spanish firms, through an online questionnaire. The hypotheses were tested by ordinary least squares regression analyses.

The results show that firms having more flexible compensation systems, that is, those providing greater freedom to workers in the election of their benefits and the design of the benefit system, reported to have a higher attraction and retention capacity than firms offering to their employees a unique and similar benefit package for all the employees.

Future studies could extent this study by analyzing different contexts in order to determine whether some institutional factors can influence these results. Similarly, it would be interesting to analyze the effects of these systems on other organizational outcomes, such as their financial performance.

Human resources policies and, especially, compensation policies have a significant influence on the ability of firms to recruit and retain core employees, necessary for corporate success. This study sheds light on the effectiveness of different benefits systems in enhancing the firms’ capacities to attract and retain core employees. Taking into account the hard financial and labor environment that the Spanish firms have to face, the results of this study can have important implications for managers.

This paper responds to recent calls asking for the necessity of analyzing the effect of different benefit systems in contexts different to the broadly considered American context. Similarly, these results could be applied to other countries with conditions similar to Spain, that is, countries where the benefit systems have been traditionally less flexible and with an offer of benefits quite different than firms located in countries where the State offers a less-social assistance to citizens.